The VAT Exemption Granted to the Investor for the Purchase of Housing and Business Premises

13/1 article of the Value Added Tax Law No. 3065. clause (I) in clause provided is written in the law in Turkey, the non-resident Turkish citizens and foreign real persons in Turkey and legal entities that is not centered in Turkey and who do not profit in Turkey, non-business purchases to be applied in housing and persons VAT exemption is stipulated. Regulation aimed at stimulating the inflow of foreign currency into the country is an issue that potential and existing investors, as well as experts interested in law and taxation, are interested in the way it is regulated in legislation and its application.

In this bulletin, Article 13/1(i) of the VAT Law provides summary explanations about the situations that are excluded from VAT and the main issues that are curious about its scope.

1.    Persons Who May Benefit from VAT Exemption

A tax exception means that issues that should be taxed in accordance with tax laws under normal circumstances are excluded from tax by the same or different laws. The 13th article of the VAT Law also regulates issues that are excluded from the scope of VAT tax. In paragraph (i) of article, a special exception is provided for the purchase of housing and workplace. The persons who can benefit from the said exception are also counted individually in the same article. According to this;

  • Turkish citizens who have work or residence permits for living abroad for more than six months (or central government offices and institutions found in Turkey and is connected to formation of the undertakings mentioned department, establishment, formation and initiatives work, therefore, except Turkish citizens living in foreign countries)
  • Real persons of foreign nationality who have not settled in Turkey
  • Legal and business institutions that are not headquartered in Turkey and do not earn in Turkey through a workplace or permanent representative

they can use the exception provided in the article in purchase of housing and workplace.

1.1.        Conditions for Turkish Citizens to Benefit from VAT Exemption

In order for the Turkish citizen to benefit from the exception;

  • Have a work or residence permit abroad valid as of the date of delivery within the scope of the exception,
  • Having received the work or residence permit at least six months before the date of delivery within the scope of the exception,
  • Being abroad for at least six months between the date of receipt of work or residence permit and the date of delivery within the scope of the exception

it is necessary to provide these terms together. These issues must be submitted to the seller before delivery of the housing or workplace with a document that the buyer will receive from the Turkish embassy or consulate.

1.2.        Conditions for Foreign Natural Persons to Benefit from the Exemption

Natural persons with foreign citizenship who do not have citizenship of the Republic of Turkey and are not settled in Turkey can benefit from this exception. Those who reside in Turkey and those who live in Turkey continuously for more than six months in a calendar year are considered settled in Turkey and cannot benefit from the exception. Temporary and specific task or job from Turkey to the business men and scientists, experts, officials, press and broadcast reporters and other people or situations that are similar to these in order to travel with the arrivals charged with rest or treatment or detention, imprisonment or illness for reasons that do not obtain, such as in Turkey, foreigners who are or have been detained in the country for more than six months, though remaining in Turkey are not settled and will have the opportunity to benefit from the exemption.

In accordance with the article 28 of Law No. 5901, natural persons who have been given a blue card and have not settled in Turkey can also benefit from this exception.

1.3.        The Status of Legal Entities to Benefit from the Exemption

A legal and business center which is not located in Turkey and is not a business place or permanent legal entities that do not earn money in Turkey through a representative can also benefit from this exception. The legal center is the center indicated in the establishment laws, statutes, main statutes or contracts of taxable institutions. The business center is the center where business transactions are actually collected and managed in terms of business. In order to benefit from the exception, the legal entity’s legal or business center must not be located in Turkey. Even if the center is located abroad, a legal entity that receives income through a place of work or a permanent representative in Turkey cannot also benefit from the exception.

One thing that should be mentioned here is that it is not possible for foreign legal entities to acquire real estate in Turkey, as a rule, except in exceptional cases (Land Registry Law art. 35). Trading companies established in foreign countries and in accordance with the laws of those countries can acquire real estate in Turkey only if permitted by special laws such as the Law for the Encouragement of Tourism and the Petroleum Law. Therefore, it can be said that the foreign legal entities that can benefit from this exception are only legal entities that are allowed to acquire real estate under special laws.

2.    What are the Real Estates Covered by the Exemption?

The scope of the exception includes buildings built as residential or business premises. In this context every building that has been qualified as, shops, offices, bureaus, housings, residences, apartments and condominiums, etc. are included in the building license are an exception. In order for a residential building or a workplace to be covered by this exception, a building constructed as a residential building or a workplace must have a building permit and be actually delivered ready for use by buyers. In residential or business places where a construction servitude can be established, a construction servitude must also be established. However, documentation of actual delivery is not required for the delivery of condominium owned houses or workplaces.

Buyers who have the conditions to benefit from the exception will be able to benefit from the exception in each of them if they purchase more than one residence or workplace.

3.    What are the Conditions to Benefit from the Exemption?

3.1.        It Must Be The First Delivery of the Building

As mentioned above, the fact that the received building has the status of a residential or business premises is the first condition to benefit from the exemption. In addition The VAT exemption is applied at the “first delivery” made by the taxpayer who is building a residence or a place of work. First delivery means, the event of purchasing the building for the first time from the builder of the building. If a residence or workplace is purchased from the builders and sold to someone else, the delivery of the residence or workplace is not considered the first delivery.

