You can now buy a new house or an office in Turkey without paying VAT and you can make a profit at the rate from 1% to 18%. It is because, in Turkey,
– Non-resident foreign real entities in Turkey,
– Non-profit companies having no legal and business place in Turkey or through a business place or ordinary agent in Turkey
are exempt from VAT in case of purchasing new houses or new offices. Legal regulation pertaining to this issue was passed on APRIL 1, 2017.
What immovable properties can you buy without paying VAT?
You can buy immovable properties which are described as:
– House,
– Shop,
– Office,
– Bureau,
– Residence,
– Apart house,
– Timeshare and etc.
in Building License without paying VAT.
However, purchasing such immovable properties requires that:
– there shall be building license,
– they shall be delivered in an actual condition ready for use by buyers
– a floor easement shall be created in a residential or work place where a flat easement can be established.
VAT Exemption is valid for new houses and offices to be purchased from a Contractor or Construction Companies.
VAT exemption applies to purchases of new houses or offices that you will buy from contractors or construction companies and which will be registered for the first time in the title deed. That is, there is no VAT exemption for second-hand residential and business sales. Therefore, you will have to pay VAT if you buy houses or offices registered for title on behalf of someone else through sale or similar kinds of reasons.
Are There Any Numbers and M2 Limitations in the Houses and Offices to be Purchased within the scope of Tax Exemption?
No, there aren’t. Foreign buyers with the required conditions can purchase more than one house or offices within the scope of tax exemption. For example, it is possible for a foreigner satisfying the conditions to buy 15 houses and 25 offices with exemption from VAT.
In addition, there is also no limit in relation to m2 of houses and work places to be purchased under tax exemption. With the exemption of VAT, you can buy 100 m2, or 1.000 m2 houses or offices.
What foreigners can benefit from VAT exemption?
– Non-resident real entities not located in Turkey (Persons residing in Turkey permanently and those residing in Turkey for a period of more than six months in a calendar year (Businessmen, scientists, experts, civil servants, press and broadcast correspondents and other persons with the same situations coming to Turkey for specific and temporary duties or work as well as other persons who come to Turkey for the purpose of collection or treatment or for rest or travel and foreigners who have been detained or stayed in Turkey for reasons other than detention, jurisdiction or disease are not considered to be settled in Turkey even if they stay in the country for six months.))
– Non-profit companies having no legal and business place in Turkey or through a business place or ordinary agent in Turkey
Can get benefit from VAT exemption.
Before the delivery of house or office, it is necessary that the sellers shall be provided with
– passport photocopies of foreign real entities and standard certificate to be obtained from relevant tax revenues of the house or office stating that they are not located in Turkey;
– certificate to be obtained from the official authorities of the countries where the legal centres are located stating that the companies whose legal or office centre is not Turkey continue their establishment and operations as well as standard certificate to be obtained from the related revenue office of the house or business place stating that their legal and office centres are not located in Turkey and they don’t get any profits in Turkey through a business place or ordinary agent.
Is there a requirement pertaining to payment terms of the sale price under VAT Exemption?
Yes, there is. In order for VAT exemption to be applied for the delivery of house or office,
– At least 50% of the sale price shall be brought before the issuance date of invoice pertaining to sale,
– The remaining amount shall be brought not later than one year
By the purchaser in Turkey (to be transferred) and paid in foreign exchange or TL to seller. It is possible that the foreign exchange can be brought to Turkey physically by the purchaser.
For example: If the sales price is directly transferred by the foreign buyer to the bank account of the seller in Turkey, it is a requirement that the sales price shall be transferred in foreign currency. If the buyers make an account for their own name in a bank operating in Turkey and transfer them to their account first from abroad and if they make payment to the seller from here, it is obligatory that the buyer shall transfer the sale price in the account opened in Turkey as a foreign exchange. However, in statutory regulation, there is no requirement that the foreign exchange fee be paid as foreign currency to the seller. Therefore, the buyers are free to pay the amounts they bring to their own accounts in Turkey as foreign exchange or as Turkish Lira.
For example: Non-resident foreign Mr. (A), who is not located in Turkey, and (B) Yapı A.Ş. have agreed on the sale of the house whose construction is completed at the amount of 500,000 Dollars on the conditions that 50% of the price shall be paid in advance and the remaining amount in 6 equal instalments. The down payment was brought to Turkey as foreign currency and paid to the seller before the bill was issued. The remaining amount will be paid as foreign currency from abroad and monthly payment will be paid to the seller after the invoice is issued. VAT is not calculated in this sales process since half of the cost is paid by the buyer to the seller in Turkey as foreign currency before the issuance of the invoice.
How shall the cost brought to Turkey be certified as the foreign exchange?
- a) It is required that the foreign exchange abroad shall be certified through:
– Bank receipt of transfer transaction in case of transferring to bank in Turkey,
– Statement forms obtained from custom offices stating that the foreign exchange is brought to Turkey if the cost is brought physically by the purchaser to Turkey.
- b) In case the payment is made by credit cards issued by foreign banks, it is obligatory to certify that the foreign currency related to the payments made with credit cards is brought to Turkey through a receipt or letter to be issued by the relevant bank in Turkey.
- c) If the seller is paid via bank after the foreign exchange is physically brought to Turkey or the foreign buyer is transferred from abroad to the bank account in Turkey, this payment must be certified through the bank receipt.
- d) In terms of VAT exemption, the sales price must be brought in Turkey as foreign currency. There is no requirement that the sales price be paid in foreign currency or TL to the seller contractors and construction companies. The price brought as the foreign exchange from abroad may be paid to the seller as Turkish Lira.
It is required that the house or office purchased as an exemption from VAT may not be sold within one year; otherwise, exemption shall be cancelled.
There is a requirement that a house or office purchased as an exemption from VAT shall be excluded from the disposal within one year (the same month and same day of the following year shall be considered as the one year period).
Otherwise, VAT not collected during the sale due to the exemption shall be collected from the foreign buyers together with the delay interest by the Ministry of Finance. It is not a matter of seeking tax and deferred interest in transfer transactions to be made after one year period has elapsed. For example, the house purchased as an exemption from VAT on 5 May 2017 should not be sold until 6 May 2018. If this property is sold on April 3, 2018 without expiration of one year, the exemption conditions are considered to be violated and the VAT not taken during the purchase phase of the property is collected together with the interest from the foreign buyer. In addition, no transaction is made with respect to this sale of the foreigner in the deed, unless such collection is made.
Source: KonutDer