Investing in foreign real estate usually comes with a slew of heavy taxes and added expenses. Fortunately, Turkey has relaxed taxation regulations and laws for international property buyers in an attempt to expand real estate development across the regions. The country not only offers unmissable investment opportunities to foreigners but also provides advantages such as resetting stamp duties, VAT discounts, and granting Turkish citizenship after purchasing a property worth $250,000. The law for VAT exemption for foreign property buyers in Turkey was approved by the government on the 1st of April, 2017.
Value Added Tax or VAT (also known as Katma Deger Vergisi in Turkey) can be a considerable expense for people looking to buy real estate. It is directly paid to the government at the delivery of the property and is usually included in the sales price offered by the real estate developers. However, the tax concession is one of the many moves the Turkish government has made to attract international and expat investors.
Who can benefit from VAT Exemptions?
- Foreigners not permanently residing in Turkey
- Turkish citizens living abroad for more than six months with their residence permit or work permit
- Institutions that have not registered any headquarters or legal residences in Turkey and have not earned any profits by a virtue of any permanent representative or a workplace
Note: VAT exemptions on Turkish properties can be made only under the following circumstances:
- The VAT discounts are offered ONLY on the first property in Turkey
- Turkish citizens who reside in foreign nations, or work for organizations, institutions, or establishments based in Turkey will not be able to benefit from the VAT exemptions
What are the conditions required to apply for VAT exemptions for foreign property buyers?
- VAT exemptions are only applicable to the newly-build properties in Turkey. However, resale and secondhand properties are generally not discounted for VAT anyway
- The purchase price must be paid in a foreign currency
- Foreign property buyers can not sell the purchased property for a year after receiving the title deed. If the real estate is sold under one year, the discounted VAT will be collected
Property features for availing VAT exemptions
Regulated in the article of the Turkish taxation laws, the scope of the VAT exemption is made under the following conditions:
- The property/building/residential project/commercial unit has an authenticated building license.
- Purchase of lands, fields, and plots are not considered valid for VAT exemptions
- The law is applicable only to residential and commercial properties
Types of VAT levied on real estate in Turkey
There are three different VAT rates that are levied on commercial and residential properties in Turkey. The rates, however, depend on the size and type of the purchased property.
- 1% VAT is applicable to residential properties with areas less than 150 meters square
- 8% VAT is applicable to residential properties with areas over 150 meters square
- 18% VAT is applicable to dual-use residential properties or commercial real estate
What are the documents required?
For Turkish citizens living abroad:
- Work permit or equivalent documents acquired from the official embassies or Turkish consulates
- A document as proof that shows the citizen was resident overseas for more than six months prior to the real estate purchase
For foreign property buyers in Turkey:
- A notarized copy of the current passport
- A copy of the Turquoise card for buyers who lost Turkish citizenship
- A copy issued by the Turkish tax authorities stating that the real estate buyer is not settled in Turkey. The following documents need to be submitted in that case:
- A notarized and translated copy of the passport
- Notarized proof of foreign address
- Passport transactions from the police department of Turkey
- A letter from the General Directorate of Immigration office stating that the applicant is not a resident of Turkey
For organizations that have not secured any profits in Turkey:
- A document as proof that the company has not earned any profit in Turkey
- A document as proof that the company is still active and it should have an Apostille
It is important to note that the real estate concessions may be altered any time depending on the Turkish Tax Regulations. We recommend that you should consult our highly-experienced legal advisors to understand the existing situation and get a full overview of the tax systems in Turkey. For more information, get in touch with our seasoned real estate professionals here.