It should be understood from the delivery that the right to save on the goods is transferred by the owner or those acting on his behalf to the buyer or those acting on his behalf. If a product is transferred directly to the final buyer without changing hands by making a chain contract with two or more people, it is ensured that each of the stages between them until the final buyer will be considered a separate delivery.

As for how the delivery should be evaluated in construction works in exchange for a share of the land plot, it is accepted that there are two separate deliveries here. The first of these, by the owner of the plot to contractor the delivery of the plot; the second issued to the land owner by the contractor and the land as opposed to residential or workplace delivery. In this case, the delivery of the residence or workplace given to the landowner in return for the land plot by the landowner is not covered by the exception, since it will not be considered within the scope of the initial delivery.

To explain the subject with an example; (A) Structure Inc. transferred some of the houses he has built on the land he taken over from (B) Real Estate Ltd. Inc. according to the contract between them, to which it has signed a construction agreement in return for land share with (B) Real Estate Ltd. Inc. Here, even if (B) Real Estate Ltd. Inc. sells these residences to a buyer who is able to benefit from the exception, the VAT exception cannot be applied in the sale process. Because the sale cannot be evaluated within the scope of ”first delivery”.

3.2.        The Deed of Real Estate Must Be Processed

In order for an exception to be applied for the delivery of housing or a place of work, a transaction must be made in the title deed. Upon notification of the exemption of the sellers, the directory of land registry annotates the relevant real estate declaration house that the sale has been made as an exception from VAT. The relevant annotation states that if these houses or workplaces are disposed of within a year, the tax that is not collected on time will be paid together with the calculated late interest.

3.3.        The Price Should be Brought to Turkey in Foreign Currency and This Situation Should Be Documented

Another condition for applying the VAT exemption is that at least 50% of the price is paid to the seller before the date of issuing the invoice for the sale, and the remaining part is brought to Turkey by the buyer in foreign currency no later than one year later. The VAT refund subject to the exception is made after the full price has been brought to Turkey and paid to the seller.

In order to benefit from the exception, it is also necessary to certify that the price has been brought to Turkey.  In the article 12.2.2 of the Communique on Amending the Value Added Tax General Practice Communique on how to perform this certification process it is stated as follows;

“It is essential that the foreign currency located abroad be brought by transferring it to a bank in Turkey. If the currency is transferred to a bank in Turkey, the transfer process is documented by a bank statement. It is possible to make the payment using credit cards issued by banks abroad, and the fact that the currency for payments made with these credit cards has been brought to Turkey must be documented with a receipt or letter to be issued by the relevant bank in the country.

It is also possible to physically bring a currency located abroad to Turkey by the buyer, and in this case, documents obtained from the customs office are used to certify that the currency has been brought to Turkey.

On the other hand, if the currency is physically brought to Turkey or transferred from abroad to the buyer’s account located in Turkey, the said price must be paid to the seller through the bank and this payment must be documented with a bank statement. It is also possible that the price brought in from abroad in foreign currency will be paid to the seller in Turkish lira.

currencies brought in before 8/3/2017 are not considered as foreign currency brought to Turkey within the scope of this exception. However, foreign currencies brought in before this date for the purpose of obtaining a specific residence or workplace and paid to the seller are considered foreign currency brought to Turkey for housing or businesses that are subject to delivery within the scope of the exception, provided that they are documented.”

3.4.        Real Estate Should Not be Disposed of for 1 year

Although this is not a condition that was originally sought, it can be considered a kind of disruptive condition that requires subsequent exclusion from the scope of the exception. Accordingly, the real estate acquired using the exception should not be transferred within 1 year, which will be calculated from the date of purchase. Otherwise, the tax that is not collected on time will be charged to the person who disposes of the real estate together with the late interest. Delay interest is calculated in accordance with Article 48 of Law No. 6183.

Tax and late interest are not charged for transfer transactions that will be made after the expiration of the one-year period.

4.    Sanction of the Application of an Exception Even If the Conditions Do Not Occur

If it is determined that the exception is applied even if it does not meet the conditions stipulated in the law, the buyer together with the taxpayer will be held responsible for VAT and tax loss penalty and delay interest that are not collected on time, as well as the buyer.

“If at least half of the cost of the housing or workplace sold under the exception is not paid to the seller by the buyer in foreign currency to Turkey no later than one year before the date of issuance of the invoice for the sale, the tax that is not collected on time will be sought from the buyer together with the seller together with a tax loss penalty and late interest from the buyer.”



Especially foreign real persons and legal entities that are not headquartered in Turkey and do not earn in Turkey, can benefit from the VAT exemption provided for residential and workplace sales in Turkey. It is also possible for Turkish citizens to benefit from the exception provided that they are not resident in Turkey. For investors planning to invest in real estate in Turkey, you can contact our team for detailed information about the conditions for using exceptions and exceptions that have significant advantages.

Best regards.

Solmaz Legal and Consulting Team.


Communiqué on Amendments to the Communiqué on General Application of Value Added Tax

Value Added Tax Law

Leave a Reply