VAT Exemption on Buying a Real Estate in Turkey

Buying real estate or investing in Turkey has already become an unmissable chance lately. Advantages such as VAT discounts, resetting stamp duties, and granting Turkish citizenship for those who purchased real estate for at least 400.000 USD made the country favorable. After all these developments, the Turkish Government has abolished VAT on property sales to foreigners for attracting more international investors. The law about the VAT exemption was approved by the Turkish Parliament on the 1st of April, 2017.

Some Turkish citizens residing abroad and foreign citizens will not pay VAT on the condition of getting new property from the construction company. Those unfairly benefitting from the exemption will be held liable for the uncollected taxes, and will be subject to a tax penalty.

The people who can profit from this law

- Turkish citizens that lived abroad for more than 6 months with their work and residence permits.
- Foreigners who have not settled in Turkey.
- Organizations that have not made any profit from Turkey or do not have an office.

Important note: Turkish citizens who reside in foreign countries, working for institutions, establishments, and institutions based in Turkey will not be able to benefit from VAT exemption.

The conditions to profit from this law

- Only the new real estate properties purchased from construction companies are included.
- The purchase price must be in foreign currency.
- The purchased real estate can not be sold for a year. If the real estate is sold in a year, the exempted VAT will be collected.

There are 3 types of VAT rates in Turkey; 1%, 8%, and 20%. Usually, 1% VAT is valid for cheap properties across Turkey. 8% and 20% VAT are for expensive properties. VAT rates for properties in Antalya are 1%. 8% or 20% VAT rates apply when buying a property in Istanbul from construction companies.
Note: Before you buy a property, ask a builder for the VAT rate or request it from us.

The documents needed for Turkish citizens that lived abroad

- Work permissions or equivalent documents that are acquired from the official embassies or consulates of Turkey.
- A document as proof that shows the citizen was there for at least six months from the date of purchase.

The documents needed for foreigners who have not settled in Turkey

- A copy of the passport issued by the country where the foreigner resides or the copy of the Turquoise card for those who lost Turkish citizenship.
- A document issued by the tax office stating that the person who will buy the property is not settled in Turkey.

The documents needed for organizations that have not made a profit from Turkey

- A document as proof that the organization is still active. This document should have an apostille.
- A document as proof that this company does not earn any profit in Turkey.

The documents needed for the ones who bring foreign currency to purchase

- If the price is to be brought from abroad through a bank, this price must be transferred to a bank in Turkey. The debit receipt must be delivered to the relevant authority.
- If the price is paid by credit card issued by foreign banks, the document showing that the money is brought from abroad must be taken by the relevant bank in Turkey.
- If the price is brought in cash from abroad to Turkey, a written document should be obtained from the relevant Customs Administration.

These documents should be obtained at a specific time before the sale.

Letter of undertaking

This document is for the commitment of the recipient regarding the VAT exemption. This letter can be signed at the sales stage.

Frequently Asked Questions about VAT Exemption

Q: What are the VAT exemption conditions in property sales?
A: Turkish citizens who have lived abroad for more than 6 months and foreigners are exempt from VAT for their first commercial or residential property in Turkey, provided that they pay in foreign currency and do not sell their property within one year after receiving the title deed.

Q: How to get a VAT exemption on buying a property?
A: In accordance with the law, which entered into force on March 8, 2017, allowing foreign citizens to purchase real estate, net of VAT. The law applies only to real estate purchased after April 1, 2017. Exemption from VAT is not considered valid for purchases of land, plots, and fields. This law applies only to commercial and residential real estate.

Q: Is it possible to purchase more than one property under this exception?
A: Yes. Those who would like to take advantage of the VAT exception are able to buy more than one property.

Q: Is there a VAT exemption in the property purchased by foreigners before April 1?
A: VAT is paid for the property that has been delivered before 1 April 2017. However, the exemption applies to those sales that were completed before April 1, but a title deed (TAPU) was issued after this date.

Q: How does the procedure work?
A: Foreigners who want to buy property can apply to the Tapu and Cadastro General Directorate (Tapu Office) with their identity documents or passports and residence permit. Those who will receive property by proxy should apply to the Tapu Office with the original and photocopy of the power of attorney together with their interpreters. Pre-application is made by taking the sequence number. After it has been determined and fulfilled the conditions required in the Tapu Office, a preliminary contract for a real estate sale is signed in the presence of a notary public. If the transfer is to be made, the sales contract is made in the Tapu Office.

Q: What happens if the buyer sells the property within a year?
A: If the residence or office purchased in the scope of the exception is sold out within one year, the uncollected tax is paid with overdue interest which is calculated according to the deferred interest rate in the 48th article of Law numbered 6183 to the tax office of the place of the estate, before the title deed transaction, by the person who sells out.

