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The lower limit of fixed capital investments to acquire
Turkish citizenship for foreigners is $500,000.
Foreigners who own real estate in Turkey worth a
minimum of $250,000 can avail Turkish citizenship.
The deposit requirement in Turkish banks is minimum
$500,000 to acquire Turkish citizenship.
Foreigners who generate jobs for minimum 50 employees
will also be able to take Turkish citizenship.
Foreign investors should hold the properties or continue
the minimum limit of financial investments for at least
3 years to meet the criteria for Turkish citizenship.
Those, who are determined by the Capital Market Board to
have purchased the “real estate investment fund share”
or the “venture capital investment share” for minimum
$500.000 or in equivalent currency or equivalent of this
amount in Turkish Liras on the condition that they hold for
three years, may become Turkish citizens as well.
Those, who are determined by the Ministry of Treasure
and Finance to have purchased the Public Debt Tools of
$500.000 or in exchange of this amount in Turkish Liras
on the condition that they hold for three years, may also
become Turkish citizens.
For meeting the criteria identified for Turkish
Citizenship, foreign investors should hold their properties,
bank accounts or the investment tools they procured for
minimum three years or maintain the minimum financial
investment limit.
How to buy property in TURKEY?
We created an important source answering all the questions that guide foreign individual investors and help while buying real estate. This book in which you can find all the procedures to own real estate in Turkey easily and in detail will be a referenceguide covering all the main subjects worthy of notice about the processes like making the most correct real estate investment, evaluating this investment and selling it for the right price.
Why Should You Invest in Turkey?
Turkey with its geopolitical position, natural and cultural richness, transportation facilities and
newly constructed bridges, airports and developed tourism, retail, entertainment, event and congress
tourism is quite an attractive country for the foreign investors and at the same time a powerful country
with its stable economy. With its growing economy, mega projects in the real estate sector and sectoral
dynamics, Turkey will continue to harbor new opportunities, provide its investor with added value and
increase its value in the future.
The Turkish real estate sector has been one of the sectors managing to sustain its growth despite
all the economic, political and social issues we have been through as a country. According to the
statistics of Turkish Statistic Institute (TÜİK), the housing sales increased by 5,6 percent and 1 million
409 thousand 314 houses were exchanged in overall Turkey in 2017 as of the end of September 2018,
housing sales are 1.002.391,0 units. Accomplishment of such a performance in spite of all experiences
that our country encountered in 2018 is the reflection of the trust in the real estate sector and the
stability of the Turkish economy.
Also granting citizenship to the foreign investors buying real estate in our country is a pleasing
development in order to attract the foreign investors to our country. It became possible for a foreigner
to acquire Turkish citizenship by purchasing a property worth at least USD 250,000. This regulation
also for the investors investing minimum USD 500,000, for people depositing USD 500,000 or for
investors providing employment to a minimum of 50 Turkish citizens as well. Moreover, with the new
legal regulation of our government, VAT exemption granted to the foreign investors. According to the
new VAT regulation, the foreign investors will have the right of buying real estate without VAT but will
not be able to sell these estates for a year.
What are the facts and figures about Turkey?
* Istanbul is the largest city by population with 15.02 million.
* Up to 400 point direct flights from Istanbul,22 direct access to the capital cities within 2 hours.
* 1.409.314 housing sales annually in Turkey at 2017. As of the end of September 2018, housing sales
are 1.002.391,0 units.
* Over USD 10,8 bn FDI in 2017, over USD 3,1 bn FDI at the end of April 2018.
* A population of 80,8 mln 47.3% under age 30.
* 6.5 mln residential units are expected to be regenerated in the next 20 years, an industry of
USD 400 bn.
* Economic growth 7,4% in 2017. The Gross Domestic Product estimate increased by 6,2% as the chained volume index in first 6 months of the year 2018, compared to the same first 6 months of the previous year.
* 18th largest economy in the world. Expected to become within the first 15 economy in the world by 2050.
* Secondary potential cities for investment:
Ankara, İzmir, Antalya, Bursa, Kocaeli and Mersin. Istanbul, as the financial centre of
Turkey, has a growth potential ofadditional office development.
* 22 cities over 1 million population.
*Turkey is visited by 32,4 mln tourists in 2017.
* Implemented urban transformation projects increases the property
market of Istanbul.
Can foreign real persons acquire real estate?
Foreign real persons, who are citizens of the countries that have been
announced by the Council of Ministers (except for Syria, Armenia, Cuba,
Israel and Cyprus) are entitled to acquire ownership rights in Turkey.
In any event, the total size of land cannot exceed 300,000 sqm for each
person. In addition, foreign real persons are only entitled to acquire real
estate up to 10% of the total surface area of the relevant district. The
Council of Ministers holds the authority to increase such amount per
person.
In order for a foreigner to officially understand whether or not she/he can
acquire a specific real property, the prospective buyer must apply to the
relevant land registry office for approval. The acquisition can be performed
upon the issuance of the relevant land registry’s approval.
Is there a different procedure applicable for property acquisitions performed by foreigners?
Aside from the procedure mentioned above, there are no differences
between foreign real persons or Turkish citizens regarding an acquisition
of property.
Is there a different tax treatment for property transactions in Turkey between Turkish taxpayers and foreigners?
