Turkish Real Estate VAT Exemption for Foreigners: Your Guide to Savings

Buying real estate in Turkey can be an exciting prospect, but it's essential to understand the intricacies of Value Added Tax (VAT) exemption to navigate the process smoothly. Whether you're a local or a foreign investor, knowing how VAT exemption works can save you money and streamline your property purchase. In this comprehensive guide, we delve into the nuances of VAT exemption in Turkey and what it means for property buyers.

How much is VAT in real estate in Turkey?

In Turkey, the Value Added Tax (VAT) - VAT known in Turkey as Katma Değer Vergisi (KDV) - on real estate varies depending on the type of property and its location. Generally, residential properties are subject to a VAT rate of 1% to 20%, while commercial properties may have a VAT rate of 20%. Additionally, there are exemptions and reduced rates for certain types of real estate transactions. 

What is VAT Exemption?

VAT exemption is a provision that allows certain transactions to be exempt from Value Added Tax, a consumption tax added to the value of goods and services at each stage of production or distribution. In the context of Turkish real estate, VAT exemption applies to specific types of properties under certain conditions.

Types of Properties Eligible for VAT Exemption

1.Residential Properties: The purchase of residential properties in Turkey is often eligible for VAT exemption. These include apartments, villas, and houses intended for habitation.

2.Commercial Properties: In some cases, commercial properties such as offices, shops, and warehouses may also qualify for VAT exemption.

Conditions for VAT Exemption

1.First-Time Buyers: VAT exemption is typically offered to first-time buyers of newly constructed properties in Turkey. This incentive encourages homeownership and stimulates the real estate market.

2.Primary Residence: To qualify for VAT exemption, the property must be intended for use as the buyer's primary residence. This requirement ensures that the exemption benefits individuals seeking housing rather than investors.

3.Price Threshold: There may be a maximum price threshold for properties eligible for VAT exemption. Properties exceeding this threshold may be subject to VAT at the standard rate.

How Does VAT Exemption Benefit Buyers?

Understanding the advantages of VAT exemption is crucial for prospective property buyers in Turkey.

Cost Savings | Save %20

By exempting eligible properties from VAT, buyers can save a significant amount of money on their real estate purchase. This reduction in upfront costs makes homeownership more accessible and affordable.

Simplified Process

VAT exemption streamlines the property buying process by eliminating the need to pay VAT on the purchase price. This simplification reduces administrative burdens and makes transactions more efficient.

Stimulated Demand

The availability of VAT exemption can stimulate demand for real estate, particularly among first-time buyers. This increased demand contributes to a dynamic and thriving property market.

How to Determine VAT Exemption Eligibility

Before purchasing a property in Turkey, it's essential to confirm whether VAT exemption applies. Here are the steps to determine eligibility:

1. **Consult with a Legal Advisor**: Seek advice from a legal advisor or real estate professional familiar with Turkish property law. They can provide guidance on VAT exemption criteria and ensure compliance with regulations.

2. **Review Property Listings**: Examine property listings to identify VAT-exempt properties. Developers and real estate agents often highlight VAT exemption as a selling point for eligible properties.

3. **Verify Documentation**: Request documentation from the seller or developer confirming VAT exemption eligibility. This documentation should clearly outline the conditions and requirements for exemption.

VAT Exemption Requirement Documents

·      Passport Notary Translation

·      Immigration Office document (provided by your lawyer)

·      Entrance Records from Police (provided by us)

·      Title Deed / Sales Agreement

·      Residency document from your country’s government office showing your address (Must be Apostilled)

·      Official documents from the property developer, which your lawyer can provide.

·      Power of Attorney for your lawyer.

·      Your tax number, which your lawyer can obtain on your behalf with Power of Attorney.

·      Money transfer receipt to the property developer.

·      The developer must be a Turkish company or have a minimum of 51% Turkish shareholder ownership.

·      You must not have a Turkish residence permit for the last 6 months.

·      You must not be a Turkish citizen when purchasing property.

NOTE: When you are granted VAT exemption by the law, you are not required to sell within 3 years. If you sell your property within 3 years, you will be liable to pay VAT.

Conclusion

Navigating the complexities of VAT exemption when buying Turkish real estate is essential for prospective buyers. By understanding the types of properties eligible for exemption, the conditions that must be met, and the benefits it offers, buyers can make informed decisions and maximize their investment. VAT exemption not only saves buyers money but also contributes to a vibrant and inclusive real estate market in Turkey.