Natural persons of foreign nationality who do not have a permanent residence address in Turkey, institutions who’s legal and business centre is not in Turkey and that do not earn income in Turkey through a workplace or permanent representative, and Turkish citizens living abroad for more than six months by obtaining work and residence permits from another country, have been exempted from Value Added Tax on housing or workplace purchases they make as of 1 April 2017.
The exception set out in Article (13/i) of the Law No. 3065 includes structures built as residential or workplace. For the aforementioned structures to be included in this exception, building permits must be obtained and actual delivery must be realised. In residential or workplaces where construction servitude can be established, it is sought that construction servitude must also be established. Residential or workplaces defined as “residential, shop, office, bureau, residence, apartment, timeshare and so on” in the building license are covered by the exception, but properties with qualifications such as land and fields are excluded. We would like to remind you that while exceptions can be applied by taxpayers who make this delivery in the “first delivery” of buildings built as residential or workplace, it is not possible to apply this exception in subsequent transfers and deliveries.
Individuals who wish to benefit from the VAT exemption must meet certain requirements.
- Natural persons of foreign nationality who do not have a residence address in Turkey: Those who do not have citizenship ties with the Republic of Turkey, and no permanent residence in Turkey for more than 6 months a year (in addition, blue card holders under Law No. 5901 will also be able to benefit from this exception if they have not settled in Turkey).
- Institutions: Legal and business centres should not be in Turkey and should not gain income in Turkey through a workplace or permanent representative.
- Turkish citizens: As of the date of delivery within the scope of this exception, they must have a work or residence permit abroad, the work or residence permit must be obtained at least six months before the date of delivery under the exception, and they must be de facto abroad for at least six months between the date of receipt of the work or residence permit and the date of delivery within the scope of the exception.
The most important point for those who want to benefit from the VAT exemption is that the money used during the purchase must be brought to Turkey as “foreign currency”. In order for the VAT exception to be applied for the delivery of housing or workplace, at least 50% of the price must be brought to Turkey as foreign currency by the purchaser within one year at the latest, and paid to the seller before the date of the issuing of invoice. It is essential that the foreign currency abroad is transferred to a bank in Turkey. In case of transfer of the currency to the bank in Turkey, the transfer must be proved by bank receipt. It is possible to make the payment via credit card issued by banks abroad, and it is mandatory to certify with a receipt or letter to be given by the relevant bank in turkey that the foreign currency for payments made with these credit cards has been brought to Turkey.
Another important consideration for purchasers who want to take advantage of the VAT exemption is that if the property is transferred to another individual within 1 year from the date of transfer, the VAT fee for which they are exempted will be collected from them.
It is notified to the land registry offices during the sales process that the real estate purchased using the VAT exception is covered by the exception. Upon this notification, it is stated that the tax that is not collected by the land registry directorates if these houses or businesses are sold off within 1 year will be paid together with the late interest calculated at the rate of deferral interest in accordance with Article (13/i) of the Law, Article 48 of the Law No. 6183. The transfer will not be carried out by the land registry offices until the letter from the relevant tax office is submitted that the payment has been made and that the transfer is possible. Tax and deferred interest are not sought for transfers after the one-year period has expired.
Sellers who will make the delivery of housing or workplace within the scope of the exception will need some documents to certify that the purchasers are covered by the exception. In this context, purchasers will be asked to provide the following documents:
- Real persons of foreign nationality who do not have a resident address in Turkey
Photocopy of the passport issued by the country of nationality and a document from the tax office where the residence or business is located that it is not in Turkey.
A document obtained from the official authorities of the country where the legal centre of the institution and the business is located, and document to be obtained from the tax office of the place where the residence or workplace is located, stating that the business centre is not in Turkey, and that it does not earn income in Turkey through a workplace or permanent representative.
- Turkish citizens
A residence permit obtained from the official authorities of the foreign country in which the individual resides, or a document of this nature or a document indicating that the individual has been abroad for at least six months from the date of receipt of the work or residence permit, or a document issued by the Turkish Embassy or Consulate in the relevant country indicating that it is not covered by subparagraph 2 of the first paragraph of Article 3 of the Income Tax Law.
The latest regulations regarding the VAT exemption for the sale of housing and workplace provide significant advantages to foreign natural persons, institutions, and Turkish citizens who do not reside in Turkey in the process of purchasing real estate from Turkey. These regulations have been particularly attractive for foreign individuals who want to acquire real estate from Turkey, strengthened their determination to invest, and consequently increased the sale of real estate to foreign individuals. In this respect, it would be appropriate to say that the regulations on VAT exemption have an important share in the real estate market of Turkey, which is becoming more active by the day.