VAT EXEMPTION AND IMPLEMENTATION

As it is known, with the Presidential Decision No. 7346; The general VAT rate applied as 18% has been increased to 20%, and the VAT rate of deliveries and services subject to 8% VAT has been increased to 10%.

As a result of these new rates, which started to be implemented as of 10 July 2023, the VAT rates applied in real estate sales have also changed.

These rising VAT rates have increased the interest and questions regarding the VAT exemption procedure, which can be applied especially in sales to foreigners.

With the regulation made in the Official Gazette dated 05.05.2017, the opportunity to be exempted from this VAT has been brought to the Buyers who meet the relevant conditions in the Housing and Office sales, provided that certain conditions are met.

Related article:

“…..

"12. Exception for Housing or Workplace Delivery

To be applied to the first paragraph of Article 13 of the Law No. 3065, with Article 7 of the Law No. 6824 dated 23/2/2017, as of 1/4/2017,

“i) To be abroad for more than six months by obtaining a work or residence permit, except for those specified in the first paragraph of Article 3 of the Income Tax Law, provided that it is applied at the first delivery of the buildings constructed as residences or workplaces and the cost is brought to Turkey in foreign currency. Turkish citizens living in Turkey, foreign national real persons who are not settled in Turkey, and residential or workplace deliveries made to institutions that do not have a legal and business center in Turkey and that do not earn income in Turkey through a workplace or permanent representative If it is determined that the exemption is applied even though it does not meet the conditions, the taxpayer and the buyer are jointly responsible for the tax, tax loss penalty and delay interest not collected on time. It must be paid by the seller before the title deed transaction, together with the deferred interest calculated according to the article.),”

clause has been added.

The procedures and principles regarding this exception application are determined below.

There are some conditions sought in order for this article to be implemented and the sale to be made exempt from VAT:

1) Construction servitude must be established;

 - It is obligatory that the building constructed as a residence or office has a construction permit and is actually delivered ready for the use of the buyers. In residences or offices where construction servitude can be established, a construction servitude must also be established.

2) Must be the first to sale of the property;

 - It is applied on the first delivery to be made by the taxpayer who built the residence or workplace.

3) Buyers who can benefit:

- Turkish citizens who have lived abroad for more than six months with a work or residence permit,

- Natural persons of foreign nationality who are not settled in Turkey,

4) Bringing the Value to Turkey in Foreign Currency

- The sale price of the real estate must be brought to Turkey in foreign currency by the buyer and paid to the seller.

Documents required for VAT Exemption:

1) A power of attorney given to the lawyer who will follow the proceedings,

2) A copy of the passport issued by the country of nationality,

3) A duly approved residence document stating that the applicant resides in a foreign country,

4) A document from the Provincial Immigration Administration indicating that the applicant does not have a residence permit in Turkey,

5) A document from the police showing the applicant entry and exit from Turkey in the last 6 months.

-       First 3 documents above must be provided by the applicant. Remainin documents will be provided by the lawyer.

- In the event that the house or workplace received within the scope of the exemption is disposed of within one year, the tax not collected on time is paid to the tax office of the place where the immovable is located, together with the delay interest calculated at the rate of postponement according to Article 48 of the Law No. 6183, before the title deed transaction.

- It is possible for buyers who meet the conditions to benefit from this exemption to purchase more than one residence or workplace within the scope of the exemption.