Tax exemption on real estate in Turkey

Turkey granted foreign investors a lot of facilities and provided many privileges and canceled some restrictions to increase the number of investors and motivate them to buy properties, and among these facilities is the tax exemption on real estate, which exempts the investor who wants to buy or sell and transfer ownership of a property to the buyer, from paying some State fees. This exemption aims to enhance the movement of investment in Turkey by easing the burden of paying taxes imposed on them, and at the same time that there are real estate owners who are exempt from paying the tax in full, some investors are exempted from paying parts of these taxes for specific periods of time.

What are real estate taxes in Turkey?

Turkey obliges every investor and property owner on its territory to pay taxes on specific dates to government agencies concerned with taxes, according to the real estate property tax law. The two persons who have the right to dispose of the property are obliged to pay it.

When the investor applies for tax exemption through the state departments concerned with tax affairs in Turkey, he must be careful and be careful, as any error while submitting this transaction exposes the property owner to being deprived of benefiting from the tax exemption law.

In addition, if the investor is exempt from paying part of these taxes, he must pay these dues at times determined by the Tax Department and the Land Registry. In the event that the property owner delays paying these taxes by their due dates, fines will be added to the value of the tax at a rate of 1.40 this percentage increases annually. This fine cannot be erased or deleted at all.

It is necessary to seek the assistance of lawyers and specialists to manage the affairs of these complex transactions, to avoid thorny legal violations by the investor, and to consult those who are trustworthy and knowledgeable about these laws.

Gars Consulting Company with its professional and specialized cadres provides a variety of services to its clients regarding tax exemption as a reliable entity that you can rely on to provide services with high expertise.

New Real Estate Tax Act 2021

Turkey seeks to attract the largest number of foreign investors in order to recover the Turkish economy, and the advantages that Turkey enjoys from a strategic location, a suitable and stimulating environment for investment have contributed to bringing these investors from various countries of the world. So it issued a number of laws regarding investors within Turkish territory, including the law to reduce the burden of Taxes on foreign and local investors, most notably the “Value Added Exemption” law, and this exception is applied to every residential property under certain conditions, a house, an apartment, an office, when it is sold for the first time.

This exemption includes both foreign and local investors, as the foreign investment laws in Turkey provide for equal treatment between foreign and local investors, and thanks to these exemptions, the investor can save a good amount of money. The tax exemption for real estate does not include exemption from annual taxes, transfer of ownership, subscription fees, and annual services.

Types of real estate taxes in Turkey

1. One-time property taxes

• Real estate title deed tax: This tax is paid when the title deed is registered in the Real Estate Registry Department in Turkey, the real estate month as it is called in some countries. Its total value is 4% of the property value.
• Value Added Tax: This tax is paid once when buying a property in Turkey, and its value ranges from 1% to 8% and sometimes reaches 18% and is determined according to the type of property, its area, its location, and the number of other factors, and this value is not calculated from the total area of ​​the property but from Net area, thanks to the exemption law for foreign investors, they are exempt from paying this tax.

2. Annual property taxes

• Municipal tax: These taxes are paid annually to the municipality of the area in which the property or facility is administratively affiliated with the municipality’s borders, and are paid through the municipality’s website, or by money order, and are paid on specific dates and at specific rates that change according to the change in the price of the property, and these taxes are paid in exchange for many services provided by the municipality.
• Earthquake and natural disaster insurance fees: where the property owner pays an annual amount of money to specialized companies approved by the Turkish government, and this amount is determined according to the criteria, including the age and area of ​​the building.

3. Monthly property taxes

These taxes are imposed on the residents of residential complexes in Turkey in exchange for these complexes providing various and various services, such as swimming pools, sports clubs, security and cleaning services, and they are known in Turkey as “Aidat”, and the percentage of this tax varies from one real estate complex to another according to the services and features it provides.

Exemption from value-added tax (KDV) on real estate

After the tax exemption benefits were issued regarding real estate in Turkey, the groups investing within the Turkish territory obtained advantages from these exemptions, as Turkey issued laws exempting foreign and local investors from value-added tax (kdv), which ranges from 1% to 18% of the value of property sales, which is paid once to the tax department according to the characteristics and location of the property.

It cannot be said that all investors can benefit from these exemptions, as only foreign investors residing outside Turkey and expatriate Turks residing outside their country and foreign companies that do not have a legal address in Turkey and are not based in Turkey can be exempted from this tax.

What are the tax-exempt properties?

Speaking of real estate taxes, it is necessary to mention the real estate covered by the tax exemption, such as residential buildings, apartments, villas, housing units, commercial real estate licensed from public offices and workplaces. This exemption is only for newly built real estate, while old real estate is not included in the exemption decision, as well as agricultural lands and other types of land, to which exemption decisions do not apply.

What are the categories for exemption from real estate tax?

As for the relevant category of this exemption, they are "foreigners not residing in Turkey, foreign legal entities that are not based in Turkey, and Turks not residing in Turkey", they are entitled to benefit from the tax exemption decision.

Conditions for exemption from real estate tax

There are some conditions that must be met when applying for an exemption from the real estate tax, as follows:

• The investor should not be residing in Turkey.
• The person applying for the exemption must not have resided for more than 6 months in Turkey during the past year.
• The applicant must not have a valid residence permit in Turkey from the previous year.
• The applicant should not have a registered address in Turkey.
• Foreign company entities shall not have a main headquarters in Turkey.
• Paying the value of the property in foreign currency, and the money paid must come from outside the country exclusively, either by bank transfer or a customs declaration document in case the money is transferred to Turkey in cash.
• The property must be new, as the old properties are not covered by the exemption.
• The real estate covered by the exemption must be limited to residential buildings (villas, apartments, and residential units), and similar commercial real estate (workplace offices). As for agricultural lands and other types of real estate, they are not included in this exemption.
• The property benefiting from the tax exemption shall not be sold again for one year.

The investor must prepare some documents:

• A translated copy of the investor's passport.
• A copy of a translated document proving the investor's residence outside Turkey.
• Turkish tax number.
• Real estate sale agreement.

In the case that the owner of the property fulfills these conditions, he must go to the Title Deed Department in the municipality to which the property belongs and submit a request for an exemption from the real estate tax, and they can also recover the previous taxes they paid when proving the eligibility to exempt them from these taxes.

Tax exemption certificate

After the investor has secured all the required documents and papers and fulfilled all the conditions, and followed all the necessary steps, to benefit from the tax exemption, he must submit an application to the Turkish tax authorities, in order to obtain a "Tax Exemption Certificate".

Gars Consulting Company services regarding tax exemption

Gars Consulting Company with its professional and specialized cadres in this field provides a variety of services to its clients regarding tax exemption as a reliable entity that you can rely on to provide services with high expertise, as it is necessary to have a Turkish lawyer when submitting an application for tax exemption in order to avoid the buyer himself from making mistakes, which It could result in the loss of your right to tax exemption.

Edited by Gars Consulting Company

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