Purchasing Real Estate for Private Use in Turkey Information from the Turkish Consulate, London
Foreigners may purchase land and property in Turkey in their own names provided that properties are located in towns (i.e. there must be municipality in the area where the property is and the property must be situated within the boundaries of that municipality or borough), not in villages or rural areas and outside of military zones.
In order to acquire the title of a property, an application has to be submitted to the local Land Registry Office in which the property is situated. After carrying out necessary searches and checks for the abovementioned requirements, the transfer of the title is done by the Land Registry Office. During the transaction, the proofs or the documents concerning the transfer of the full purchase price into Turkey must be presented to the Land Registry Office. Also a one per cent duty (i.e. tax) both for the purchaser and seller is due and collected during the transaction (note: this is now 2%). There exists an annual property tax, collected by the municipalities (i.e. local governments) at the rate of 0.3 per cent for private buildings. The newly built properties are exempt from the annual property tax for 5 years. All properties are subject to revaluation for every five years for tax purposes. The acquired property may be resold or rented out and the proceeds may be transferred out of Turkey. Different regulations apply when a property is purchased for business related purposes.
Property Purchasing Laws and Procedures in Turkey
Turkey is becoming a popular holiday destination with its immense unspoilt coastline and Mediterranean climate which offers all-year-round sunshine. Buying property in Turkey is now seen as a good future investment considering the fact that Turkey is on the verge of becoming a member of the EU and has one of the fastest growing emerging markets in the world.
Here is the essential but general information regarding the path to ownership of a property in Turkey according to Turkish Laws (article 35 of the Turkish Constitution) and which problems might arise during the process. Different properties are subject to differing laws (depending on location). Because the following is general information only, we encourage you to consult an expert or visit our company in Turkey, Kalkan Property Services. We specialize in real estate in addition to architectual projects and construction. By doing so you can avoid the possibility of heartbreaking disappointment (i.e. when you learn that due to unseen regulations, your dream of a summer house on your purchased land can only be that, a dream). Buying property in Turkey can be a complex matter and knowledgeable, professional service is required.
Turkish Property Legislation
Ownership is defined in article 35 of the Turkish Constitution. This article stipulates that anyone is entitled to ownership and that these rights can only be restricted by other legal stipulations. The restrictions may consist, for instance, of zoning schemes, restrictions applicable to foreigners, etc.
The ownership regulations are elaborated in the Turkish Civil Code, article 633. This mainly explains how ownership is acquired. For the purchase of property by a foreign person, the registration of the land is especially important. In Turkey there are regional directorates of the Land Registry Department, which are subdivided in provincial or district offices and they are all controlled by the state.
Property Registration and Delivery
In most European countries the buyer and seller go to a public notary to have the property put in the name of the new owner. The public notary is responsible for the correct settlement of this procedure. The public notary is also responsible for the delivery, which often takes place in the form of a ‘deed of transfer’ and the entry in the property register.
In contrast to this, the entry in the property register in Turkey is not performed by a public notary, but by an official of the Property Registry Department. It is legally compulsory for both sides (the seller and the buyer) to be present at the entry. It is possible to authorise another person to do so but the authorisation requires a notorial deed. As a security measure, it is also advisable to authorize the sale through an official notary.
The delivery of the deed of transfer does not require the intervention of a public notary in Turkey. The only applicable stipulation concerning the delivery is that it takes place in writing. After the entry and delivery the property register issues a proof of ownership, which is called ‘Tapu’. The ownership is only obtained at the moment that the building(s), if under construction, has been completed and the full amount has been paid.
Mainly there are no legal restrictions against foreigners regarding the acquisition of property ownership. However, the Village Act and the Military Prohibited and Security Areas play an important role; Article 87 of the Village Act denies the right to foreigners to ownership of property that is outside the centre of a village in case the cadastral division of this area had not been arranged yet or it may belong to the Ministry of Forest. Also, the act regarding Military Prohibited and Security Areas can be an impediment and therefore restrict the acquisition of property by foreigners if the property is located within a particular distance of military sites or strategically important areas.