Note: VAT is not calculated in this sales transaction since half of the price is brought to Turkey in foreign currency by the buyer and paid to the seller before the invoice is issued.

Q: What is the condition that the immovable property can be subject to the exception?
A: The building, which is built as a commercial or residential property, must have a building permit and need to be delivered to the buyers in a ready-to-use condition. Property defined as residential, flats, timeshare, office, shop, aparthotel, and similar in the building permit is considered within the scope of the exception.

Q: Can I benefit from the exemption if I buy a new property from the second owner?
A: Not. This exception applies only to primary real estate made by the taxpayer who built the real estate. If a residence or office is bought and resold to someone else, this type of real estate is considered secondary and does not fall under this law.

Q: How and to whom is the payment for the property sold?
A: In order for VAT exemption to be applied in the purchase of commercial and residential property, it is necessary to bring and to pay the minimum of 50% of the sales price before the date that the invoice for the sale was issued, and the remaining amount within one year at the latest is paid by the buyer to the seller in foreign currency.

Q: What are the provisions for bringing the money (sales amount) to Turkey?
A: It is essential to transfer foreign currency to Turkey via the bank. If the money is brought using the bank, the authentication of foreign currency being brought to Turkey is provided by a bank receipt. Payment can be also done with a credit card given from foreign banks. In this case, it's confirmed by a receipt or a document given from the related domestic bank that says the payment is made and brought to Turkey as foreign currency. However, if it is brought physically by the buyer, it should be confirmed by a document acquired from the Customs Administration.

Note: According to the law in which the Law No. 6824 was published in the Official Gazette, foreign currencies brought before 8/3/2017 are not considered as foreign currencies brought to Turkey under this exception.

Updated on 15.10.2019:Due to the inability to apply for VAT exemption in countries with difficulty in foreign exchange transfer; A flexible solution was brought to the issue with the communiqué issued by the Revenue Administration of the Ministry of Treasury and Finance in the Official Gazette. With this amendment, the major difficulty in bringing the sales price to Turkey as foreign currency in real estate purchases the especially Iran as well as some African and European Countries has been resolved. According to the provisions added to the communiqué;

- In case of foreign currency transfers to be made within this scope, If the bank receipt of the transfer includes information about the recipient and the commercial or residential property subject to a delivery, or;
- Provided that the seller has got a consent letter that states the amount subject to transfer has been sent on behalf of the buyer, and containing the information of the recipient and the commercial or residential property subject to a delivery, VAT exemption will be applied.

Q: How to claim a VAT refund after buying a property?
A: VAT refund on the exception is made after all of the price value is brought to Turkey and paid to the seller.

The sales made are declared with the Value-Added Tax declaration for the taxation period in which the commercial or residential property is delivered. The seller (construction company) may claim the refund of value-added tax in cash or payment on account. In case the required documents are submitted, payment on account requests are fulfilled regardless of the amount without looking for the tax inspection report, Chartered Accountant report and indemnity. The seller's cash refund requests arising from this transaction and not exceeding 5.000 TL are fulfilled without looking for the tax inspection report, Chartered Accountant report, and indemnity required. If the refund request exceeds 5.000 TL, the refund of the excess will be refunded according to the tax inspection report or the Chartered Accountant report.

Q: What are the necessary documents to request a refund to account?
A:
- Standard request for a refund,
- VAT list to be downloaded for the period in which the exception was declared,
- List of sales invoices,
- Documents to be supplied by the seller before delivery,
- Bank receipts confirming that the entire currency has been brought to Turkey, or;
- Receipts proving that paid to the seller with the documents received from the Customs Administration,
- Example of the land registration certificate.

Q: What happens if the exemption does not take place duly?
A: In cases where the exemption is applied in the absence of the conditions stipulated in Article 13/i of the Value Added Tax Law, SELLER and BUYER shall be responsible simultaneously from the payment of the outstanding tax, loss of tax penalty and default interest.

If at least 50% of the sales price is not paid before the date of invoice and the remaining amount is not brought to Turkey in foreign currency and not paid to the seller, SELLER and BUYER shall be responsible simultaneously from the payment of the outstanding tax, loss of tax penalty and default interest.

Q: Does Antalya Homes has experience on VAT exemption?
A: Antalya Homes is the first company in Turkey to develop a VAT exemption implementation. We received a refund of 966,000 TL VAT on sales to foreigners that we carried out in previous months. Read the testimonials of Antalya Homes.

It is time for those who are considering buying a property in Turkey. You may benefit from the exception of VAT by buying real estate in Turkey. Today contact Antalya Homes' experienced sales agents to find your dream home with the best price guarantee.

* The content was updated on 04.09.2019.

Leyla Zengin

AUTHORLeyla ZenginMarketing Services Manager

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