The Turkish Parliament has approved a new law providing
significant tax advantages for leaseback transactions. The main aim
of this regulation is to encourage companies to liquidate immovable
property to meet their financial needs.
Accordingly, starting from August 2013, sales of immovables to
leasing companies within a leaseback scheme will be exempt from
corporate tax and VAT, provided that ownership of the property is
transferred back to the seller when the lease contract expires.
The conditions of the exemption are as follows:
Only sales of immovable property can benefit from
The property must be sold to a leasing company described in the
Law Numbered 6361;
After the sale, the leasing company (lessor) should lease the
property to the seller (lessee);
Ownership of the property should be transferred back to the
lessee when the leasing contract has expired;
To enjoy corporate tax exemption, the lessee should not be a
real estate trade company;
Profit from the sale should be deposited into an equity account
(the balance of the account cannot be transferred to another
account before the end of the fifth calendar year following the
year in which sale is made).
The tax advantages of sale and leaseback are as follows:
Total profit from the sale is exempt from corporate tax at the
seller level regardless of how long the property is held;
Sale of the property to a leasing company is exempt from
Lease of the property back to the seller is exempt from
Transferring ownership of the property back to lessee is exempt
Profit from the sale is exempt from corporate tax at the lessor
level when ownership is transferred back to the lessee;
A lower title deed fee (0.0455% instead of 4%) is applied to
all transactions within the scope of the leaseback scheme;
The leaseback agreement is exempt from stamp tax.
In addition to tax advantages, leaseback transactions enable
Turkish companies to prepare more accurate local financial tables.
Since the Turkish accounting standards used by SMEs are tax driven,
most of such companies' financial tables do not reflect the
actual value of assets. When applied, sale and leaseback may update
and increase the accuracy of financial tables.
Moreover, since long-term assets will be converted into
short-term assets, financial ratios will be improved after
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Cyprus Tax Department recently issued Forms T.D 38, T.D 38Qa and T.D 38Qb applicable to individuals being Cyprus tax residents but non-Cyprus domiciled.
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