In principle there is no difference between Turkish residents and nonresidents for property acquisitions for taxation purposes. Foreigners are subject to the same rules with the Turkish citizens/residents. But, in
May 2017, law has passed from parliament regarding VAT free real estate acquisition for foreigners. (Please refer to VAT section for details) In that sense, being a foreigner would be much more advantageous for real estate
acquisitions for the first sale of new buildings built as residences and workplaces.
Is there a difference between the procedures to be applied for office and villa or apartment/condo acquisition?
The land registry system used in Turkey is a reliable and secure system, whereby every real estate transaction is
officially registered.
Transactions involving acquisition of office and villa or apartment/condo are subject to the same official procedures.
Can the foreign successors of the foreign property owner inherit the property?
The foreign successors can acquire real property by way of inheritance, subject to the following conditions; (i) the successor must be a citizen of the countries that have been announced by the Council of Ministers; (ii)
the real property shall not be within the borders of restricted zones (such as military zones, security zones, etc.) (iii) the total size of real property that will be inherited by a single successor shall not exceed 300.000 sqm
and 10 % of the total surface area of the relevant district.
If the successor is not entitled to acquire property due to any of the abovementioned
restrictions, the successor is obliged to sell the property to an
eligible third party within a maximum period of one year. Otherwise, the
property will be sold by the Ministry of Finance, and the sale price will be
paid to the successor.
How to find a property: Is it necessary to use a real estate agent?
Property can be acquired through a direct transaction that is completed
with the landowner or, alternatively, a real estate agent may be hired to find
a suitable property satisfying the relevant requirements. Real estate agents
are paid via commission if and when the transaction is completed. As per
market practice, the real estate agents charge 3-4% (including VAT) of the
purchase price. Such commission is usually borne equally between the
buyer and the seller.
Am I paying the right price?
There are real estate appraisal companies which determine the current
market value of properties. These companies can be used to understand
the accuracy of the purchase price. Alternatively, real estate agents working in the neighbourhood can be
visited to understand the market value of the properties within the relevant area.
How secure is the Turkish land registry system?
The land registry system used in Turkey was initially formed by the
Ottoman Empire, and gradually developed into the existing system
over the years. It is a reliable and secure system, whereby every piece of
real estate transaction is officially registered. Land registry records are
public; therefore, the rights of third parties, who acquire ownership or an
interest in any form of real estate in land registry records, are respected.
Beyond the official ledgers, information regarding the legal status of real
properties (ownership rights, rights registered in favour of third parties,
encumbrances, etc.) is also maintained in a computer system called Takbis.
Is it necessary to conduct a site survey?
Before proceeding with any real estate transaction, it is advisable to
conduct a site survey to provide information regarding the legal status of
the target property, and to identify any foreseeable legal risks and their
effect on the use of the subject properties for the intended purpose. The
main information and documentation to be evaluated in carrying out such
site survey are as follows:
• Evaluation of current ownership
Ownership details of the property should be examined prior to the
transaction to ensure that the seller legally owns the property.
• Encumbrances over the property
Title deed records of the property should be examined to determine if
there are any outstanding liens, mortgages, or any other encumbrances in
favour of third parties attached to the property. It should be also examined
if there are any other annotated rights, such as easements, promises to sell,
etc. If there are no encumbrances or annotations, the ownership of the
property may be transferred without any restriction or legal risk.
• Cadastral Records
The cadastral records of the property must be in conformity with the
relevant zoning plans, and must not contain any notable or unusual
information. Also, the cadastral borders (ownership borders) of the
property must match the borders of the property as indicated in the zoning
plans.
• Zoning Status of the Property
The zoning plan and plan notes must be examined before the municipality
in order to identify the types of activity (such as residential, office, hotel,
etc.) building can be used for.
• Construction License and Building Utilization Permit
The construction license and building utilization permits are the main
permits that must be obtained from the relevant municipalities in order
to construct a new building or to carry out alterations to an existing
building. The property must hold a valid construction license and building
utilization permit that confirming that the building is constructed in
accordance with the construction license. If the reason for the lack of an
occupancy permit is an inconsistency between the completed building
and the construction license, the relevant municipality may demolish the
building or require it to be modified so as to conform to the construction
license, and the landowner may be subject to various fines, as well.
• Current Physical Status of the Property
The actual status of the property and its neighbourhood should be
evaluated by visiting the property. Due diligence regarding the compliance
of the current physical status of the property with its original as-built
projects should be carried out before entering into any agreement.
What are the main types of purchase agreements?
• Purchase/Sale Agreement (Direct Acquisition)
According to Turkish law, the sale of a property can only be completed
before the relevant land registry with the attendance of both the seller and
purchaser. In order to transfer the ownership, the parties must execute a
standard transfer deed prepared by the relevant land registry.
Acquisition of the property can be accomplished through purchase
directly from the existing landlords. Real estate agents, if involved, charge a
commission for their involvement in the purchase as mentioned under our
response to previous question.
• Promise to Sell Agreement
Prior to the sale of property, the seller and purchaser may enter into a
preliminary “Promise to Sell Agreement.” This is the only preliminary
agreement that can be validly executed between the parties and, in order to
be binding, it should be prepared by and signed before a notary public.
If you are to buy a building under construction, make sure that the contractor is financially reliable and legally authorised.
