Acquisition of real estate by foreigners and non-resident Turkish citizens is encouraged through various regulations by the Government.
With Law No. 6284, published in the Official Gazette dated 08.03.2017, clause (i) has been added to Article 13/1 of the VAT Law, and thus, starting from 01.04.2017, Turkish citizens and foreigners who do not reside in Turkey and meet the conditions have been granted VAT exemption in the first delivery of real estate.
-First Delivery of Residence or Workplace
The exemption is applied at the first delivery to be made by the person who constructs the residence or workplace, in other words "on the first sale". In case the residence or workplace is purchased from the constructors and sold to someone else, the delivery is not considered as the first delivery. For example, if a person who has bought five flats from a construction company sells these five flats to a foreigner, the aforementioned VAT exemption is not possible to be applied. For the construction agreements in return for land share, the construction of real estate on the land is carried out by firstly transferring the land to the contractor company, then constructing the residence by the contractor, and consequently transferring it to third parties. Since the transfer of the landowner to the contractor is not considered within the scope of the first delivery, the real estate sold within the scope of the construction agreement in return for land share is also within the scope of the exemption. It is possible to purchase more than one residence or workplace within the scope of the exemption.
In order for the real estate to be subject to delivery within the scope of the exemption, it must have a construction permit and the real estate must be actually delivered. In residences or workplaces where a condominium is established, the condition of actual delivery is not required.
-Who Can Benefit From VAT Exemption?
- Foreign Real Persons
The following conditions are required; that the domicile of the foreigner is not in Turkey and that they have not resided in Turkey continuously for more than six months in a calendar. Temporary departures from Turkey do not interrupt this period and are included within each other.
Scientists and specialists who come to Turkey for a certain and temporary duty or work, those who come for treatment or travel purposes, and those who stay in Turkey for more than six months for reasons such as arrest or illness also benefit from the exemption.
- Legal Entities
Corporations that do not have their legal and business center in Turkey and do not earn any income in Turkey through a workplace or permanent representative may benefit from this exemption.
- Turkish Citizens
Must met the following conditions together:
- Having a work or residence permit abroad, valid as of the date of delivery,
- Having a permit that is obtained at least six months before the delivery date,
- Being abroad for at least six months between the date of the permit and the date of delivery.
Turkish citizens must prove that they are within the scope of the exemption with residence documents obtained from the governmental authorities of their country of residence and Turkish Consulates, and documents proving that they have been abroad for six months from the date of obtaining a work or residence permit.
- Conditions for Bringing the Real Estate Consideration into Turkey:
- Period of Time for Bringing the Consideration into Turkey
At least 50% of the consideration must be brought into Turkey in foreign currency by the buyer and paid to the seller within one year at the latest before the invoice for the sale is issued.
- Form of Bringing the Consideration into Turkey
It is essential to bring foreign currency abroad by transferring it to a bank in Turkey. In case the foreign currency is transferred to a bank in Turkey, the transfer transaction is documented with a bank receipt. It is also possible to bring the foreign currency abroad into Turkey physically by the buyer, in this case, the foreign currency brought into Turkey will be proven with the declaration forms taken from the customs administrations.
Selling out the Residence or Workplace within One Year
In order to implement the exemption in the delivery of residence or workplace, a transaction must be established in the land registry.
Those who make sales within the scope of the exemption notify the land registry directorates that the sale of residences or workplaces is made with an exemption from VAT within the scope of Article (13/i) of Law No. 3065. Upon this notification, an annotation is attached in the declaration section of the land registry by the land registry directorates stating that in case these residences or workplaces are sold out within one year, the tax which was not collected before will be paid together.
Failure of the Duly Realization of the Exemption
If it is determined that the exemption is implemented even though it does not meet the conditions, the buyer and the seller are held jointly responsible for the tax, penalty for the loss of tax, and interest of default not collected before.
Realization of the Return
In case the refund is requested to be made by deduction, regardless of the amount, it is carried out without seeking a tax inspection report, CPA (Certified Public Accountant) report, and security. Again, cash refund requests not exceeding TRY 5,000 are also carried out in this way. In case the refund request exceeds TRY 5,000, the refund of the excess amount is carried out based on the tax inspection report or CPA report. If security is provided, the taxpayer's refund request is carried out and the security is released based on the result of the report.
As a result;
Value-added tax shall be considered within the scope of the exemption in the acquisition of a real estate by non-resident foreign citizens and Turkish citizens, and corporations that do not have a legal and business center in Turkey and do not earn income through their workplace or permanent representation provided that the following conditions are met together;
- The real estate must be a residence or a workplace (residence or workplace defined as a residence, shop, office, bureau, etc. in the construction permit),
- The building must have a construction permit and also a floor servitude must be established
- The real estate must be actually delivered, ready for the use of the buyers (confirmation of the actual delivery is not required for the delivery of residences or workplaces with condominium ownership),
- The delivery must be the first delivery,
- At least 50% of the consideration must be paid to the seller before the invoice for the sale is issued, and the remaining must be paid by bringing into Turkey in foreign currency within one year at the latest,
- The transaction must be made regarding the sale at the land registry and the land registry directorates must be informed that the transaction is made.
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.