Article 13 of Turkish Value Added Tax Law No. 3065 provides VAT exemptions on certain goods and services. Consequently, the first delivery of a home or office shall be exempt from VAT for Turkish citizens abroad and non-resident real or legal persons.

Although the law has been in force for two years, many investors are unaware that they can benefit from tax relief. Ecovis shows the conditions and the procedure for foreigners wishing to invest in Turkey and take advantage of the tax relief.

In order to benefit from the exemption, the buildings must have a construction license and be delivered in turnkey condition. Authentication of the actual delivery is not sought in the delivery of homes or offices where property ownership is established. “First delivery” means the first sale of the buildings following their construction. If the buildings are purchased second hand, then the exemption does not apply.

This exemption applies to:

• Turkish citizens who have lived abroad for more than six months with a work or residence permit (excluding Turkish citizens contracted abroad temporarily ).
• Foreign real persons who are non-resident in Turkey.
• Institutions that do not have corporate centre in Turkey or do not generate earnings through a workplace or permanent representatives in Turkey.

Buyers who meet the conditions of the exemption may purchase more than one home or office under the exemption. Turkish citizens wishing to benefit from the exemption should meet all the conditions below:

• They should have a work or residence permit valid on the date of the delivery concerned.
• The work or residence permit must have been obtained at least six months before the date of the delivery relating to the exemption.
• They must have been abroad between the date when a work or residence permit was received and the date of the delivery within the scope of the exemption.

“Foreign national” means a person who does not have a citizenship connection with the Republic of Turkey under the provisions in Article (3/1-d) of Law No. 5901 (3/1-d). Those who have a residence address in Turkey and those who have resided in Turkey permanently in a calendar year (temporary absence does not affect the residence time in Turkey) are considered to have settled in Turkey.

Payment Terms

In order to benefit from the exemption, 50% of the purchase value of the building must be brought into Turkey by the buyer in foreign currency before the billing date, and the remaining amount within one year at the very latest, explain the Ecovis experts. A bank receipt is considered proof of payment. It is also possible to make payments with a credit card issued by an overseas bank. The amounts collected by credit card must be documented with receipts or written confirmation from the bank in Turkey.

Should the buyer physically bring the amount of foreign currency into Turkey, he/she needs to document the amount of that currency with a certificate from the customs directorate. After the foreign currency has been physically brought into Turkey, it can be delivered to the seller in Turkish lira. Note that transactions made with foreign currencies brought into Turkey before March 8, 2017 are not eligible within the scope of this exemption.

Those making sales within the scope of this exemption must inform the directorates of the land registry that sale of the home or office was made exempt from VAT within the scope of Article (13/i) of Law No. 3065. Where the exemption was wrongly applied in the absence of the conditions stipulated in Article (13/i) of Law No. 3065, the taxpayer and buyer shall jointly be responsible for any tax not collected in time, loss of tax penalty and default interest.

Author:

Mustafa Bulut, Partner, Sworn in CPA, Chief Auditor, ECOVIS Diplomat Denetim ve Yeminli Mali Müşavirlik A.Ş., Izmir, Turkey