Turkey: Legislative Regulation Regarding The Sale Of Residential Estate And Workplace To Aliens

Last Updated: 3 July 2017
Article by Mustafa Gunes

In order to take advantage of the exception within Article 13/(i) of Value Added Tax Law (referred to herein as VATL), one shall neither accomplish and deliver properties as if operationalized nor execute a conveyance of title on the very first day.   

A VAT exception regarding residential estate and properties which are handed from abroad is brought by the effectuated law no. 6824 that is issued on 8 March 2017 dated Official Gazette. Technically, (i) sub clause is added to the first paragraph of Article 13 of Value Added Tax Law ("VATL") by means of the Law no 6824, thus another exception referred in CVAT is inserted to the Code. Related Article 7 of law no. 6824 as follows:

Article 7 –

Following sub clause is inserted within the first paragraph of Article 13 of 25/10/1984 dated and 3065 numbered Value Added Tax Law.


"i) only if providing the application at the first delivery of property or workplace constructions and bringing the price as foreign currency to Turkey; Turkish citizens who are living abroad more than six months by obtaining work and residence permit; foreign national real persons who are not residing in Turkey ;and institutions which are not gaining profits from Turkey via a company or a permanent representative and do not have a registered or working office in Turkey; with the exception of designated at second paragraph of first sub clause in the 3rd article of Income Tax Law ( Such that, both tax-payer and buyer shall be jointly and severely liable for taxes that are uncollectible on time, loss of tax penalty and interest of default in case of determining an application of the exception although specified conditions within the sub clause is not provided. In the case of disposing delivered property or workplace within the exception, before title deed transaction disposer must pay taxes that are uncollectible on time, with deferment interest which is calculated with regard to 48th Article of Law no.6183.),"

A notice has issued in 05.05.2017 dated Official Gazette to illuminating the application of VAT exception, recognizable with the aforementioned provision of Law. Described application within the notice is appropriate in many ways while there are some crucial parts that need to be criticized:


  1. (12.1.1) Article of the Notice has a regulation as follows "for subjecting a property or a workplace to the delivery within the exception herein; a structure that is constructed as a property or a workplace, must have a building license and must be assigned in fact as ready for buyers to use".
  1. Again, (12.3) Article of the Notice has a regulation as follows "for applying an exception to the delivery of a property or a workplace, there needs to be a title deed transaction. Those who make sales within the exception shall notice Directorate of the land registry inform about the sale with indicating the exception that is in the context of Article (13/i) of the Law no. 3065. Therewith, an annotation will be affixed to statements part of the book of land registry by Directorate of the land registry; this annotation is about the uncollectible on time tax payment which will be paid with interest of default that is calculated in regard to deferment interest rate stated in the 48th article of Law no. 6183 if the property or workplace is disposed in one year."


These provisions are written in such way that; to apply the exception which is determined in Law no.6824, firstly a property or a workplace needs to be finished as ready for a buyer's use and has to be made its delivery in land registry directorate. In fact, the regulation in the Law is not excluded those two matters while it is not asserting them as mandatory factors.

In the case of applying the notice as is, there would be lots of problems regarding sales with respect to especially prepaid sales that is to say real estates which are not ready to be delivered; a number of transactions about exception will be decreased and in conclusion expected benefit from the Law, may not be reached. Again, landowners or investors prefer not to consult transferring of the right of access because of possible project alterations in combined projects especially. Yet, transferring title may result with a problem of receiving approval of many owners in the process of zoning and license, and finalization of the project may be at risk. Thus, if the conveyance of title will be a mandatory application as the Notice prescribed, an opportunity of benefiting from VAT exception by many large projects, would disappear. In order to prevent these problems, the Notice needs to be aligned with the Law and from now on, the application should be temper to the Law rather than the Notice.

While approaching the subject as a legal regulation, it would be significant to determine what "the procreator subject matter of tax is" since the subject matter is a tax. Yet, the tax shall be born primarily to mention a tax exemption.  The procreator subject matter of VAT is defined in VAT Law Article 10, follows as:

Occurrence of the procreator subject matter:

Article 10 –

Procreator Subject Matter:              

a) In the event of delivery of goods and service accomplishment, delivering the goods or accomplishing the service,             

b) Before delivering the good or executing the service, in case of procuring invoice and so forth documents, regulating invoice or likewise documents limited to the amount in these documents,     (...)

It is understood from literal of the Article that even there will be no invoice making out, delivering the good will procreate the VAT. Though paragraph (b) indicates that preparing invoice or so forth documents before delivering the good, the VAT will arise with a limitation to a number of such documents. The reason of such regulation is; about effectuating and collecting the tax obviously.

At this point, it is important to determine the time when the invoice will be arranged. Regarding this issue, Article 231/5 of VAT includes "the invoice shall be arranged within minimum seven days from delivery of the good or executing the service". The same paragraph aims to arrange the invoice punctually by stating that the invoices which are not arranged in designated time, shall be regarded as unadjusted invoices. Another saying, in our opinion, there is no rule of law about making out an invoice in advance. Designated time being by Law; is about the last date for making out an invoice.

On the other hand, the main goal of the Law no. 6824 that brought VAT exemption regarding property and workplaces which have a price as foreign currency, is to inflow of foreign currency to the country. That is to say, legislator prefers not to take a tax which should be taken under normal circumstances, to provide inflow of foreign currency and to keep this money within the borders of the country for minimum one year; preferring inflow of foreign currency rather than tax collection.