In order to qualify for protection against third party claims, the Promise
to Sell Agreement should be registered with the land registry. In the event
of non-registration of the Promise to Sell Agreement, any subsequent
purchase of the property by a third party acting in good faith will be valid.
The annotation will be valid for a period of five years.
What are the payment options available?
The purchase price of the property may be made cash, via wire transfer or
blocked checked.
Should the acquisition of the property be done in person?
Either the purchasing party (i.e. foreign real person) or his/her legal
representatives can conduct transactions regarding the acquisition of
property. If acquisition transactions are carried out by way of a power of
attorney, such power of attorney must be drafted and regulated by a notary
public, and must also be signed before the notary public, who, under
Turkish Law, has the power to control and certify that the authorization to
act on behalf of such person is being duly granted. The power of attorney
that is to be used for the acquisition of property must include the full name
and address of the legal representative(s), as well as all of the authorities
granted to the legal representatives for the acquisition of the property.
If the power of attorney is drafted and executed abroad, the following steps
should be taken: (i) a photo of the signatory must be included, (ii) the
photo must be signed, sealed or stamped by the relevant authority issuing
such PoA, (iii) the power of attorney must be prepared in the official
language of the issuing country and (iv) the power of attorney should be
notarized and apostilled. In order to be binding, the translation of such
power of attorney must be notarized in Turkey.
Are there any rules regulating the right and obligations of the
parties living in the same property? (Condominium
Law-Management Plan)
A management plan is an agreement between condominium owners that
regulates the management of the main structure and common areas. All
condominium owners and their successors are bound by the provisions of
the management plan.
The purpose of the management plan is to determine rights and
obligations of the parties to each other, who live in the same property,
and to provide rules on the management of the property concerning the
purpose and method of use and the other issues related to management,
such as operations, auditing, maintenance, and repair work, and to
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11
ensure the establishment and continuity of a peaceful, healthy, safe and
proper working system of the property in accordance with the rules of
Condominium Ownership Law.
The provisions of the management plan are valid to the extent they are
in compliance with the provisions of the Condominium Ownership
Law. Accordingly, condominium owners cannot add provisions into the
management plan that alter or substitute the mandatory provisions of the
Condominium Ownership Law.
The board of condominium owners (the “Board”) is responsible for
the management of the common areas. The condominium owners are
the natural members of the Board, and are entitled to participate in the
management of the entire building in accordance with the provisions of the
Condominium Ownership Law. The Board may outsource management
power to professional management companies.
In addition, each person has also rights and obligations to the other
persons living in the same property arising from Condominium
Ownership Law and Civil Law.
Is it necessary to hold a tax number to acquire a property?
A tax number is requested from the buyer at the time of the property
acquisition before the land registry. A foreign real person may obtain a
tax number by applying to any tax office, together with a copy of his/her
passport (translated and certified by a notary public).
What are the main taxes related to property transactions?
In principle every property acquisition for individuals are subject to some
transaction taxes such as “Title Deed Fee”, “Value Added Tax”, “Stamp
Duty,” and “Notary Charges”. Additionally, holding a property in Turkey
triggers a wealth tax called “property tax.” Income derived from property
such as rental income or capital gain obtained at the time of disposal of
property would also subject to “Income tax”.
Each tax mentioned above would subject to specific calculation, payment,
declaration rules and of course have some exemptions.
What is “Title Deed Fee”? How it is calculated and paid?
“Title Deed Fee” is calculated according to the “Fee Law” for the
transactions concluded at the title deed registry such as property buying/
selling, registration of rental contract, annotations of any transaction made
at registry etc. At the time of acquisition, title deed fee at the rate of 2%
(Decreased to 1.5% until 31 Oct 2018) is applicable over the sales price for
buyer and seller separately. Fee has to be paid to the tax office before the
transaction made at the registrar.
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As per Resolution No. 2018/11674 of the Council of Ministers and
Amending Annex of the President’s Decision Declaring No. 287 dated
31/10/2018, the title deed fee rate applicable to sale of residences and
workplaces is reduced until 31 March 2019. After 31 March 2019, the
buyer and the seller will continue to separately pay a title deed fee at the
rate 2% over the sales price, unless a new legislation is enacted until such
date.
Is VAT applicable for all property acquisitions in Turkey?
In principle every commercial, industrial and professional transaction made
in Turkey is subject to VAT. So, in principle property sales also fall into
the scope of VAT. On the other hand in the following cases there is no VAT
applicable for property sales:
“Initial transfer of a residence or a workplace to a purchaser who is, (i)
a Turkish citizen living abroad for more than 6 months with a work or
residence permit, (ii) a foreign person, not residing in Turkey, or (iii) a
legal entity which does not have its business center in Turkey and does
not generate income via a workplace or a resident representative in Turkey
is exempted from VAT. It shall be also noted that a VAT exemption of a
foreign person/entity for the aforesaid transactions is only applicable, if
the transfer fee of the real estate in such transactions are brought to Turkey
and paid to the seller in foreign currency. In addition to that, the said
property must be held for at least one year after the acquisition. In case
that the property is sold within a year after the acquisition date, the VAT
will become payable together with late payment interest.”
- If the seller/owner of the property is an individual who is not dealing
with any commercial activity.
- If the seller of the property is a company which is not dealing with real
estate trading on a regular basis and having held the said property for more
than two years.
What are the VAT rates to be applied for property acquisitions?
