Bulletin Details

Regulations have been published regarding newly introduced VAT exemption for real estate sales to non-resident persons and corporations

The Law numbered 6824 enabled the exemption of real estate (residential or business) sales made to non-resident real persons and corporations from VAT by including a provision to the Law on VAT, to be effected as of 1 April 2017.

The General Communique on VAT published in Official Gazette dated 5 May 2017 contains the details with regards to this exemption. 

In this regard, residential real estate and business real estate (e.g. office premises) sales to,
-Foreigners that are not resident in Turkey,
-Corporations that do not have a corporate domicile and place of business in Turkey and that do not make profit in Turkey through a permanent establishment or permanent representative,
-Turkish nationals that are resident abroad with a work or resident permit. 
will be exempted from VAT.

For this exemption to be applied, the real estate built as residential or business place shall have a construction permit and shall be transferred to the buyer in a ready for use condition. In addition, real estates for which construction servitude may be established shall have it registered.    

The exemption can be applied only for initial transfer of ownership of the taxpayer constructed the residential or business place. Resale of the real estate after buying from constructors cannot be deemed as an initial transfer. 

A Turkish national shall meet all the following criteria to be eligible for the exemption.

-He must be holding a valid work permit or residence permit as of the date of property transfer,
-The work or residence permit must have been obtained at least 6 months before the date of property transfer,
-He must have lived abroad at least for 6 months between the date of obtaining work or residence permit and the date of property transfer.

Eligibility through meeting the abovementioned criteria shall be certified by documents issued by Turkish embassies of consulates.

On the other hand, Turkish nationals who reside abroad due to their duties in Turkish governmental departments and institutions or entities and organizations based in Turkey, cannot benefit from this exemption. 

Additionally, foreigners that are resident in Turkey or that have lived in Turkey for more than six months continuously in a calendar year, are not eligible for the exemption (temporary departures do not cease the six-month period).
Corporations that do not have statutory domicile and place of management and that do not make profit through a permanent establishment or permanent representative in Turkey can benefit from the VAT exemption.

Any corporation meeting the foregoing shall certify this by a document regarding its incorporation and continuation of activities issued by authorities of its home country and, a document issued by the local tax office for the place of real estate, demonstrating that it does not have statutory domicile and place of management and in Turkey and it does not make profit by a permanent establishment or representative in Turkey.    

The VAT exemption would be applied, provided that minimum 50% of the sale price is brought to Turkey in foreign currency before the invoice related to sale is issued. The rest of the amount shall be brought within one year following the said date and paid to the seller.

The amount in foreign currency in a foreign country shall be transferred to a bank account in Turkey. In case the foreign currency is transferred to a bank located in Turkey, such transfer shall be documented with a bank receipt.

On the other hand, it is also possible to bring the money into Turkey physically through customs. In such case, the amount shall be declared and customs documents shall be used to prove that the amount is brought to Turkey.   

Please contact us should you have further questions.