VAT Exemption for foreign individuals’ real property acquisition in Türkiye
Foreign individuals’ real property acquisition in Türkiye are exempt from VAT under certain conditions.
Authors: Av. Haşmet Ozan Güner, Stj. Av. Doğukan Menderes
Date: 29.08.2024
Summary of VAT Exemption
Foreign nationals residing outside Türkiye benefit from VAT exemption when purchasing residential units or workplaces in Türkiye, provided that it is the first delivery.
Funds should be brought from outside Türkiye in foreign currency, either by the purchaser or a third party.
To benefit from the exemption, the tax office of the location where the property is located must confirm that the purchaser does not reside in Türkiye.
If the purchaser resells the property in three years, s/he must pay the VAT and its delay interest for the initial purchase.
Legal framework
As per Turkish VAT Law, certain property purchases of foreign individuals residing outside Türkiye are exempt from VAT. Details of the exemption are set out under Section (B/12) of the Communiqué on the General Application of Value Added Tax ("Communiqué").
Conditions of exemption
Conditions of benefiting from the VAT exemption are as follows:
The purchaser must be a foreign individual residing outside Türkiye.
The sale must be the first delivery of the property.
Property must have a construction permit and be delivered as ready-to-use.
The property must be a residential unit or a workplace, and accordingly the construction permit must indicate the property as residential unit, store, office, bureau, residence, apart unit, time-share property or similar types.
Purchase price of the property must be brought into Türkiye in foreign currency.
At least half of the purchase price must be brought into Türkiye and paid to the seller before the invoice is issued. The remaining portion of the payment must be brought into Türkiye and paid to the seller within one year.
Movement of the funds
The funds must be brought, in principle, by transfer to a bank in Türkiye.
The funds can be transferred to Türkiye by the purchaser, as well as by third party real persons or legal entities on behalf of the purchaser. In such case, the transfer must include the following details in the transfer description:
Purchaser’s details and property or commercial unit details (project name, address, and independent section information), OR
a confirmation letter from the sender of the funds, including the purchaser’s and property details, indicating that the amount has been sent on behalf of the purchaser.
The funds can also be brought to Türkiye in cash. In this case, Turkish customs authority documents regarding the physical cash will be required. In such case, the funds must again be paid to the seller through banks.
Restriction of sale for three years
After the transfer of title, the property should not be sold for a period of three years to benefit from the exemption. If the purchaser wishes to resell the property within three years, the title deed transfer cannot be realized without paying the VAT fee and its delay interest.
The text above is for information purposes and is not a legal advice or investment recommendation.