General VAT rate in Turkey is 18% and this rate is also applicable for the
property sales. In principle property sales including office, residential
properties, land acquisitions etc. are all in principle supject to 18% VAT
which is calculated over the sales price in principle.
But, there are different VAT rates set for the residential properties fulfilling
some specific conditions. Please note that all residential unit (except which
are subject to 1% VAT) and workplace sales will be subject to 8% VAT until
March 31, 2019.
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13
What are the VAT rates specific to residential property sales?
“In addition to the normal VAT rate of 18%, rates of 1% and 8% are also
applicable to residential units having a net area of less than 150 sqm,
according to certain conditions. If the project is within the scope of urban
regeneration, the 1% VAT rate is applied regardless of the value of the
property. With a recent enactment in legislation, the thresholds for tax
values have been increased in favor of tax payers, which is applicable to
new projects (with a commencement date after 1 January 2017). Thus, we
strongly suggest consulting your tax advisor for the exact VAT rates for
a residential unit with a net area of less than 150 sqm. Please note that
residential units having a net area of more than 150 sqm and all other
properties in Turkey are subject to the 18% VAT as mentioned above.”
Please kindly note that all residential unit sales other than the ones
that subject to 1% VAT, will be subject to 8% VAT without any net area
limitation till March 31, 2019. Also, please refer explanations under
“Is VAT applicable for all property acquisitions in Turkey?” section
for VAT free acquisitions.
What is “Stamp Tax” and how is applied to the property
transactions?
In principle agreements signed in Turkey are subject to stamp tax over
the highest monetary value stated or referred in the agreement at 0.948%
Please note that Promise to Sell Agreements are exempt from stamp tax
and Prepaid Residence Sell Agreements are subject to 0% stamp tax.
Leasing agreements are subject to stamp tax at 0.189%. On the other
hand, agreements signed between individuals who are not dealing with
any commercial activity do not subject to stamp tax. Signatory parties
are mutually liable for the payment of the stamp tax. No stamp tax is
calculated if parties conclude their agreement in front of the title deed
registrar.
What are the financing models for a property acquisition?
The most common financing for property acquisitions is mortgage
financing, under which the financing institution establishes a mortgage
over the target property in consideration for a loan of up to approximately
80% of the market value of the target property. Foreign real persons are
also entitled to benefit from this mortgage financing model offered by
Turkish financial institutions.
What kind of loans am I offered?
There are fixed rate and floating rate loans both on the shelf. But fixed rate
loan is common in Turkey. So, by choosing the first one, you can pay your
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loan with equal monthly instalments and a fixed interest rate through the
life of your loan. By doing so, a fixed interest rate enables you to learn the
exact amount of your monthly instalments in advance and your loan will
not be affected by volatile market conditions.
How establishment of a Mortgage is done?
A mortgage can only be established through an agreement in compliance
with a certain official form. The official mortgage deed must be executed
and registered by the parties before the relevant the land registry office.
The legal scheme concerning the establishment of liens on immovable
properties, i.e. mortgages, is mainly regulated under the Turkish Civil
Code numbered 4721 (the “TCC”). Pursuant to the local regulations, a
mortgage can be established on an immovable property in order to secure
current or future credits. A mortgage can only be established on real estate
that is registered in the title deed registry.
Foreign real persons can become the mortgagor without being subject to
any approval.
As a foreigner which requirements should I meet for the
mortgage? What are the application conditions?
To get any kind of loan, including mortgage, it is legally compulsory to be
18 years or older.
Even though incomplete houses are also subject of mortgage in some
certain conditions, common practice requires that the property to be
purchased must be ready to be occupied and have minimum right of
easement.
Maximum LTV is up to 80% of the value of the property that you are going
to buy.
Even though 120 months is most preferred one, loan maturity for
mortgages goes up to 180+ months.
As loan currency, you can prefer TRL, USD, EURO or some other
convertible currencies if available. However, there are certain restrictions
for foreign currency loans.
Is there a compulsory property insurance requirement?
According to the Law on Natural Disaster Insurance, “compulsory
earthquake insurance” (DASK) must be held for the property. The title
deed registries and the institutions providing utility services will not
perform any transactions regarding the property if this compulsory
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15
insurance is not held. Apart from such mandatory insurance, the owner
of the property may, at his/her own discretion, insure the property against
risks, including, but not limited to, theft, fire, flood, storm, etc.
What are the other conditions to be remarked for financing?
In order to protect your property, mandatory earthquake insurance
is required. For other possible risks; life insurance and home owners
insurance are recommended.
A guarantor is not necessary at the time of application. However, a
guarantor or co-borrower may be required as additional collateral.
For fixed rate mortgages, a certain percentage of the pre-paid amount may
be charged as a pre-payment penalty.
Following the approval, what are the phases to finalize the
process?
There are three quick phases to finalize the process before title deed
transfer.
• Appraisal
If your loan application is approved by a financial institution (FI),
there will be an appraisal process to determine value and confirm legal
conformity of the property you are going to buy. The appraisal process is
committed through the FI and finalized in a few days.
• Pre-contractual Information Sheet
After the appraisal process is completed, you have to sign the precontractual
information sheet. According to the Turkish Mortgage Law,
the loan contract must be signed reasonable time after the pre-contractual
information sheet has been signed. The pre-contractual information sheet
contains all the important details of your loan, payment schedule, interest
rate, principal amount, monthly instalments and all the fees.