When we evaluate both of rule of law and their goals;

  • It is understood that tax will be arise regarding Article 10 of VATL when either delivery of the good or invoice event existed, and also it is understood that it is possible to make out an invoice before delivering the good, hence the tax would be existed.
  • Article 231/5 of VATL indicates the latest regulating time, thus there is no prohibition about invoicing before delivery of the good.
  • 7th Article of Law no.6824 and paragraph (i) which is inserted Article 10 of VAT Law indicate that protected interest in bringing a VAT exemption to properties and workplaces, is to provide a permanent inflow of foreign currency to the country.

Under these circumstances, there is no legal basis to make a regulation in (12.1.1.) the Article of Notice as "a structure that is constructed as a property or a workplace, must have a building license and must be assigned in fact as ready for buyers to use". In our opinion, it is possible to bind an invoice to a sale of constructed detached-section even though the construction is not finished yet, only if constituting a construction servitude, and VAT exemption shall be made as far as the amount which appears on the invoice. Constituting a construction servitude condition is arises intrinsically. Hence this condition shall be met since it is not possible to mention a limited property right which is officially registered and also not possible to indicate which detached-section is sold, without establishing construction servitude. Therefore, regulation of the Notice is appropriate.

Regulation within the Notice about detached-sections to be sold, as "they must be assigned as ready to use", is based on misevaluation of the statement in VAT Article 10(i) as "implementing at first delivery". Again, the legislator makes a choice and indicates that its aim is not solely about providing foreign currency, but also prefers giving precedence to building society (namely manufacturers) to making sales, in order to support those who create added-value and employment by building, rather than those who make property merchandising. Consequently, "first delivery" expression in here, is to exclude pre-owned sales. Due to the same reason, by preferring "first delivery" rather than "first transfer", the aim of delivering the good and not selling it for one year by foreign currency bringers who benefit from VAT exemption, is provided. If we will handle legislator's main goal as providing permanent foreign currency input and making manufacturer sector to benefit from it principally, then understanding the literal of the law will be correct, so preventing unwanted consequences will be possible.

When we evaluate the regulation at (12.2) Art. of the Notice, we need to get back to 10/(i) Art. of VAT which is inserted with the Law no.6824. Last sentence within bracketed of relevant paragraph includes a provision, such that "In case of disposing a property or a workplace within the scope of exemption, in one year, it is a must for taxes that are uncollectible on time, (...) shall be paid with deferment interest, by disposer before title deed transaction". There is an ambiguity in the second part of this sentence. Afterward of the sentence, rather than "before title deed transaction" there should be "before title deed transaction or disposing between delivery time to the end of one year ".  Yet, this sentence doesn't sound consistent as is. When we read the sentence correctly, it is not difficult to understand that the legislator aims to keep the input foreign currency at least one year so that it couldn't have the characteristics of hot money. Making such a regulation by the legislator doesn't need to be perceived "title deed transaction" in (12.3) Art. of the Notice as a precondition. Parties may reach a consensus about price and payment conditions by making an agreement inter se and make a payment in return for the invoice. Again, parties may determine the time of title deed transfer by becoming a part of herein agreement. The critical point in here is; buyer shall not transfer the premise from delivery or from transfer until one year, and by any chance, it is transferred then it should be annotated that the excluded tax needs to be paid with deferment interest rate. Thus and so, protected main goal of the Law will be provided. Therewith it doesn't need to be interpreted the last sentence of the 10(i) Art. of VAT Law provision as: there should be a title deed transfer transaction to benefit from the exemption.

In terms of understanding the topic clearly; it is good to examine an example in the Notice. Let's suppose that parties agreed to payment conditions regarding a property which have a price that comes from abroad as foreign currency by an alien, that this payment will be one-half cash and the other-half will be paid by 6 installments. When we examine the case with intendment and literal of law, as distinct from the Notice, application in this case study shall be:

  1. Parties specify price and payment conditions by agreeing verbally or in a written form. (obligation to make an agreement in an official form to transferring limited property rights, only gives the buyer a right to transfer real property; otherwise, in business life, parties may agree by trusting each other with making a deal in a common or a verbal way.)
  2. Immediately after the agreement, the Seller regulates an invoice which is as far as the cash amount or all the sale price. (number of invoice only effects VAT amount which benefits from exemption as a procreator event of VAT. Parties may either make out an invoice to include VAT into exemption as a lumpsum or may subject this VAT which will be subjected to an exemption not sooner than it arises, into many invoices.)
  3. While the Buyer is giving VAT proclamation regarding a corresponding period of the invoice, the Buyer declares VAT amount in the invoice as an exemption with an indication of a special code as it is described in the Notice.
  4. In accordance with the consensus of the parties, whether the building is finished and ready for use or not; when due become affected, property ownership or access right transfer shall be made.
  5. They add annotation about transfer prohibition of the property by the buyer from last installment date or (if delivery already happened) from the delivery date or transfer of the title deed, to one year; otherwise excluded tax needs to be paid with deferment interest rate.

As it is seen from the example, the application could take place without depending on completion of the building or transfer of title deeds from day one, and it is very easy for tax administration to detect if any misappropriation arises. Besides the only thing that tax administration will do, comprise of obtaining the statement that is referred at (3)rd step and then questioning (4)th step from registries of deeds and controlling the condition which takes place at (5)th step. A contrary idea; namely insisting on ready to use delivery and insisting on transfer conditions, could decrease transaction number, end up with having less foreign currency input, thus will not serve the main aim that the law protects. Abusing this way is not end up with a loss of public finance because the essential tax can be collected with its deferment interest.

To sum up our relevant legal opinion briefly; to benefit from the exemption which is inserted in Art. 13(i) of VAT, it is not mandatory neither to complete real estates as ready to use nor transfer title deeds from day one.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions