Fake Invoice Allegations and KURGAN Tax Audits in Turkey 2026: A Legal Guide for Foreign-Owned Companies — Tax Procedure Law Art. 359, VAT Deduction Denial, Threefold Penalty, Voluntary Disclosure, Deadlines and Directors’ Criminal Exposure

Turkey’s Tax Inspection Board (Vergi Denetim Kurulu) is sending letters to companies whose suppliers have been flagged as issuers of fake invoices. Some come from KURGAN, the Board’s risk-analysis system. Others are Examination Preparation Letters that ask the company to complete an online questionnaire. Neither is a tax audit, and neither can be challenged in court. The answer a company gives is evidence, however, and will be used in any later tax examination and criminal investigation. Under the Tax Procedure Law (TPL, Law No. 213), VAT shown on an invoice is deductible only if it relates to a real supply to the buyer (VAT Law Arts. 29 and 34). If an invoice is held to be fake, the deduction is denied and the tax is assessed. The tax loss penalty is one times the tax. It rises to three times where the fake document was used knowingly (TPL Art. 344). Knowingly using a fake document is also a crime punishable by three to eight years’ imprisonment (TPL Art. 359). That liability falls on individuals: the directors and managers who made or authorised the decision. A company that corrects its returns before an informant’s report, before an examination and before the offence is detected can avoid both the penalty and criminal liability (TPL Arts. 359 and 371). Correcting a genuine purchase, however, gives up a valid deduction and most of the right to sue. This guide explains the letters, the rules, the decision between correcting and defending, the deadlines and the exposure of directors. It reflects the law in force on 27 October 2026.

What KURGAN is and what has happened

KURGAN stands for Kuruluş Gözetimli Analiz, a risk-analysis project of the Tax Inspection Board. Development work began in early 2024, and the system was first run on current data in August 2025. It was presented to the public with the Board’s Strategy for Combating Fake Documents of 1 October 2025 and the accompanying KURGAN Guide for Taxpayers and Professionals. The word kuruluş (“incorporation”) in the name reflects its logic: it watches companies from the day they are set up, in order to identify entities incorporated for the purpose of issuing fake invoices.

For a buyer, the key point is that KURGAN scores transactions, not taxpayers. The Guide states that the system does not declare either the buyer or the seller a risky taxpayer, that a KURGAN letter is a forerunner of a possible audit rather than the audit itself, and that it is not coercive. The Ministry’s progress report of October 2026 adds that a KURGAN output has no legal effect on its own and that the final assessment is made in a tax examination.

The progress report also states that a new audit package is issued each month for current periods, that Organised Tax Evasion Audit Departments in Ankara and Istanbul were planned to start work on 1 October 2026, and that a stricter approach has been adopted under which knowing use is the rule and unknowing use the exception. The same report adds that this does not mean intent is assumed automatically for every taxpayer suspected of using fake documents. The space between those two statements is where a company’s defence lies.

Which letter have you received?

The letters look alike. All come from the Tax Inspection Board and most arrive by electronic notification. Their legal nature, the deadline and the options they leave open differ, however, and the first task is to identify which one has arrived.

The most important distinction is between the two models of the Examination Preparation Letter. Where the letter comes from the Board’s presidency, no inspector has yet been appointed. According to the administration’s guide, corrections and payments made at this stage are reviewed before an examination file is opened, and the matter may be closed without an examination if the risk is resolved. Where the letter comes from an inspector, a notice of examination has already been served; the guide states that this model cannot be sent before that notice. This difference determines whether voluntary disclosure remains available.

The legal framework

KURGAN is new, but the rules that decide the outcome are long-standing provisions of the Tax Procedure Law, the VAT Law and the Administrative Procedure Law. The table below summarises the provisions that matter most in a fake invoice file.

Communiqué No. 306 on the Tax Procedure Law also matters for intent. Under it, a tax crime report is prepared, a criminal complaint is made and the threefold penalty is applied where a taxpayer used a fake document knowingly. Where the taxpayer is found to have used it without knowing, no tax crime report or complaint is made and the penalty is one times the tax. The Ministry’s 2026 progress report confirms that this Communiqué continues to be applied.

Fake and misleading invoices: the definitions

Turkish law distinguishes between two kinds of problematic document. A fake document (sahte belge) records a transaction or situation that did not take place as if it had. A misleading document (muhteviyatı itibarıyla yanıltıcı belge) relates to a real transaction or situation but misstates its nature or amount (TPL Art. 359; VAT General Implementation Communiqué, sections IV/A2-3.1 and 4.1). The distinction matters for the penalty, for the criminal charge and for the defence.