• Signing Loan Contract
Once the pre-contractual information sheet has been signed, a reasonable
time later (one business day in practice) you can sign the loan contract,
payment schedule and other credit documents.
After you sign these documents, the pledge documents are prepared
by the FI.
If all required documents are complete and accurate and submitted in a
timely manner, it takes on average a week from the application date to
disbursement day.
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How is the disbursement and title deed process?
On date of appointment, the FI contiguously establishes the first degree
lien on the property after registration of sale of the property in title deed
office. Then the FI transfers the loan amount to the seller’s bank account or
delivers a guaranteed check for the loan amount to the seller.
Transanction costs- title deed
transfer charge: A tax of 2 % is
payable on the sale of the real
property. This charge is payable by
both buyer and seller seperately
Acquisition phase
17
Holding
phase
Is it possible to obtain a residency permit after acquiring a
property?
According to the “Law on Foreigners” and “International Protection”,
foreigners who have acquired property in Turkey are entitled to apply for a
short-term residency permit. Short-term residency permits are granted for
a period of up to two years for each application. The applicant is required
to declare a residence address when filling out the forms.
Is it possible to obtain citizenship, after acquiring a property?
As explained above, the foreigners who have acquired property in Turkey
are entitled to apply for a short-term residency permit up to two years. As
per the Turkish Citizenship Law and the Regulation on the Application of
the Turkish Citizenship Law, a foreigner may acquire Turkish citizenship
by residing in Turkey for continuously five years before the date of
application.
However, there has been a recent amendment in the Regulation on
the Application of the Turkish Citizenship Law and with this recent
amendment; it became possible for a foreigner to acquire Turkish
citizenship by purchasing a property worth at least USD 250,000.
Additionally, it is also possible to acquire Turkish citizenship by entering
into promise to sell agreement via notary public for an immovable,
provided that the the condomnium ownership or condomnium servitude
is established for the said immovable, (ii) the applicant paid in advance
at least USD 250,000 or equivalent Turkish Lira or foreign currency
amount and, (iii) the agreement is annotated to the land registry with the
undertaking not to assign or de-register the agreement for three years.
So, if the value of the property is equivalent ot more than USD 250,000,
the foreign owner of such immovable will not have to wait for 5 years
to acquire Turkish citizenship after having the short-term residency
permit. Ownership of such property should be kept for a period of 3 years
minimum.
As per the Regulation, an annotation must be registered in the land registry
records of such property stating that the property would not be subject to sale
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for 3 years. Thus, it will not be possible to sell the property within 3 years if
the foreign owner of the property has acquired citizenship after purchasing
the property.
How to start using the utility services?
The owner of a property may only apply for subscription of the utility
services (such as electricity, water and sewage system connection) following
the issuance of the building utilization permit. Accordingly, if the building
utilization permit is in place, following the acquisition or leasing of the
property, the new owner or tenant must apply to the relevant institution,
and should execute an agreement regarding usage of the relevant utility
service. The new owner or tenant can use the utility services following the
execution of the utility service agreement, and after making payment of the
subscription or deposit fee.
What are my tax liabilities if I hold the property only for my own
use?
Income tax is applicable only if you rent your property and earn “rental
income” or sell your property and derive “capital gains”. So, if you hold
your property in Turkey only for your own use and not rent it to any other
parties, you will not be subject to any income tax in Turkey.
Can I lease my property to third parties?
Turkish citizens as well as foreign real persons are free to dispose of their
property. They may sell, lease or pledge their property to third parties.
Can the parties freely determine rental amounts?
The freedom of contract is one of the main principles of the Turkish Lease
Law. Therefore, except for the mandatory provisions of the Turkish Code of
Obligations (TCO), the parties can freely determine contract terms, including
rental amounts.
Is rental adjustment possible?
Parties to a lease agreement can regulate a rental adjustment rate.
According to the TCO, adjustment rates for rents paid in Turkish Lira
cannot exceed the Producer Price Index. However, the parties may
determine a higher adjustment rate in their lease agreement and exercise
such rate if they both agree to do so. In the event that the rental is
determined as a foreign currency, no adjustments can be made to the
You can use the utility services following the
execution of the utility service aggrement, and after
making payment of the subscription or deposit fee.
Holding phase
19
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rental for the first 5 years. However, such restriction shall not apply until
1 July 2020 for lease of workplaces if the lessee is a merchant as specified
under the TCC or a private/public legal person.
Is foreign currency rental possible?
The parties may determine a foreign currency for rent payments. As
mentioned above, if the rental is determined as a foreign currency, no
adjustments can be made to the rental for the first 5 years. After the expiry
of the first 5 years, the judge will determine the rental in accordance with
(i) the PPI, (ii) the current status of the leased property, (iii) the precedent
rentals, and (iv) changes in the foreign currency.
The law stated in the previous paragraph has very recently been replaced by a
new presidentail decree no.85 that came into force (i.e Decree On Amendment
To Decree No. 32 Regarding Protection Of Value Of Turkish Currency
“Decree”). Among others the Decree states that, “The prices under the lease
agreements executed by and between persons residing in Turkey cannot be
denominated in any foreign currency or cannot be indexed to any foreign
currency, except for the circumstances determined by the Ministry.” This
legislation is not applicable for non-Turkish residents.
