To increase foreign currency inflow and to support construction sector, value added tax exemption for residential estate or business place sales regarding international investors has been regularized.

Aforementioned tax exemption is being implemented retroactively from 4th January 2017 by an added paragraph to 13th article of Value Added Tax Law numbered 3065, put into force via 7th article of Law numbered 6428 dated 8th March 2017.

Implementation terms of this regulation has been clarified via Communiqué serial number 12 amending General Implementation Communiqué on Value Added Tax. In light of these arrangements;

  1. Buildings solely constructed as residential estate or business place shall be subject to the exemption. These real estates shall have construction permits and those shall be delivered to buyers as ready-to- use. Residential estate or business place which will be subject to construction servitude shall additionally be registered for construction servitude. Residential estate or business place defined as; dwelling house, shop, office, bureau, residence, apart flat, timeshare house and etc., on construction permits shall be evaluated in scope of the exemption. For the delivery of residential estate or business place subject to property ownership, authentication of de facto delivery is not required regarding the implementation of exemption.
  2. Solely the initial delivery of these immovables shall be subject to the exemption. As the initial delivery, it has been referred to Value Added Tax Law 2nd article; initial delivery is the handing on the power of disposition of the good by owner or by persons acting on behalf of the owner, to buyer or to persons acting on behalf of the buyer.
  3. Beneficiaries enclosed by the exemption are;
    1. Turkish citizens settled abroad for more than 6 months via work or residence permit, (Turkish citizens residing in foreign countries on the occasion of their official assignments or their duties derived from institutions based in Turkey shall not be benefited from the exemption.)
    2. Foreign real persons not holding Turkish citizenship and are not settled in Turkey according to Income Tax Law No 193, Here under this regulation, residence permit holders in Turkey and real persons stayed permanently in Turkey for more than 6 months in one calendar year (temporary leaves do not hold settlement period) are considered as settled.
    3. Institutions not having headquarter & business-quarter in Turkey, and institutions not earning income in Turkey via business office or permanent representative.
  4. Price shall be brought to Turkey as of foreign currency. In scope of the above cited Communique, minimum 50% of the price shall be paid before the invoice date, and at latest within following one year the rest shall be paid by buyer to seller as of foreign currency brought to Turkey. Foreign currency shall both be brought via transferring to a bank in Turkey; or in case of payments made via credit cards given by banks abroad ,documentation of these payments by bank receipt or letter arranged by related domestic bank is considered adequate. In addition, foreign currency shall also be brought physically by buyer, in this scenario documents taken from customs office are considered. Pay brought from abroad as foreign currency shall also be payed to seller as Turkish Lira.
  5. Transaction procedure shall be mandatorily made in land registry office. Sellers benefiting from the exemption shall essentially notify land registry offices regarding the residential estate or the business place sale took place as exemption from VAT in scope of VAT Law article 13th, paragraph (i).
  6. Residential estate and business place bought off via this exemption arrangement shall not be traded off within one year. In case the residential estate or business place bought in scope of this exemption is traded off within one year, uncharged tax during the transaction shall be paid by trader, including the interest for delay, to tax office where the immovable is located.

Furthermore another facilitation brought by above cited regulation is the enablement of VAT refund. Sellers delivering possession in scope of the exemption shall have the refund of obliged VAT, regarding refund right derived from this delivery, as in cash and/or on account.