The VAT Communiqué states that the administration may not treat a document as fake or misleading under its special VAT refund rules without these findings being made or reported, and that a mere informant’s report or complaint is not enough in the absence of other findings (sections IV/A2-3.1 and 4.1). Those statements belong to the refund chapter, but they show which findings the administration itself considers necessary. A detailed explanation of how a VAT deduction is denied and how the resulting assessment is calculated is available in our Turkish-language guide on the denial of VAT deductions (in Turkish).

Correct or defend: the central decision

This is the central question for a company that receives a letter. The Board’s position is that information requests do not ask the taxpayer to correct its returns, but that taxpayers who do correct may be removed from examination plans. The progress report states that in one past monitoring programme 97.46% of returns were filed without reservation, and those taxpayers were removed from the fake document examination plans on the basis of risk analysis. Taxpayers who filed with a reservation were referred for examination.

Correction is not cost-free. Filing an amended return removes the VAT from the deduction, requires payment of the tax with late-payment interest or a surcharge, and largely removes the ability to challenge the company’s own return in court. Where the goods or services were in fact received, that is a high price.

The table shows general directions only. In each case the decision turns on the amounts, the company’s compliance history, the share of the disputed purchases in total purchases, the strength of the document chain and the criminal exposure of the managers. An amended return can resolve the tax position, but it does not by itself close the criminal file.

Voluntary disclosure and its limits

Under TPL Art. 371, taxpayers who commit acts giving rise to a tax loss penalty, and those who participate in them, are not penalised if they disclose the facts on their own initiative by petition and meet the statutory conditions. Art. 359 also provides that it does not apply to those who report the situation in compliance with the conditions of Art. 371. Voluntary disclosure (pişmanlık) is therefore the only tool that can close both the tax and the criminal side of a fake invoice file.

The administration’s guide to the Examination Preparation File states that voluntary disclosure is not available for the subject of the file, although an amended return may still be filed. Tax lawyers have criticised this position: an information request is not one of the events that close voluntary disclosure under Art. 371, namely an informant’s report, the start of an examination and, for offences, detection of the offence, and a guide cannot remove a right granted by statute. Article 73 of the Constitution requires tax obligations to be set by law, and it is argued that the limits of this right can likewise only be set by law. Where the letter was sent by an inspector after notice of examination, the door is closed by the statute itself.

Where returns are corrected without the conditions of voluntary disclosure being met, the tax loss penalty is not removed altogether. For returns filed late other than after the start of an examination, the penalty is applied at 50% (TPL Art. 344(3)). A separate limited route exists for small amounts: for fake or misleading document use not exceeding TRY 870,000 in a calendar year (2026 amount) or 5% of that year’s total purchases, a preliminary finding letter may be served; if the return is corrected and the tax paid with the surcharge within 30 days, the penalty is 20% (TPL Art. 370(b)). The effect of an informant’s report on these options is explained in our Turkish guide on reporting fake invoices and criminal complaints (in Turkish).

Knowing or unknowing use: the 13 criteria

Every fake document use examination turns on one question: did the company know the invoice was fake? The Tax Inspection Board’s Circular of 18 April 2025 on fake or misleading document use examinations set out objective criteria for answering it for the first time. The Circular was published as an annex to the KURGAN Guide, and the 12 questions of the Examination Preparation File were drafted with these criteria in mind.

The Circular works in two stages. First, the examiner establishes whether the goods or services on the invoice were actually received. If they were not, the Circular treats the document as used knowingly. If they were, the examiner considers whether a document not belonging to the actual seller was used knowingly, by reference to the criteria below.

The criteria show that intent is not decided by a general claim of good faith but criterion by criterion, on concrete facts. Our Turkish guide on knowing and unknowing use (in Turkish) discusses each criterion with case law of the Council of State.

The evidence file for each invoice

A company’s strongest asset is a document chain built for each invoice. The same chain supports the reply to the letter, the Examination Preparation File, a later tax court action and the managers’ statements in any criminal investigation. Where a document is missing, the reason should be explained in writing.

Turkish law requires collections and payments above TRY 30,000 to be made through banks or similar institutions (TPL supplementary Art. 257; Communiqué No. 459 as amended by Communiqué No. 575). Payment by bank to the seller’s own account is among the most concrete evidence of good faith. Controls that companies can put in place before buying are explained in our Turkish guide on supplier due diligence against fake invoice risk (in Turkish).

Timeline: from letter to tax court

A fake invoice file moves through a sequence of deadlines, each of which closes a different door. The table shows the stages from the letter to the tax court.

If an examination begins, the company receives a notice of examination, and the inspector may use the examination model of the preparation letter to ask the same questions, this time as part of the examination file. According to the progress report, fake document use reports have been prepared through an automated reporting system since 19 August 2026. The system calculates the return data, the VAT carried forward and the effect of denying the deduction; the report notes that the output is a draft and that the final assessment remains with the inspector. Examinations can therefore conclude faster than before, and the defence needs to be ready from the outset.

If a tax assessment is issued

When a deduction is denied, the tax is assessed and a tax loss penalty is imposed: one times the tax if unknowing use is accepted, three times if knowing use is found. Where the company had VAT carried forward, the carried-forward amount is reduced first, and the tax is assessed for the periods in which payable VAT emerges once the return table is recalculated. Late-payment interest runs on the tax, not on the penalty, from the normal due date of each period at the monthly rate set under Law No. 6183 (TPL Art. 112(3)); that rate has been 3.7% per month since 13 November 2025. The calculation is explained step by step in our guide on VAT deductions denied for fake invoices.

In court, the company’s main arguments can include that the administration has not shown with concrete findings that the goods or services were not in fact obtained from the seller, that the report on the seller has been applied to the buyer automatically, that no counter-examination or analysis of the flow of goods was carried out at the buyer, and that intent was presumed rather than assessed under the criteria of the 2025 Circular. Two recent decisions of the Council of State (Danıştay) are relevant. In a decision of 28 January 2026 (E.2024/128, K.2026/32), its Plenary of Tax Chambers upheld, by majority, a judgment holding that disallowing the full invoice amount for corporate tax purposes was unlawful where the possibility that the goods had been bought from others had not been investigated and the true or closest-to-true tax base had not been determined. In a decision of 26 December 2025 (E.2023/6402, K.2025/5970), the Third Chamber took into account the outcome of the issuer’s own tax case, and the outcome of the assessment for the earlier period from which VAT had been carried forward. The procedure and a full Turkish model petition are in our guide on tax court action against fake invoice assessments (in Turkish).

Criminal exposure and personal liability of directors

The most serious consequence of a fake invoice allegation is criminal. Under TPL Art. 359, a person who uses a fake document faces three to eight years’ imprisonment, and a person who uses a misleading document faces eighteen months to five years. Criminal liability attaches to the individual who committed the act, not to the company. The question is therefore who decided, or was authorised to decide, that the invoice would be recorded and its VAT deducted.

Whoever signs the reply to a KURGAN letter or the Examination Preparation File may later be called to give a statement to the prosecutor. Every sentence of the reply should be consistent with what that person can say under questioning. The personal liability of managers is explained in our guide on personal liability of directors and managers in fake invoice cases and in our Turkish guide on the liability of company managers in fake invoice cases (in Turkish), and the defence in the criminal case in our guide on the defence petition in the criminal case (in Turkish).

A worked example

Assume that a company recorded an invoice of TRY 1,000,000 plus 20% VAT, that the invoice is held to be fake, that payable VAT arose in the period in which it was recorded, that knowing use is found and that the full invoice amount is disallowed for corporate tax at the general rate of 25% (Corporate Tax Law Art. 32(1)).

On the VAT alone, interest at 3.7% per month for 24 months would add TRY 177,600 (200,000 × 3.7% × 24); the rate changes from time to time, and each period is calculated at the rate in force. Losses, carried-forward VAT, the domestic minimum corporate tax (Corporate Tax Law Art. 32/C), provisional tax and any repeat-offence increase (TPL Art. 339) all change the result. The example shows why a decision on a single supplier can be material at group level.

Points specific to foreign-owned companies

Foreign-owned subsidiaries and branches face the same rules as domestic companies. Several practical points nevertheless deserve attention.

Recovering losses from the seller is discussed in our Turkish guide on recourse and damages claims against the seller (in Turkish). Broader questions of doing business in Turkey are covered in our Legal Guide for Foreign Investors in Turkey.

Model structure of a response

The reply to a KURGAN letter or the explanations in the Examination Preparation File should not be a one-line reconciliation. A well-prepared reply is the first draft of the later tax court petition and of the managers’ statements in any criminal investigation. The model below is an English working draft for group review. The version filed with the administration must be in Turkish, and each paragraph must match the documents attached.

Three things should be avoided in any reply: categorical statements that the documents cannot support, explanations that blame the seller without showing the company’s own care, and text prepared by the accounts team without legal review. Once filed, a reply cannot be withdrawn; a mistake made at this stage reappears months later in the examination report as the company’s own statement. A Turkish model reply with answers to the 12 questions is in our guide on replying to KURGAN and Examination Preparation letters (in Turkish).

How Hukukçular Evi can help

Hukukçular Evi Ankara handles the tax and criminal sides of fake invoice files together. For foreign-owned companies, the work starts with identifying the type of letter and the deadline. It then covers an invoice-by-invoice risk review, preparation of the evidence file against the 13 criteria, the Turkish reply or Examination Preparation File, and advice on the legal effect of correction, voluntary disclosure or filing with a reservation. If an examination opens, we follow the records and the report evaluation stage. If an assessment is issued, we bring the tax court action, and we act for directors and managers in any criminal investigation. We correspond in English with group legal and finance teams. The scope of the service is described on our fake invoice defence page (in Turkish), and the lawyer’s profile is on the author page. You can reach us on +90 554 648 37 15.

Frequently asked questions

Does a KURGAN letter mean a tax audit has started?

No. According to the KURGAN Guide, a KURGAN letter is a forerunner of a possible audit, not the audit itself. It is an information request under TPL Art. 148. An examination starts only when a notice of examination is served.

How long do we have to reply?

The period is stated in the letter and runs from service. The official guide gives no fixed number of days. If the period is not enough, a reasoned request for more time should be made before it expires.

What happens if we do not reply?

After a written warning, a special irregularity penalty may be imposed under TPL supplementary Art. 355. More importantly, the risk analysis records the silence and the company enters any examination unprepared.

Do we have to remove the invoices from our records?

No. The Board’s information requests do not require correction. Correction is a choice; where the goods or services were received, it gives up a valid deduction and largely removes the right to sue over the company’s own return.

Will correcting our returns end the matter?

There is no assurance. The Ministry reports that taxpayers who corrected without reservation in a past programme were removed from examination plans, while those who filed with a reservation were sent for examination. A correction resolves the tax position but does not by itself close the criminal file.

Can we still make a voluntary disclosure after an Examination Preparation Letter?

The administration’s guide says not for the subject of the file, although an amended return may be filed. Some tax lawyers argue that an information request is not one of the statutory events that close voluntary disclosure under TPL Art. 371. Once an inspector has served a notice of examination, the door is closed by statute.

Can we challenge the letter in court?

The administration’s guides treat these letters as information requests rather than final, enforceable acts. On that view, the right to sue arises when the tax and penalty assessment is served after an examination.

Our supplier has been reported as a fake invoice issuer. Are our invoices automatically fake?

No. The KURGAN Guide states that the report on the seller does not on its own require a finding of intent against the buyer. Whether the goods were actually received, and from whom, is decided on the facts of each purchase.

What is the penalty if knowing use is found?

The tax loss penalty is three times the tax (TPL Art. 344), it cannot be settled, and under Communiqué No. 306 a tax crime report and criminal complaint follow. Knowingly using a fake document carries three to eight years’ imprisonment (TPL Art. 359).

And if unknowing use is accepted?

The penalty is one times the tax and, under Communiqué No. 306, no tax crime report or criminal complaint is made. The VAT deduction is still denied if there was no real supply.

Can the company itself be prosecuted?

Criminal liability under TPL Art. 359 attaches to individuals. The company bears the tax and penalties, and its legal representatives may be personally liable for amounts that cannot be collected from it (TPL Art. 10; Law No. 6183 supplementary Art. 35).

Can a foreign manager be prevented from leaving Turkey?

In a criminal investigation, a judge may impose a ban on leaving the country as a judicial control measure (Code of Criminal Procedure Art. 109(3)(a)).

What deadlines apply once an assessment is served?

Within 30 days, the company may apply for the 50% penalty reduction (TPL Art. 376), apply for settlement where only a one-times penalty was imposed, or sue in the tax court (Administrative Procedure Law Art. 7). These routes exclude each other.

Does suing stop collection?

Yes, for the disputed amount (Administrative Procedure Law Art. 27), except for taxes assessed on returns filed with a reservation. Late-payment interest continues to run on any amount ultimately upheld.

Does paying the tax end the criminal case?

No. Paying the assessed tax, interest and half of the penalties reduces the prison term under the effective repentance provisions of TPL Art. 359, by half at the investigation stage and by one third before judgment.

Related guides

• Legal Guide for Foreign Investors in Turkey (Türkiye) 2026 — the entry point to our English guides
• VAT Deduction Denied for Fake Invoices in Turkey: How the Assessment Is Calculated
• Taxation of Foreign Institutional Investors in Turkey
• Company Liability for Managers and Employees in Turkey
• Can a Foreigner Be a Board Member or Manager of a Turkish Company?
• Service of Documents in Turkish Proceedings
• Anti-Money Laundering Rules in Turkey
• Company Formation in Turkey for Foreigners
• Buying a Turkish Company as a Foreign Investor
• Tax Evasion Offences under TPL Art. 359: Main Guide (in Turkish)
• Fake Invoice and KURGAN Decision Tool (in Turkish)
• Amended Return or Objection? (in Turkish)
• Personal Liability of Directors and Managers in Turkish Fake Invoice Cases