The secondary legislation, the Communiqué (No. 2018-32/52) Amending the
Communiqué (No. 2008-32/34) Regarding Decree No. 32 On the Protection
of the Value of Turkish Currency (“Communiqué”) was published to
introduce the exceptions and details on the Decree. The Communiqué repeats
the restriction to denominate the agreement price and any other payment
obligation arising from lease agreements for real estate in foreign currency
or indexed to foreign currency. However, the Communiqué introduced an
exception to this restriction. Accordingly, agreements for the lease of real estate
are no longer subject to foreign currency restrictions if executed as tenant
by non-citizens residing in Turkey; Turkish branches, representation offices,
offices or liaison offices of persons residing outside of Turkey, or Turkish
subsidiaries in which such persons directly or indirectly hold a 50% or greater
interest and/or hold under joint control and/or control; or companies located
in free zones, so long as the agreement is in relation to their activities in free
zones.
What is the maximum lease duration?
There are no restrictions regarding the term of a lease agreement. Parties are
free to determine the term of the lease agreement by mutual agreement. The
TCO also regulates extensions of term of lease agreement in case there is no
mutual agreement between the parties and it also determines conditions to
terminate.
An independent lawyer will negotiate on your
behalf and advise you on any penalties you might
incur for late payment or other delays.
Do lease agreements bind third parties?
Lease contracts can be annotated before the relevant title deed registry. In such
a case, the tenants are entitled to claim their rights against third parties, such
as a new owner of the property. The annotation of a lease agreement prevents
eviction of the tenant (during the lease term) from the premises, if and when
the property is transferred to a third party.
How is my rental income taxed in Turkey?
Rental income is subject to “Income Tax”. Income Tax is calculated on a yearly
basis by taking into consideration for all rental income collected during the
calendar year. Rental collections relating to the previous years and current
year are subject to tax as the income of the year in which collection is made,
whereas collections made for future years in advance are taxed as income
of the year to which they relate. Moreover, the income obtained at the time
of a lease transaction made on the basis of a foreign currency is converted
to Turkish Lira using the exchange buying rate of the Turkish Central Bank
effective on the date collection is made and the tax is levied accordingly.
Yearly rental income is declared via an annual income tax return between 1st
and 25th of March in the following year that the rental income is obtained
and taxed at the rates between 15% and 35%. Income Tax is paid in two equal
instalments in March and June.
Specific portion of the rental income derived from residential property is held
to be exempt from Income Tax. The exempt amount is TRY 5,400 for the year
2019.
Taxpayers who derive rental income that is subject to withholding tax (please
refer to the following question for details) will submit a tax return in the event
the gross amount for this rental income exceeds TRY 40,000 which is the cap
set for submitting a tax return in 2019. At the time of determining this cap, the
gross rental income which is subject to withholding tax as well as residential
rental income exceeding the exemption amount are taken into account
together. In the scope of declaring rental income obtained during a calendar
year, individuals are allowed to deduct some expenses.
As regards expenses to be deducted while determining the base for the
rental income to be taxed, there are two methods that can be selected by the
taxpayers. These are:
Holding phase
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• Real Expense Method
In case of selection of the real expense method, following expenses that are
incurred in relation to the leased properties can be deducted from the gross
rent amount:
- Lighting, heating, water and lift expenses
- Administrative expenses,
- Insurance expenses for the properties and rights leased out,
- Interest expense of the borrowing made and spent for the properties and
rights leased out,
- 5% of the acquisition amount of the property rented out for residential
purposes for a period of five years (this deduction equalling the 5% of
the acquisition amount will only be applied to the income derived from
the relevant property, the portion not deducted will not be treated as
excess expense),
- Property tax, duties, charges and goodwill as well as participation amounts
for expenditure paid to municipalities,
- Amortizations,
- Repair expenses,
- Rents and other real expenses paid by those who have leased out properties
and rights which they have rented.
- Rent amounts of residential or accommodation units occupied by those
persons who lease out their residential units (excluding rent amounts paid
by non-resident taxpayers in a foreign country), and
- Damages, losses and indemnities.
The portion of these expenses corresponding to the income amount held
exempt from tax cannot be deducted.
• Lump Sum Expense Method
Taxpayers who prefer the lump sum expense method can deduct the lump
sum expense corresponding to 15% of the amount remaining after the
offsetting of exemption amount from the rental income. Taxpayers who prefer
this method cannot use the real expense method for the next three years.
What happens if my lessee is a company?
Legal entities have to calculate tax withholding at 20% over rental payments for
properties leased by real persons and pay the relevant amounts to the affiliated
tax office. Real persons obtaining the relevant rental income offset these taxes
that are levied to their earnings from the tax that will be calculated over their
yearly declared earnings.
Should I charge VAT to my rental income?
No. Rental income obtained by individuals who are not dealing with any
commercial activity or from the properties that are not part of the enterprise
are not subject to VAT. So, as an individual lessor you will not charge any VAT.
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Ordinary regions
Residential unit
1% 2% 3% 1%
2% 4% 6% 2%
Workplace Arable land Other land
Metropolitan
municipality
boundaries and
surrounding areas
Holding phase
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Does stamp tax applicable if I sign a rental agreement?
