Turkey has become a popular location for foreigners seeking to purchase real estate. In recent years, the Turkish government has taken several measures to simplify the process of purchasing real estate for foreign investors. One such measure is the VAT exemption applicable to foreign purchases of real estate in Turkey.
In this article, the term “foreigner” is used to describe a person who resides abroad for more than 6 months in a calendar year. As Bayraktar Attorneys, we specialize in international law, although Turkish citizens who reside abroad can benefit from the VAT exemption as many times as they wish, as long as they reside abroad and fit the conditions below.
What is VAT?
VAT (Value Added Tax) is a tax imposed on the sale of goods and services. In Turkey, the VAT rate varies based on the nature of the sold goods and services. For instance, the VAT rate on food and beverages differs from the VAT rate on electronics. For a broader overview, see our guide to understanding VAT in Turkey.
How Much VAT Is Applied to Real Property in Turkey?
In Türkiye, the VAT rate varies depending on the nature and size of the sold property. According to the current regulation:
For residential properties up to 150 square meters, the VAT rate is 10%.
For residential properties exceeding 150 square meters, 10% VAT is applied to the first 150 square meters, and 20% VAT is applied to the portion exceeding 150 square meters.
For commercial properties, the VAT rate is 20%, regardless of the square meters.
Turkish Real Estate VAT Exemption for Foreigners
Foreigners who purchase real estate in Turkey are eligible for a VAT exemption. This means that they do not have to pay the VAT that is normally applied to the property’s purchase price. The exemption applies to both residential and commercial properties.
Although commonly referred to as a “VAT exemption for foreigners,” this terminology is not technically accurate—what truly matters is residency status. The exemption is granted not based on nationality but on non-residency; both foreign nationals and Turkish citizens who reside abroad and meet the necessary conditions can benefit from it. This is one of several incentives that make property purchases for foreigners in Turkey attractive.
Conditions for VAT Exemption
To qualify for the VAT exemption, foreigners must meet certain conditions. These conditions include:
The property must be delivered to the first owner
This rule is often mistaken as requiring that the property be new. Although the VAT exemption mostly applies only to newly built properties, what matters is the first delivery. For instance, if the construction company rents the property to someone else for 10 years after it has been constructed, the VAT exemption will still be possible because the property will be sold for the first time after 10 years—even though it is not new, the first delivery will occur at that point. Second-hand properties are not eligible for the exemption.
The property must be registered to the foreigner’s name
The property must be registered to the name of the foreign buyer, and they must keep the property for at least one year.
The foreigner must not have any residence in Turkey
The VAT exemption is only available to foreigners who do not have a residence in Turkey. This means a foreigner must stay abroad for more than 6 months in a calendar year.
The payment must be made from abroad
The payment for the property must be made with money brought from abroad. This can be either cash or via bank transfer. The cash option requires a declaration at the borders. Buyers should retain documentation such as the foreign currency purchase certificate (Döviz Alım Belgesi) to evidence that funds originated abroad.
Benefits of VAT Exemption
The VAT exemption offers several benefits to foreigners who wish to buy property in Turkey. The most obvious benefit is the cost savings. The VAT rate in Turkey is currently 20%, which can be a significant amount for high-value properties. The exemption can help foreigners save money on the purchase price of their property.
In addition to cost savings, the VAT exemption can also make the process of buying real estate easier for foreigners. By removing the VAT requirement, the buying process becomes more streamlined and simplified. This can help attract more foreign investors to the Turkish real estate market. For a wider perspective, explore our insights on foreigners’ real estate investment in Turkey.
Conclusion
The exemption of value-added tax on foreign purchases of real estate in Turkey is an attractive incentive for foreign investors. The Turkish government has made purchasing real estate more accessible and affordable for foreigners by eliminating the VAT requirement. It is essential to remember, however, that certain conditions must be met in order to qualify. If you are a foreigner looking to purchase property in Turkey, it is essential to work with a qualified real estate agent and attorney who can guide you through the process and ensure that you meet all the requirements for the VAT exemption.
