Invoicing in Service Exports

There are thousands of businesses developing software, creating designs, or providing consultancy to companies abroad. They don't ship physical goods, there's no customs process — but they still need to issue invoices.

The rules for service exports operate quite differently from goods exports.

Document type: e-archive

While goods exports use e-invoices with an export scenario, the situation changes for service exports: since there is no customs declaration, the document is issued as an e-archive invoice.

This distinction is important because a service invoice issued with an export scenario expects a customs match, which stalls the process. We covered the differences between the two document types in our e-invoice vs. e-archive differences article.

If you are a self-employed professional, you issue an e-self-employment receipt instead of an invoice; check out the e-SMM article.

Under what conditions does the VAT exemption apply?

Service exports are exempt from VAT. However, this exemption is not automatic; essentially, the following conditions must be met simultaneously:

The customer must be abroad. The buyer must not have a workplace, legal headquarters, or business center in Turkey. Services provided to a company with a branch in Turkey do not fall under this scope.

The service must be utilized abroad. This is the most debated condition. The work you do must be used for the overseas customer's operations abroad. If your work is geared towards an operation in Turkey, the exemption becomes debatable.

The exemption justification must be stated on the invoice, and the relevant exemption code must be used. Consult your financial advisor to confirm the correct code for your business.

Earnings deduction

Alongside the VAT exemption, there is also an advantage on the income/corporate tax side. A portion of the earnings generated from certain services provided abroad (such as software, architecture, engineering, design, data processing, and call centers) can be deducted from declared income.

There are conditions for this deduction: the service must be provided from Turkey, the invoice must be issued in the name of the overseas customer, and a specific percentage of the earnings must be brought into Turkey. Since rates and conditions change with legislation, verify the current status.

To apply this deduction, these earnings must be tracked separately. If you pool your domestic and international income into a single category, it becomes difficult to separate them at the end of the year.

On the collection side

Payments generally arrive in foreign currency via bank transfer or payment institutions. There are three things to pay attention to here:

The invoice exchange rate and collection exchange rate will differ. The difference between them must be recorded; check out the exchange rate difference invoice article.

Intermediary deductions are expenses. The commission deducted by the payment platform is not deducted from your revenue; the invoice is issued for the gross amount, and the commission is recorded as a separate expense.

Foreign currency accounts should be kept separate. Combining foreign currency and TRY accounts under the same heading makes the balance meaningless. The bank and cash management article explains this setup.

Frequently asked questions

Do I have to issue an invoice to an overseas customer?

Yes. Even if the customer doesn't request it, you are required to issue a document due to your tax residency in Turkey.

I work freelance, should I establish a company?

If you are earning regular income, tax residency is required. The establishing a sole proprietorship article explains the first steps.

What language should the invoice be in?

It is issued in Turkish; foreign language explanations can be added so the customer can understand it. For bilingual output, check out the template customization article.

Can I receive payments via PayPal or Wise?

The collection method and the invoicing obligation are separate issues. However, if you plan to benefit from the earnings deduction, clarify the requirement of bringing the funds into Turkey with your financial advisor.

When set up correctly, service exports provide advantages on both the VAT and earnings fronts. Tracking the conditions in a recordable way is a prerequisite for utilizing these benefits.

Open a free account on Qolay.App to track your international income separately and efficiently.