As mentioned above, in principle agreements having a monetary value signed
in Turkey are subject to “Stamp Tax” including leasing agreements over the total
leasing amount stated in the agreement at 0.189%. On the other hand, since
leasing agreements between two individuals are exempt from stamp tax no tax is
calculated.
Is it obligatory to register rental agreement to the title deed
registry? What are the fiscal liabilities if we register?
No. It is not obligatory. But, if parties are agree to register Title Fee at the
rate of 0.683 % over the total rental amount is calculated and paid to the
Tax Office.
Should I pay property tax for all my properties in Turkey? How and
when?
Yes. Land and buildings in Turkey are subject to property tax and the
taxpayer is the owner of the building.
Property tax rates vary depending on property type and its location
(whether the property is located within the boundaries of a metropolitan
municipality). Tax rates that are currently effective according to these
criteria are as follows:
Property tax is calculated over values determined by municipalities for the
streets and avenues. So, you should check your property’s tax value by the
related municipality.
Property tax liability for persons who purchase property starts as of the
beginning of the year following the year in which the sale is made.
Property tax is paid in two equal instalments, the first one due for
payment in March, April and May and the second one due for payment in
November.
Also, as an additional liability called “the surcharge for the protection of
immovable cultural assets” is collected together with the property tax at
10% of the annually collected property tax.
Disposal
phase
Are there any different principles applicable while selling a
property owned by a foreign real person?
There is no difference regarding the principles of a property sale by a
foreign real person and a Turkish citizen. However, if the purchaser is a
foreign real person, the procedure as set forth under “acquisition” above,
will apply.
Should I pay income tax if I decide to sell my property?
Yes. Capital gains derived from the disposal of properties, which have been
acquired by individuals in return for an acquisition amount and which are
held for less than five years, are subject to income tax. Thus, no Income Tax
is calculated for the capital gains obtained from the property sales after 5
year holding period.
How is capital gain taxed in Turkey?
Individuals deriving capital gain from the property sales have to declare
their income on a yearly basis with Income Tax declaration. The tax base
is the positive difference between the sales price and the acquisition value.
While determining the earnings to be taxed, “expenses incurred due to
disposal and remained under the responsibility of the seller”, and “Taxes
and charges paid” are separately deducted in addition to the cost amount
of the property. Acquisition cost is indexed with monthly inflation rates
for determination of net capital gains. Please note that, the cost adjustment
can only be made if the increase in Producer’s Price Index (PPI) is at least
10%. Moreover, of the capital gains obtained during a calendar year, TRY
14,800 is exempt from income tax for the year 2019.
How is title deed charge calculated at the time of disposal?
Similar to the fee calculated and paid at the time of acquisition, title deed
fee at the rate of 2% (Decreased to 1.5% until 31 March 2019) is also
applicable over the sales price for buyer and seller separately. Fee has to be
paid to the tax office before the transaction made at the registrar.
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Should I add VAT to my selling price?
If the owner of the property is an individual who is not dealing with
commercial activity, no VAT is applied. However, if the purchase and sales
of properties are made within a business organization that can perform
this activity on a regular basis, property sales will be subject to VAT.
Please note that Turkish Ministry of Finance classifies sales activities of
individuals as made within business organization if an individual makes
more than one sale within one calendar year or one sales per year in the
consequent years.
Do my tax liability changes if I am the shareholder of a company
holding a property in Turkey?
Yes. As being a non-resident individual shareholder of a Turkish company,
you may obtain “dividend” income from your Turkish investment. Or, at the
time of disposal, you may obtain “capital gain” from the sale of your Turkish
Company shares.
Your tax liability changes
if you are the shareholder
of a company holding a
property in Turkey.
Disposal phase
25
Before making any
transaction, consult your
advisor for the latest double
tax treaty provisions.
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Your Turkish company holding a property in Turkey will be to
Corporation Tax at the rate of 22% (For 2019 and 2020; and for following
years at 20%) over its all yearly income. After tax profit can be distributed
to the shareholders after setting aside first and second degree legal
reserves. Please note that Turkish REIT’s are exempt from corporate tax.
So, REIT’s can distribute all their after legal reserve income without any
corporate tax burden.
At the time of profit distribution, Turkish company has to withhold
Income Tax for their non-resident shareholders at the rate of 15%. This rate
can be reduced to 10% or even 5% if there is a Double Tax Treaty between
Turkey and the Country on which the shareholder is resident. Please also
note that withholding tax rate for the dividend distributions of Turkish
REIT’s is 0%. So, if you have a Turkish REIT shares and receive profit from
these REIT’s, no withholding tax will be calculated at the time of profit
distribution. The withholding tax calculated by the distributing Turkish
Company will be the final tax burden for the non-resident shareholder at
the Turkish level.
If non-resident shareholder decides to sell his/her shares in the Turkish
Company, capital gains in principle would be taxable. If the Turkish
company is a public company such as Turkish REIT’s, capital gains will be
taxed via withholding by the intermediary banks or brokerage houses. The
withholding tax rate for public companies is 0%. So, no capital gains tax is
calculated for the disposal of shares of the Turkish Companies by nonresidents.
All other share disposals will be subject to capital gains at the
rate up to 35%. Again, in the case of “Double Tax Treaty” between Turkey
and shareholders’ country, capital gains would be avoidable. In most of the
treaties, sale of Turkish company shares after 1 year holding period would
limit Turkey’s taxation rights. But, before making any transaction please
consult your advisor for the latest double tax treaty provisions.
