Goods may have been delivered, services completed, invoices issued, and revenue recorded. However, the inability to collect the sales price creates a significant discrepancy between the profit shown in the business records and its actual cash flow.

Tax legislation allows this collection risk to be considered as an expense under certain conditions. The basis of this practice is the provision for doubtful receivables regulated in Article 323 of the Tax Procedure Law No. 213.

The determining factor here is not whether the business believes it cannot collect the receivable, but whether the receivable meets the conditions stipulated by law. The expiration of the due date, the customer's financial difficulties, or the termination of the commercial relationship between the parties are not sufficient, by themselves, to justify setting aside a tax provision.

1. Which receivables are considered doubtful receivables?

Article 323 of the Tax Procedure Law covers two separate groups of receivables, provided they are related to the acquisition and maintenance of commercial and agricultural income:

• Receivables that are in the litigation or enforcement phase.

• Debts that remain unpaid despite protests or written requests, and that do not exceed the monetary limit set for the relevant year.

A provision may be made for these receivables according to their recoverable value on the valuation date. The receivable to which the provision relates should be indicated separately in the records; in transactions with collateral, the provision should be limited to the amount remaining outside the collateral.[1]

Setting aside a provision does not mean the receivable is written off or the debtor is released from their debt. The receivable and the related collection process continue. Another element monitored in accounting is the risk of non-collection of the receivable.

2. Is it absolutely necessary that the receivable has been previously recorded as revenue?

In the case of receivables arising from the sale of goods and services, it is necessary to establish a link between the transaction and revenue records. However, it is not correct to limit the application only to receivables previously recorded as sales revenue.

In the special ruling of the Istanbul Tax Office dated 06.04.2015 and numbered 62030549-125[6-2013/354]-627 , it was explained that order advances given for the continuation of commercial activity can also be subject to consideration if they meet the conditions in article 323 of the Tax Procedure Law.[2]

Therefore, advances given for goods or services to be received, which are reclaimed upon non-fulfillment of the contract and whose collection has become doubtful, should be evaluated separately. These amounts may be directly related to commercial activity even if they did not previously generate sales revenue.

However, the ruling does not mean that every advance payment can be directly expensed. Indeed, in the case in question, the doubtful receivables application was not accepted because the necessary follow-up conditions were not met.

The commercial nature of the transaction and the existence of conditions of suspicion are both required. Loans given to partners, employee receivables, and other financing transactions cannot be considered within this scope simply on the grounds that they have a credit balance in the accounting records.

3. What should be considered in a lawsuit or enforcement proceeding?

The fact that the legal process has reached the litigation or enforcement stage required by law necessitates the actual initiation of the legal process for collection. Handing over the file to a lawyer, preparing a notice of default, or informing the client that a lawsuit will be filed if payment is not made is not the same as this stage.

In administrative practice, it is also required that the initiated lawsuit or enforcement proceedings be pursued seriously . Files that are formally opened for the purpose of setting aside a provision and are not pursued may be subject to tax criticism.[3]

Similarly, a bounced check indicates a problem in collecting the debt; however, it does not, by itself, mean that the conditions for litigation or enforcement proceedings have been met.

The follow-up list to be submitted to accounting must include at least the debtor's information, the amount owed, the start date of the follow-up, the file number, the status of the collateral, and the amounts collected.

4. The small receivables limit in 2026 is 25,000 TL.

After the amendment made by Law No. 7338, there is a monetary limit in the law for the assessment of small receivables. In 2026, this limit is 25,000 TL according to the General Communiqué No. 588 of the Tax Procedure Law. [4]

Therefore, a different tax threshold cannot be established based on the company's turnover, its self-determined level of materiality, or estimated legal fees.

For receivables not exceeding 25,000 TL, the doubtful receivables application may be possible even without initiating a lawsuit or enforcement proceedings. However, it is not sufficient for the amount to be below the limit; the condition of non-payment despite protest or multiple written requests must also be met.

In the special ruling of the Istanbul Tax Office dated 13.02.2023 and numbered E-62030549-125[6-2020/409]-199749 , the following points are particularly emphasized in the written request method:

• The letters reaching the recipient more than once on different days.

• The notification must be served to the debtor or to persons legally authorized to receive the notification.

• Proof of the notification and the relevant dates.[5]

Therefore, it is not enough to simply prepare or send a collection reminder; records proving that it reached the recipient should also be kept. Notary, registered electronic mail (KEP), or documented postal methods can be considered for this purpose.

The amount from the previous year mentioned in the ruling should not be carried over to the 2026 application. When considering the written request and proof approach, the monetary limit should be taken from the regulation of the relevant year.

5. In which accounting period should the provision be set aside?

The tax authorities' approach is to set aside the provision in the accounting period in which the receivable becomes doubtful.

In the private ruling dated 11.04.2014 and numbered 64597866-105[323-2014]-46 , it was stated that provisions should be made in the year in which the lawsuit or enforcement proceedings are initiated; provisions cannot be made in subsequent periods for receivables for which no provision was made in the period in which they became doubtful.[6]

For example, if a business operating on a calendar year basis has enforcement proceedings initiated in October 2026 for its receivables, the provision assessment should be made with respect to the 2026 accounts. The fact that the case remains open in 2027 does not, according to the administrative approach, leave the provision allocation period to the business's discretion.

Therefore, reporting litigation and enforcement files to accounting only at the end of the year is not a correct workflow. Initiation of proceedings, file progress, and collections should be shared throughout the period.

While setting aside a provision is optional, this choice should not be interpreted as meaning that the expense can be transferred to any desired accounting period.

