VAT Exemption on Real Estate Sales

Under What Conditions May the VAT Exemption Apply?

For foreign individuals, holding foreign citizenship alone is not sufficient. Whether the buyer is considered resident in Türkiye under the residency rules of the Income Tax Law is assessed separately.

For this reason, the buyer's residence, employment, length of stay and existing records in Türkiye should be reviewed before the transaction in terms of eligibility for the exemption.

The exemption may apply to the delivery of properties built as residences or business premises that meet the conditions required by the legislation.

The structural and title deed characteristics of the property, its delivery status, and whether it has the character of a residence or business premises within the scope of the exemption should be checked before the transaction.

One of the basic conditions of the VAT exemption is that the residence or business premises be within the scope of a first delivery.

The first delivery made by the taxpayer who built the residence or business premises may be considered within the scope of the exemption. If the property is resold after being purchased from the person or company that built it, the subsequent sale is, as a rule, not regarded as a first delivery.

For this reason, particularly in purchases from a project company, a developer or another seller, the legal and tax nature of the sales chain should be reviewed.

For the exemption to apply, the sale price must be brought into Türkiye in foreign currency and paid to the seller in the manner prescribed by the legislation.

According to the VAT General Implementation Communiqué, at least fifty percent of the sale price must be brought into Türkiye in foreign currency by the buyer and paid to the seller before the date on which the invoice for the sale is issued, and the remaining portion within one year at the latest.

It is important that the payment plan be structured in line with the contract, the invoice, the bank transfers and the property delivery/title deed process.

It must be substantiated with appropriate documents that the price was brought into Türkiye from abroad and paid to the seller.

Bank transfers, payment receipts and, depending on the nature of the transaction, other documents showing that the foreign currency was brought into Türkiye are reviewed together with the sales file.

Although it is possible for the foreign currency brought from abroad to be paid to the seller in Turkish lira, the source of the foreign currency and the payment chain must be traceable through documents.

Applying the VAT exemption is not a transaction completed solely at the buyer's request. The seller's invoicing and tax practice, the bank payment documents and the property's title deed process must be carried out consistently with one another.

The law firm reviews the legal status of the buyer and the property, the contracts and the payment documents. Tax calculations, tax returns, VAT refunds and accounting procedures are carried out by the independent financial advisor or tax advisor.

If a residence or business premises acquired under the VAT exemption is disposed of within three years, the VAT that was not collected at the time must be paid, together with the interest prescribed by the legislation, before the title deed transaction.

For this reason, if a quick resale of a property acquired by benefiting from the exemption is planned, it is important to separately assess the VAT consequences that will arise before the sale.

Does the VAT Exemption Apply to Every Foreigner?

No. Being a foreign national alone is not sufficient to benefit from the VAT exemption.

Whether the buyer is considered resident in Türkiye, whether the property is a first delivery, whether the price is brought into Türkiye in foreign currency, and the other conditions required by the legislation are assessed together.

In particular, for foreigners who have lived or worked in Türkiye for a long time or who have a residence record, the buyer's residency status under the tax legislation should be reviewed separately.

Does the VAT Exemption Apply to Second-Hand Properties?

The exemption in Article 13/i of the VAT Law applies to the first delivery of a residence or business premises.

Where the property has previously been delivered by the taxpayer who built it and is later put up for resale, the subsequent sale is not regarded as a first delivery for the purposes of this exemption.

For this reason, the sales history of the property and the legal capacity in which the seller transferred it should be checked before the transaction.

Are the VAT Exemption and Buying Real Estate for Citizenship the Same Thing?

No. The VAT exemption is a tax provision; Turkish citizenship by real estate, on the other hand, is subject to separate investment and citizenship conditions.

If the same property is to be purchased for citizenship purposes and it is also planned to benefit from the VAT exemption, the conditions of the two regimes should be checked independently of each other.

Explore Turkish Citizenship by Real Estate

What Do We Check Before the Transaction?

Within the scope of this review, the entry-exit records, the letters from the Presidency of Migration Management and the tax administration, and the apostille/translation procedures for foreign documents that are deemed necessary are also obtained or coordinated on a file-by-file basis. Tax calculations, returns, refunds and accounting practices are carried out by the independent financial advisor or tax advisor.

How the Process Works

If a Transaction Has Been Made Without Meeting the VAT Exemption Conditions

If the VAT exemption has been applied even though the conditions for the exemption were not met, tax that was not collected at the time and the related financial consequences may arise.

For this reason, it is important to check the buyer's status, the first delivery and the foreign currency payment conditions against documents before the sale or title deed transfer is completed.