Disposal phase
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The Application
Process of Turkish
Citizenship
through
Investment
With the decision published in the Official Gazette dated 19.09.2018, the
financial and investment costs in the process of transition to the Turkish
citizenship were reduced. Accordingly, the foreigners who have purchased
real estates at least USD 250.000 worth in Turkey will be able to directly
become Turkish citizens.
How the application process to Turkish citizenship works?
If you purchase real estate at least USD 250.000 worth, your application for
Turkish citizenship will be processed with your application to the General
Directorate of Land Registry and Cadaster. The General Directorate of Land
Registry and Cadaster checks whether the properties sold are worth at least
USD 250.000. (You have to prove that you have purchased a property at
an amount of USD 250.000 from a real estate company licensed by CMB
(Capital Market Board). The report you receive from any real estate agency
or consultancy company shall not be valid.) The Directorate of Land Registry
gives approval for citizenship between 3 and 7 days. Once your application is
approved, you must apply to the Immigration Office for a residence permit
without an appointment. After the approval of the Immigration Office, you
must apply to the General Directorate of Population and Citizenship Affairs
in the same day with the approval document and residence permit. The
process following the title deed application is followed in the Citizenship
Information Offices located in İstanbul and Ankara. Your application shall be
completed between 46 and 60 days.
Is it also possible for my family to become Turkish citizens?
Yes. You, your spouse and all your children under the age of 18 can become
Turkish citizens.
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The Application Process of Turkish
Citizenship through Investment
Can I purchase more than one real estate to reach the limit of
US$ 250.000?
You can purchase more than one real estate with a total value of at
least USD 250.000. But you should apply for all at the same time. Your
application for citizenship is accepted only if the values declared to
the General Directorate of Land Registry and Cadaster are above USD
250.000.
What is the responsibility of the Ministry of Environment and
Urbanization?
The real estate appraisers confirm whether the worth of the real estate
is more than USD 250.000. The Ministry requests the “entailed estate
annotation” from the General Directorate of Land Registry and Cadaster.
The payment of the real estate that you purchased must be made by bank
transfer to the property owner.
How should I calculate the USD and TL exchange rates?
The value of the immovable on USD basis shall be calculated by the Land
Registry and Cadaster General Directorate over effective selling price of
the CBRT on the date of sale.
How long does it take to conclude the citizenship process?
If the documents required for citizenship applications are complete, your
application shall be concluded within 45 to 60 days. The government has
opened private offices to reduce this time.
Shall I acquire citizenship when I meet all the requirements?
The process of citizenship approval depends on the fact that you do not
pose a threat to national security and this is verified and finalized through
national security archives.
Can I acquire Turkish citizenship by purchasing a rentguaranteed
commercial property?
You can purchase any real estate with a total value of USD 250.000 or
above.
I do not have time to come to Turkey. How can I get Turkish
citizenship?
You can have this process made without coming to Turkey by giving power
of attorney to a trusted consulting company.
How many people can apply for a title deed?
Only one person and first degree relatives (spouse and children under 18)
can acquire citizenship.
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30
I have purchased real estate in Turkey before. Now can I apply for
citizenship?
The application can be made with real estate purchases and investments realized
after 18.09.2018.
Do I have to waive my existing citizenship when I become a Turkish
citizen?
No. Depending on your own state regulation, Turkish laws permit dual or multiple
citizenship.
Do I have to do compulsory military service if I get Turkish
citizenship?
When your child under the age of 18 comes to the military age, he is obliged to do
military service. Persons entitled to dual citizenship are able to do military service
in one of the two countries of which they are citizens. If you have completed your
military service, you may need to prove it by a document. Persons older than 22
years of age are required to apply to the General Directorate of Population and
Citizenship Affairs whether they hold special conditions or not.
Which nationalities are accepted for Turkish passports?
All citizens who purchase property in Turkey can make application.
Can my child above the age of 18 also benefit from the citizenship
right?
No.
Can I obtain citizenship for my disabled child over 18?
You can obtain citizenship by documenting that your child is in need of care.
Should the money be transferred to Turkey via bank? I am an Iranian
citizen and I cannot transfer money via bank.
This issue is not clear yet.
The process of citizenship can last for 2 months. Can I obtain a
residence permit during this process?
Once your application is approved, you and your 1st degree family members will
be granted a residence permit on the same day without any waiting period. (No.
6458/31-J)
Is it possible to have dual citizenship in Turkey?
Yes, Turkey allows dual citizenship, but you should consult with your consulate of
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your own nationality. Some countries, such as India, China and Saudi
Arabia may impose restriction on dual citizenship.
How can I become a Turkish citizen if I am not a citizen of any
country (stateless, heimatlos)?
You can apply for Turkish citizenship when you purchase a property with
a value of at least USD 250.000 together with a proof of your heimatlos
(travel document issued by the United Nations).
Is there any critical point to know?
The ministry wants to ensure that the minimum value is USD 250.000.
Certified real estate appraisers value real estate to prevent price fraud.
There may be deviations of up to 20% between the sales price and the
valuation. Therefore, we recommend that you make calculations by taking
this fact into account and purchase the real estate accordingly.
The process of being a Turkish citizen by making investment
