Declaring a Lower Sales Price at the Title Deed in Türkiye

Foreign nationals purchasing real estate in Türkiye are often surprised when they are advised during the title deed transfer process to declare a sales price lower than the actual purchase amount.

In many transactions, buyers hear suggestions such as:

“Let us declare a lower value at the Land Registry to reduce taxes.”

For foreign investors unfamiliar with the Turkish real estate market, this raises immediate legal concerns and confusion.

Is this legal?
Is this considered fraud?
Should you accept it?
What are the risks?

This article explains why such practices have historically existed in Türkiye, the applicable legal framework, and the risks for foreign investors particularly those applying for residence permits or citizenship by investment.

Why Is the Declared Title Deed Value Sometimes Lower Than the Actual Price?

In Türkiye, the title deed transfer tax is calculated as:

• 1. percent of the declared sales price

Pursuant to:

• Articles 57 and 58 of the Fees Law No. 492 (Harçlar Kanunu)

This 4 percent transfer fee is typically shared equally between:

• Buyer (2 percent)

• Seller (2 percent)

Because the tax is calculated based on the declared value at the Land Registry, parties sometimes agree to declare a value closer to:

• The municipal assessed value
  rather than

• The actual market purchase price

Historically, this practice has developed as a market habit intended to reduce:

• Transfer taxes

• Future capital gains tax exposure

A Cultural and Historical Practice Does Not Remove Legal Risk

Foreign buyers must understand an important nuance.

Yes, it is widely known that in practice:

• Real estate sales have historically been declared at values lower than the actual transaction price.

However:

• This does not make the practice risk free

• Nor does it make it fully compliant with tax law

The declared value at the Land Registry becomes the legally binding reference for:

• Transfer tax

• Capital gains tax

• Insurance coverage

• Pre-emption (right of first refusal) disputes

• Inheritance related litigation

• Allegations of simulated transactions (muvazaa)

Legal Consequences Under Turkish Law

If the declared title deed value is found to be inconsistent with the actual transaction value, the tax authorities may initiate an assessment under:

• Tax Procedure Law No. 213 (Vergi Usul Kanunu)

Possible consequences include:

• Additional transfer tax assessment

• Administrative tax penalties

• Late payment interest

• Capital gains tax reassessment for the seller

In certain cases:

• Banks providing mortgage financing may report inconsistencies between loan appraisal reports and declared sale values

Additional Risk for Foreign Buyers Seeking Citizenship

Foreign nationals purchasing property in Türkiye for:

• Residence permit eligibility

• Turkish citizenship by investment

face additional scrutiny.

If it is determined that:

• The declared value at the Land Registry does not reflect the actual investment amount

this may lead to:

• Rejection of the citizenship application

• Revocation of granted citizenship

particularly under regulations governing investment based acquisition of nationality.

Other Legal and Financial Risks

Declaring a lower title deed value may also result in:

Insurance Issues

Property insurance policies are typically based on the registered value.
In case of damage or total loss:

• The insurance provider may refuse full compensation.

Loan and Mortgage Issues

Banks rely on expert valuation reports.
A discrepancy between declared value and appraisal may:

• Affect loan eligibility

• Reduce approved financing limits

Pre-emption Rights

In co ownership disputes:

• Third parties exercising pre-emption rights may acquire the property based on the registered value.

If the registered value is artificially low, the buyer may suffer financial loss.

Can the Declared Value Be Corrected Later?

Once the title deed transfer has been completed:

• The declared sale price cannot be amended at the Land Registry.

However:

• Parties may apply to the tax office through a voluntary disclosure mechanism to pay the under declared fees.

This process may mitigate further penalties but does not eliminate legal exposure entirely.

What Should Foreign Investors Do?

Foreign buyers should not treat this issue as a mere administrative formality.

While the practice has historically existed in the Turkish real estate market, it carries:

• Tax implications

• Legal risk

• Immigration consequences

Each transaction should be evaluated individually.

At Bayraktar Attorneys, we advise foreign clients on:

• Declared title deed value strategies

• Tax compliance risks

• Citizenship investment requirements

• Legal implications of undervaluation

Consulting legal counsel prior to transfer may prevent future financial or legal complications.

Conclusion

Declaring a lower sales value at the Land Registry may appear advantageous in the short term. However, it may expose both buyer and seller to administrative penalties and legal disputes.

Foreign investors should carefully evaluate the implications and seek professional legal advice before proceeding with title deed declarations.