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VAT PHASE

Is VAT applicable for all property acquisitions in Turkiye?

In principle every commercial, industrial and professional transaction made in Turkiye is subject to VAT. So, in principle property sales also fall into the scope of VAT. On the other hand in the following cases there is no VAT applicable for property sales:

“Initial transfer of a residence or a workplace to a purchaser who is, (1) a Turkish citizen living abroad for more than 6 months with a work or residence permit, (2) a foreign person, not residing in Turkiye, or (3) a legal entity which does not have its business center in Turkiye and does not generate income via a workplace or a resident representative in Turkiye is exempted from VAT. It shall be also noted that a VAT exemption of a foreign person/entity for the aforesaid transactions is only applicable, if the transfer fee of the real estate in such transactions are brought to Turkiye and paid to the seller in foreign currency. In addition to that, the said property must be held for at least one year after the acquisition. In case that the property is sold within a year after the acquisition date, the VAT will become payable together with late payment interest.”

If the seller/owner of the property is an individual who is not dealing with any commercial activity.

If the seller of the property is a company which is not dealing with real estate trading on a regular basis and having held the said property for more than two years.

 

What are the VAT rates to be applied for property acquisitions?

General VAT rate in Turkiye is 18% and this rate is also applicable for the property sales. In principle property sales including office, residential properties, land acquisitions etc. are all in principle subject to 18% VAT which is calculated over the sales price in principle. But, there are different VAT rates set for the residential properties fulfilling some specific conditions.

What are the VAT rates specific to residential property sales?

“In addition to the normal VAT rate of 18%, rates of 1% and 8% are also applicable to residential units having a net area of less than 150 sqm, according to certain conditions. If the project is within the scope of urban regeneration, the 1% VAT rate is applied regardless of the value of the property. With a recent enactment in legislation, the thresholds for tax values have been increased in favor of tax payers, which is applicable to new projects (with a commencement date after 1 January 2017). Thus, we strongly suggest consulting your tax advisor for the exact VAT rates for a residential unit with a net area of less than 150 sqm. Please note that residential units having a net area of more than 150 sqm and all other properties in Turkiye are subject to the 18% VAT as mentioned above.”

Please kindly note that all residential unit sales other than the ones that subject to 1% VAT, will be subject to 8% VAT without any net area limitation till Sep 30, 2017. Also, please refer explanations under “Is VAT applicable for all property acquisitions in Turkiye?” section for VAT free acquisitions.

What is “Stamp Tax” and how is applied to the property transactions?

Agreements that signed in Turkiye are subject to stamp tax over the highest monetary value stated or referred in the agreement at 0.948%. Leasing agreements are subject to stamp tax at 0.189%. On the other hand agreements signed between individuals who are not dealing with any commercial activity do not subject to stamp tax. Signatory parties are mutually liable for the payment of the stamp tax. No stamp tax is calculated if parties conclude their agreement in front of the title deed registrar.

 

“As per Resolution No. 2017/9759 of the Council of Ministries, no stamp tax liability shall arise (stamp tax rate shall be regarded as 0%) from (1) promise to sell agreements that are officially executed before the respective notary public, or (2) duly executed pre-paid property sale agreements.

Furthermore; as per Resolution No. 2017/9973 of the Council of Ministries, no stamp tax liability shall arise (stamp tax rate shall be regarded as 0%) from (1) officially executed construction agreements in return for flat (kat karşılığı inşaat sözleşmeleri), (2) officially executed construction agreements in return for revenue share (hasılat paylaşımı inşaat sözleşmeleri), (3) undertaking agreements executed between contractors and sub-contractors, regarding aforesaid officially executed construction agreements in return for flat or revenue share (inşaat taahhüt sözleşmeleri), (4) consultancy agreements regarding aforesaid officially executed construction agreements in return for flat or revenue share (danışmanlık sözleşmeleri) and (5) building inspection service agreements (yapı denetim sözleşmeleri). 

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