The major legal restrictions mentioned above may in turn change or even be (partly) cancelled by more recent legislation which is closely related to the promotion of the economic position of Turkey or the adjustment of regulations and laws to EU or tourism promotions for foreigners etc.
Buying real estate in Turkey involves many regulations. Not only must formal regulations be taken into account, but foreigners must also heed the various legal exceptions to acquire real estate.
The zoning schemes, the antecedents of the selling party and the legal restrictions imposed by Turkish property legislation are some important aspects that must be approached objectively, reliably and professionally.
Mavi Real Estate and Property Services offers you valuable assistance and allows you to have an objective and thorough investigation carried out regarding the property in which you are interested. Our well-educated staff are happy to help you. So please do not hesitate to contact us either through email or fax or in person for any additional information.
Turkish Property Tax Information
Non-residents are taxed in Turkey on income arising from Turkish sources only and are liable to a number of other property related taxes outlined below. The tax year in Turkey is the calendar year and an individual is considered resident in Turkey if s/he spends 183 days or more in any tax year in Turkey.
There is an agreement between The United Kingdom of Great Britain and Northern Ireland and The Republic of Turkey for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains. But at present, Ireland and Turkey have not signed a Dual Taxation agreement but one is expected in near future. This will impact the tax implications on income received from Turkish property.
Taxes payable when purchasing a property in Turkey:
Turkish Transfer fees @ 2% are payable by both the buyer and the seller side on the sale of a property. These fees (i.e. 4% in total) are based on the declared value of the property. However, the declared value of the property cannot be lower than the ‘tax value’ determined by the local town hall, which is also used as the base of the property tax. 2% is also payable on the register of new buildings constructed on land.
The VAT rate in Turkey on the sale of property is 18%. But sales of houses which are below 150 meter square in net area, are subject to 1% VAT. If an immovable is owned by a company in Turkey, than selling this immovable after having held for 730 days (2 full years) might not be subject to VAT and corporate tax. This exemption also depends on some other conditions.
Turkish Stamp duty is levied on sale & lease contracts. The rates range from 0.15% – 0.75% and depends on the value of the contract.
Ongoing property taxes payable in Turkey are as follows:
Turkish Rental Income for a non-resident is taxed at scaled rates from 15% – 35%. Expenses directly related to the renting of the property are allowable as a tax deduction eg repairs & management fees.
There is also a lump-sum expense method, which allows the taxpayer to deduct 25% of the gross income as the expense without proving with documents.
Tax is deducted by way of a withholding tax. If a DTA comes into effect reduced rates of withholding tax may apply.
A Turkish tax return must be filed by 25th March with taxes payable in 2 equal payments – March & July.
Local Turkish Property taxes (rates) are payable in 2 equal installments – May & November. Rates are calculated based on the value of the property and are subject to thresholds set by the Tax Authorities as follows:
Other buildings 0.2%
Farming land 0%
Vacant land (but allocated for construction purposes) 0.3%
Other applicable taxes are as follows:
Turkish Capital Gains Tax (CGT) arising from the sale of property is treated as income in the year of assessment. It is taxed at the marginal rate of 15% – 35%. A capital gain of upto TRY 6,800 in 2008 is exempt from CGT. Details of the disposal must be made within 15 days of sale. Property, if owned after January 1st 2007 and held for more than 5 years is exempt from Turkish CGT.
Turkish Inheritance Tax (IHT) rates vary from 1% – 30%. Tax on inherited property is deducted from the taxable value of the asset.
Foreign Citizens Who Can Legally Buy Property in Turkey
Property law takes effect, all foreigners gain right to own
Under Construction Properties are Now Available for Turkish Citizenship by Investment
In accordance with the amendment made to the Turkish Citizenship Law published in the Official Gazette on 07.12.2018, a new convenience provided for foreigners who want to become Turkish citizens. Foreigners who want to buy an under construction property may also obtain Turkish citizenship, after the regulating contract from the notary for the property sale and committing to buy a property worth of 400.000 USD.