6. Can a provision be made for uncollected VAT?

Yes. According to section V of the General Communiqué No. 334 of the Tax Procedure Law, if the conditions in article 323 of the Tax Procedure Law are met, the receivable is recorded in the relevant period records and declared in the VAT declarations, a provision can also be made for the receivable arising from VAT.[7]

For example, an unsecured receivable of 120,000 TL, consisting of 100,000 TL in service fees and 20,000 TL in VAT, can be provisioned for, including VAT, if the necessary conditions are met.

The process here is not a cancellation of the calculated VAT. The sales invoice or previously submitted VAT return is not automatically corrected due to the allocation of a provision for doubtful receivables.

However, it is a different matter if the receivable subsequently becomes worthless under Article 322 of the Tax Procedure Law . Article 29/4 of the VAT Law allows for the deduction of VAT calculated and declared on these receivables in the tax period in which the receivable is written off as a loss.

However, if the same VAT has previously been expensed in the income or corporate tax base through the provision for doubtful receivables, the relevant amount must be considered as income for VAT deduction. A duplicate expense and deduction effect cannot be created on the same tax amount.[8]

7. How are accounting records kept?

In the following example, the Uniform Chart of Accounts is applied; it is assumed that the entire receivable of 120,000 TL is unsecured and meets the tax reserve requirements.[9]

Transferring receivables to doubtful trade receivables:

Provisioning:

Assuming that 30,000 TL is collected in the next accounting period:

The corresponding amount collected is also closed:

After these transactions, the remaining amount of the receivable and consideration is 90,000 TL. The status of the remaining amount will be monitored separately.

8. Doubtful receivables and worthless receivables are not the same.

Doubtful receivables involve uncertainty regarding collection. In the case of worthless receivables, it must be established by a court ruling or convincing documentation that collection is no longer possible.

According to Article 322 of the Tax Procedure Law, worthless receivables are written off as losses at their recorded value on the date they acquire this characteristic. If a provision has been made beforehand, the closing transaction is associated with the existing provision.

The decision of the business management that "no further collection can be made from this customer" does not, by itself, constitute a worthless receivable. Similarly, the creditor's unilateral abandonment of collection does not automatically create a loss that can be deducted from the tax base. This point is clearly stated in the special ruling dated 06.04.2015.[2]

Therefore, the fact that the receivable is economically problematic and the fact that it can be written off from the records for tax purposes should be considered separately.

9. Taxpayers operating on an accrual basis can also benefit.

The application is not exclusive to taxpayers who keep their books on an accrual basis.

According to the provision added to Article 323 of the Tax Procedure Law by Law No. 7338, taxpayers who keep books on the basis of business account also record their doubtful receivables that meet the conditions in the expense section and the amounts collected later in the income section in the period in which they are collected.[10]

Therefore, the above example entries 128 and 129 should not be considered mandatory entry formats for all taxpayers who can benefit from the application.

10. A separate assessment file should be created for each receivable.

The file used in the application should contain the following information to facilitate tracking the rationale and duration of the process:

• Contracts, invoices, and delivery or service documents showing the source of the receivable.

• Information about the debtor, due date, remaining balance, and collateral, if any.

• Written payment requests and delivery and notification records.

• Case or enforcement file number and commencement date.

• Period, amount, and accounting voucher for the provision.

• Subsequent collections and closed provisions.

The accounts receivable aging report is the starting point for this study. The supporting file for the tax assessment should reveal the nature of the receivable, the follow-up process, and the correct accounting period.

Footnotes and references

[1] Tax Procedure Law No. 213, Article 323. GIB – Text of the Law .

[2] Istanbul Tax Office Directorate’s special ruling dated 06.04.2015, numbered 62030549-125[6-2013/354]-627 . Subject: Whether advances paid can be considered as worthless or doubtful receivables. GIB – Special Ruling .

[3] Istanbul Tax Office Directorate’s special ruling numbered 11395140-105[323-2015/VUK-1-19556]-48699 . Serious continuation of litigation and enforcement proceedings and evaluation of collateral. GIB – Special Ruling .

[4] General Communiqué No. 588 of the Tax Procedure Law ; 5th supplementary issue of the Official Gazette No. 33124, dated 31.12.2025. 2026 Tax Procedure Law 323 limit: 25,000 TL . GIB – Text of the law where the current amount is processed .

[5] Istanbul Tax Office Directorate’s special ruling dated 13.02.2023, E-62030549-125[6-2020/409]-199749 . Subject: Whether uncollectible receivables can be deducted as expenses and the recording of worthless receivables. GIB – Special Ruling .

[6] The Tax Administration’s special ruling dated 11.04.2014, numbered 64597866-105[323-2014]-46 . Accounting period for setting aside receivables and doubtful receivables in bankruptcy proceedings. Tax Administration – Special Ruling .

[7] General Communiqué No. 334 of the Tax Procedure Law , Section V: Provision for Doubtful Receivables for Value Added Tax. Official Gazette No. 25453, dated 05.05.2004. GIB – Communiqué .

[8] Value Added Tax Law No. 3065, Article 29/4 . GIB – Text of the Law .

[9] General Communiqué No. 1 on the Implementation of the Accounting System , Uniform Chart of Accounts and its explanations; accounts numbered 128, 129, 644 and 654. GIB – Chart of accounts and its explanations .

[10] Law No. 7338, Article 35 ; Amendment to Article 323 of the Tax Procedure Law. GIB – Text of the Law .

Tax rulings reflect the administration's interpretation within the context of the circumstances of the case in which they were issued. They do not automatically provide the same legal protection for other taxpayers. Monetary amounts in older rulings should be evaluated in conjunction with the current limits of the transaction year.