Navigating the Real Estate VAT Exemption Process for Foreigners in Turkey: A Comprehensive Guide
Investing in a foreign real estate market can be an attractive opportunity for international buyers seeking a strategic location and booming market. Turkey, with its rapidly growing economy, rich cultural heritage, favorable investment climate, has emerged as a hotspot for foreign buyers. As part of its efforts to boost its real estate sector, the Turkish government offers a value-added tax (VAT) exemption process specifically designed for foreign investors. In this comprehensive guide, we will explore the intricacies of the real estate VAT exemption process for foreigners in Turkey, providing you with essential information to embark on a successful investment journey.
According to the VAT Law, VAT exemption is applied to foreigners and Turkish citizens residing abroad for more than 6 months, provided that the sale price is brought to Turkey in foreign currency upon the first delivery of residential or business premises.
It is of utmost importance to bear in mind that If the individuals who acquire property and workplace under this exemption sell it within 3 years of the land registry registration, the VAT amount will be paid by the transferor, in addition to the accrued interest.
Understanding VAT Exemption Process:
1. The Scope of the VAT Exemption:
Foreign individuals or legal entities interested in purchasing residential properties, namely apartments, houses, or villas, directly from construction companies or real estate developers are eligible for VAT exemption. This incentive aims to attract international investors by eliminating the 20% VAT typically imposed on real estate transactions.
2. Essential Eligibility Criteria:
To qualify for VAT exemption, foreign investors must meet the following prerequisites:
a) Investing as Individuals: Foreign individuals must be non-Turkish citizens without permanent or temporary Turkish residency permits.
b) Investing as Legal Entities: Companies incorporated outside Turkey or individuals representing those legal entities may be eligible for VAT exemption, provided they have no presence or permanent establishment in Turkey.
3. Legal Documentation and Procedures:
To initiate the VAT exemption process, prospective buyers are required to submit several essential documents, including:
1. Passport:
The first document, and perhaps the most essential, is your passport. As an internationally recognized identification document, your passport serves as proof of your citizenship abroad.
2. Address Registration (Abroad):
To proof your residency in the host country, you may be required to provide proof of address registration abroad. This proof confirms that you have a fixed residence address where correspondence and official documentation can be sent.
3. Sales Contract or Title Deed:
This legally binding agreement or deed will outline the terms and conditions of your property acquisition, providing detailed information about the property, its boundaries, and any encumbrances or restrictions. Ensure that the document is signed and notarized to establish its validity.
4. Petition from Provincial Immigration Office:
For individuals not residing in Turkey, a petition issued by the provincial immigration office indicating non-residency is crucial. This document certifies that you are not a resident in Turkey.
5. Entry and Exit Record from Police Department:
When dealing with international transactions, it is vital to maintain an accurate record of your entry and exit from the host country. A document issued by the police department, showcasing your entry and exit dates, serves as proof of your legal presence in the country.
6. Power of Attorney:
While residing or conducting business overseas, it may be necessary to grant power of attorney to a trusted lawyer.
4. VAT Payment Procedure:
Foreign investors seeking VAT exemption are required to make the full payment for the property using international bank transfers from their personal accounts abroad. Additionally, the payment should be made directly to the seller and can be done through the lawyer. In accordance with Turkish legislation, the Value Added Tax (VAT) levied on real estate transactions shall be reimbursed to the buyer upon the completion and delivery of the property.
Turkey's real estate VAT exemption process provides an attractive incentive for foreign investors to venture into the thriving Turkish property market. By understanding the essential criteria and following the prescribed procedures, international buyers can unlock valuable opportunities and enjoy the benefits of a VAT-free investment. Nevertheless, it is crucial to seek professional advice from real estate experts and legal consultants specialized in Turkey's real estate laws to ensure a smooth and legally compliant investment journey. By navigating the VAT exemption process effectively, foreign investors can seize the immense prospects offered by Turkey's real estate market and embark on a successful and lucrative investment venture.