Title deed and the appraisal report was mandatory to obtain a Turkish Citizenship. When customers want to buy a property from an under construction project, they were losing the chance of getting citizenship because the real value of the property is not the value declared in appraisal report as the project is not completed. Now, this rule has been removed with the new regulation. The notarized property purchase commitment is enough when buying a property from the project under construction.
According to the circular published in the Turkish Official Gazette in previous months, Turkish citizenship acquiring procedure was facilitated by reducing the limit required for citizenship. The fixed capital amount for foreigners to be entitled to Turkish citizenship was reduced from 2.000.000 USD to 500.000 USD. – The amount envisaged obtaining Turkish citizenship through the property purchasing was reduced from 1.000.000 USD to 400.000 USD. – The employment limit was reduced from 100 to 50 people.
Turkish Citizenship by Notarized Property Purchase Commitment
On 07.12.2018, new chapter added to the regulation provides new easiness to those who want to obtain to Turkish citizenship. Foreigners who regulate contract from the notary for the property sale and commit to buy a property worth of 400.000 USD, may get Turkish Citizenship. The notarized contract pledging that property sale is made by cash payment and the committed that the contract will not be transferred or abandoned for three years is enough. Moreover, foreigners who buy a property from unfinished or off-plan projects may also apply for citizenship.
According to the new decision published in the Turkish Official Gazette;
The commitment of the property purchase worth at least 400.000 USD. • The property commitment has to be organized by the notary. • The notarized contract should annotate that the commitment property will not be sold for 3 years. • The property purchase commitment is also valid for under construction or off-plan projects.
8 August 2012 / ALI ASLAN KILIÇ, ANKARAA new piece of legislation — often referred to as the reciprocity law — which is intended to allow foreigners to purchase property in Turkey, even if Turks do not enjoy the same right in those same foreign countries, has taken effect.
“Now the citizens of 183 nations can own property in our country,” Environment and Urban Planning Minister Erdoğan Bayraktar said at a press meeting on Wednesday, announcing the implementation of the law.
In early May, Parliament passed the bill concerning the sale of land to foreigners that eliminated the reciprocity requirement and increased the limit on the size of land able to be bought by foreigners to 30 hectares. President Abdullah Gül did not take much time to sign the bill into law, and it was then published in the Official Gazette on Monday.
The new law amends title deed laws and changes the previous reciprocity requirement, which dictated that the citizens of 89 countries did not have the right to own property in Turkey because Turkish nationals are not entitled to own property those countries. Among these countries were Russia, the Gulf States and the Turkic republics of Central Asia.
According to the new law, foreign individuals and businesses are required to submit their project proposals for vacant plots of land to Bayraktar’s ministry within two years of purchasing the land. If the ministry approves the project, it will be forwarded to the local land registry office for monitoring.
With the introduction of the law, real estate prices are expected to increase across Turkey, but particularly in İstanbul and the country’s highly-touristic southern belt. In a statement released from his office in late May, TAB Real Estate Investment Chairman Ahmet Temeltaş said it will help raise real estate prices in İstanbul by as much as 200 percent. “The price of a square meter of real estate is likely to increase to as much as $6,000-$7,000 from the current $2,000 levels in a short period of time,” he said. He believes particular parts of the province will experience the biggest hikes in prices. He named Ataşehir, Maslak, Çekmeköy, Sancaktepe, Kartal, Pendik and Halkalı as examples of the best İstanbul neighborhoods in which to invest.
According to the Central Bank of Turkey’s latest figures, housing prices increased at an annualized rate of 11.68 percent in July while consumer inflation averaged at 9.07 percent compared to the same month past year. According to the Real Estate Investing Partners Association (GYODER), 96,000 housing units were sold in the first quarter of 2012, 5.5 percent more than a year ago.
Turkey attracted $3 billion in foreign real estate investments between 2003 and 2008. This number was $2 billion last year. Market observers expect the anticipated foreign investor influx to Turkish real estate markets could create as much as $5 billion in sales per annum after the new law.