FOREİGNERS' RİGHT TO ACQUİRE REAL ESTATE İN TURKEY

Although the acquisition and inheritance of real estate by foreigners has been subject to legislative amendments multiple times in Turkish Law; until 1868, earlier before the Republic, foreign real persons were not given any right to acquire immovable property, with some exceptions.

The citizens of France, Sweden, Norway, Belgium, England, Austria, Denmark, Prussia, Spain, Greece, Russia, Italy, Dutch, USA, Portugal, Iran and Romania excluding the Hejaz land, in accordance with the Safer Law adopted on 08.06.1868 and the Protocol dated 09.06.1868 were considered as equal with their Ottoman subjects and this continued until 1914, when the law on the abrogation of capitulations begun to be implemented.

With the Treaty of Lausanne signed on 24.07.1923, it was decided that reciprocity would be seeked in the acquisition of real estate by foreigners. In the Article 35 of the Land Registry Law dated 22.12.1934 and numbered 2644 regulated within scope; without prejudice to other legal verdicts regarding the restriction, foreign real persons have been ensured the right to acquire and inherit immovable property in Turkey, provided that they are reciprocal. However, making changes in Article 35 of the Land Registry Law through Law No. 6302, foreigners' acquisition of real estate were tightened up. That is to say; it has been declared that the total area of the immovables acquired by foreign nationals and limited real rights of independent and permanent nature cannot exceed ten percent of the area of the district subject to private ownership and thirty hectares per person throughout the country. Hence, a spatial restrict has been imposed on foreigners acquisition of immovables. Furthermore, there may be a zonary limitation except the spatial limitation. As a matter of fact; acquisition of immovables by foreigners in military districts and safe districts is banned through Law No. 2565.

Consequently, foreigners within the scope of up-to-date regulation; can acquire real estate and  inheritance in the case of inheritance or any other legal reason in Turkey, taking into account the reciprocity and the Article 35 restrictions. Hence, the existence of the principle of reciprocity between the country of foreign nationality and Turkey should be checked out in the lawsuits filed first, and according to the result, right ownership should be given within the scope of Article 35. If not, then a decision will be taken with incomplete research and evaluation.

In fact; in the decision of the Supreme Court of Appeals 14. HD., E. 2016/8030 K. 2017/1328 regarding the request of a foreign real person for an inheritance certificate; "In the present case, considering that there is a legal benefit in filing the case with adversary, because the immovables (which were claimed to belong to the deceased before) that the court decided to register on behalf of the defendants on the grounds that the owner was not found, whether there is reciprocity regarding the inheritance of the immovables between Turkey and ... on the date of death of the inheritance; according to the reply of the letter from the Ministry of Foreign Affairs by asking the Ministry of Justice through the General Directorate of International Law and Foreign Relations, the other evidence in the file should have been evaluated together and a decision should be made according to the result, it was not considered correct to make a written decision with incomplete examination and research, hence the decision had to be cancelled." showed that the element of reciprocity should be checked out in giving right ownership to foreigners.

With real estate right ownership; foreign real or legal persons who have acquired a real estate are also liable for tax and charges related to the immovable property. As a matter of fact; they are subject to taxation as limited taxpayers for rental income and sales of their real estates. Furthermore, the rental and sale of real estate can be subject to value added tax in some cases.

Liabilities of tax and charges foreign investors will come across to in the process that will start with the transfer of the real estate are as follows;

1. TİTLE DEED FEES

The payer of this fee would be the transferor and the transferee. The fee is collected separately for both parties at the same rate. The fact that the buyer is a foreign person or legal person does not change the title deed fee rate. The title deed fee is valid for all real estates (residence, workplace, plot, field/farm, land, etc.).

2. PROPERTY TAX

According to real estate law, any residence , workplace or land within the borders of Turkey is subject to Property Tax. For this reason, foreigners who buy real estate in Turkey are required to pay Property Tax. If these real estates are within the boundaries of the metropolitan municipality and adjacent areas, the rate to be applied doubles. The requirement to pay Property Tax starts one year after the real estate is purchased.

3. TAXES ON INCOME

Two types of income can be acquired from real estate purchased by foreigners which are rental income and property sales income. In this case, the real estate owner being a foreign real person or company will make a difference in the tax implementation.

3.1-Rental Property Income

If the recipient of the rental income is a foreign real person, the property will be subject to property income tax. If there is no double taxation agreement in force between the state of the Republic of Turkey and the country where the foreign owner is residing, the property is subject to taxation. If such an agreement is in force, an action will be taken in accordance with its relevant verdicts.

3.2-Property Sales Income

If a foreign natural person is constantly into buying and selling procedures, then the acquisitions are accepted as commercial income and the income acquired from the sale of the property is subject to capital gains tax (CGT).

3.a-Real Estate Sales Incomes Acquired by Commercial Companies

If the rental income is acquired by a company established in Turkey, it is directly considered as commercial income. Corporate tax to be applied for rental income can be discounted through personnel expenses and financial expenses. Although it has been changing in recent years, commercial companies are subject to corporate tax at a rate of 25% for 2021 and 23% for 2022.

3.b-Real Estate Sales Incomes Acquired by Companies

As given above, the income of corporates is processed according to the commercial income clauses.

3.c-Rental Income Acquired by Foreign Companies

Foreign companies carrying on their operations in Turkey are considered as limited taxpayers. Only the rental income acquired within the borders of Turkey is taxed through stoppage for businesses or buildings owned. Stoppage is applied to the rental payment of limited taxpayers, and the aforementioned stoppage must be notified to the tax office by the taxpayer of the rent.

3.d-Real Estate Sales Incomes Acquired by Foreign Companies

In case the limited taxpayer foreign companies sell their property in Turkey, the income acquired will be determined within the context of corporate tax. As mentioned above, whether this acquisition is commercial or whether the capital obtains income can differ. Income from the purchase and sale of the property will be subject to corporate income tax. The rates of corporate tax have been given above.

4. INHERİTANCE AND SUCCESSİON TAX

If the property of a foreign real person in Turkey is transferred back to a foreigner through inheritance or transfer, the inheritance and succession tax is applied without taking the country of residence of that person into account. Since the transfer is carried within the borders of Turkey, the foreign country does not matter here. The fact that the parties to the transfer are real or legal persons does not affect the tax application.

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.