resources required to provide services have made the allocation of Value-Added Tax (VAT) revenues a significant issue in local finance. This study aims to identify and classify optimal criteria for allocating these revenues among municipalities and to assess the extent to which they are reflected in the VAT Law. The research is applied in nature, employs a qualitative and exploratory approach, and utilizes documentary content analysis alongside a comparative method. Domestic and international scholarly studies, as well as the text of the VAT Law (Articles 38 through 42), were coded based on four initial thematic axes—allowing for inductive extraction—after which overlapping concepts were merged. The criteria were then refined based on theoretical and empirical support, conceptual distinctiveness, feasibility, and motivational implications. The process resulted in ten final criteria categorized under four axes: public service needs and demand; financial capacity; revenue effort and motivation; and structural, developmental, and geographical factors. A comparison of these criteria with the law revealed that only population and level of development are explicitly mentioned; furthermore, the "level of development" lacks an operational definition and is referred to implementing regulations. Financial capacity and revenue effort are influenced only implicitly through the "principle of origin," while the geographical criterion is reflected solely in pollution-related levies. Five other criteria—namely demographic and social structure, density and dispersion, expenditure needs, economic base, and reliance on central resources—were not found in the text of the law. Furthermore, the law’s primary mechanism—a fixed share based on settlement type—is not recognized in the literature as an independent criterion. These findings indicate a gap in conceptual coverage between the literature and the legislation. Accordingly, it is recommended to incorporate need-adjustment coefficients, simultaneously assess fiscal capacity and revenue effort, and explicitly define underdevelopment indicators within the law or its implementing regulations.