Legal Matters Concerning the Purchase of Property in Turkey

Turkey is becoming a popular vacation spot due to its vast sun-drenched virgin coastline and Mediterranean environment Purchasing property in Turkey is also increasingly seen as a solid long-term investment, given that Turkey is on the verge of joining the EU and has one of the world's fastest-growing developing markets.

Foreigners are allowed to buy land and property in Turkey in their names, as long as the properties are in cities rather than villages or rural regions and are not in military zones. Article 35 of the Turkish Constitution defines ownership. This article states that everyone has the right to possess anything and that these rights can only be limited by other legal provisions. Zoning systems, limits on immigrants, and other restrictions are examples of constraints. To get a property's title, an application must be presented to the local Land Registry Office where the property is located. The Land Registry Office transfers the title after conducting the appropriate searches and verification for the above-mentioned conditions.

The proofs or paperwork about the transfer of the whole purchase price into Turkey must be given to the Land Registry Office in the course of the transaction. During the transaction, a 1% duty (i.e., tax) is owed and paid by both the buyer and the seller (note: this is now 1.5 percent). Private buildings are subject to a yearly property tax of 0.3 percent, which is collected by municipalities (i.e., local governments). For the first five years, newly constructed properties are free from paying annual property taxes.

Turkish tax system requires that all properties will be reevaluated every five years. The property obtained can be resold or rented out, with the revenues being moved out of Turkey. When a property is bought for commercial reasons, other rules apply.  The registration of the land is crucial when a foreign individual purchases property. In Turkey, the Land Registry Department has regional directorates that are split into province or district offices and are all under governmental administration.

In 2020, the World Investment Report (UNA) ranked Turkey second in Asia for foreign direct investment. Whereas direct foreign investor capital inflows totaled 12.94 billion dollars in 2018, up to 11.48 billion dollars a year earlier. Some EU nations have historically invested heavily in Turkey. After the Netherlands, the United States is Turkey's second-largest investor. Dutch investment in Turkey is 15.8% of all foreign investments.

What Are The Requirements to Buy a Property for Foreigners in Turkey?

Foreigners are mostly interested in investing in Turkey nowadays. If you want to buy a property in Turkey you can be interested in Turkish citizenship by investment process and guide.

Buying a home in Turkey necessitates a set of documents:

• An identification number for tax purposes (Vergi Numara).
• A Turkish bank account (Learn how to open a Turkish bank account.)
• Documents from your country of residence (such as an electric bill).
• Two pictures

What are Property Purchasing Laws and Procedures in Turkey?

You must first locate a home you wish to purchase.  Once you've chosen your ideal property, the agency will draft a contract with you outlining the purchase's terms and conditions. This will include the amount of your holding deposit, a deadline for paying the whole deposit, and the property's ultimate balance cost. For the length of the process, a legal translator assigned by government notary offices will be there to ensure that you understand everything.

The buyer's passport(s) is then taken to the Notary, where the legal translator will translate them. Security and property location checks need this. The translation will take little more than half an hour, and the purchaser will have the passport shortly after (s). The contract will then be taken to a local solicitor by the agency's local office experts and the buyer. Your lawyer will handle the TAPU (title deeds) and Iskan (habitation license) applications, as well as contract negotiations. The Iskan is a technical passport for your home that contains information such as the number of stories and internal infrastructure. The TAPU is a legal document that establishes who owns what and who does not. The owner's picture, as well as an official stamp and signature, will be included in this document.

It's vital to double-check a TAPU's validity by making sure the name on the TAPU matches the seller's name. Your solicitor will double-check all of this for you. He will also ensure that the TAPU is free of obligations and corresponds to the property in issue. The solicitor, the legal translator, and one other witness will then witness all parties signing the contract drafted by Turkey Homes. To secure the property, you will be required to pay a holding deposit (the lowest holding deposit allowed is USD 2,000 or equivalent in Turkish Lira) and a date will be set for you to pay the remaining deposit, which is typically 1-2 percent of the property's selling price.

Here is the most recent information as of August 2018. There is no longer a military application process for foreign purchases in 16 Turkish regions, ranging from Fethiye to Bodrum and Antalya. You will pay the remaining sum on your property and your solicitor will sign over the deeds of the property after all other documentation is completed. To get a property's title, an application must be presented to the local Land Registry Office where the property is located. The Land Registry Office transfers the title after conducting the appropriate searches and verification for the above-mentioned conditions. In Turkey, both parties (the seller and the buyer) must be present at the property register entry during the transaction. Additionally, evidence or documentation about the complete purchase price transfer into Turkey must be given to the Land Registry Office.

At the time of the deed transfer, all taxes and fees will be paid.  A buyer's fee of 3% of the property's worth will be required to be paid to Turkey Homes. You'll also have to pay the purchase tax (stamp duty), which is equal to 4% of the property's assessed value. The assessed value of a property is usually approximately 60% of the purchase price, thus your purchase tax will be 4% of 60% of the property's value. This tax is paid to the local government.

You will receive your TAPU as a new property owner after the buying procedure is completed (title deed). To register a property in Turkey, you must first register with the local tax office and create a Turkish bank account. You will need to produce another form of identification with your home address in the nation you are resident to create a Turkish Bank account, in addition to your original copy of your passport. This may be a driver's license, a utility bill (electricity, water, gas, and so on), or a council tax bill. You'll be issued a unique tax number after the bank account is created, and you'll need to notify the local government that you now own the property.

1. Turkish Property Legislation

Articles 35 and 36 Land Registry Law No.2644 of the Turkish Constitution define ownership. This article states that everyone has the right to possess anything and that these rights can only be limited by other legal provisions. Zoning systems, limits on immigrants, and other restrictions are examples of constraints.  The registration of the land is crucial when a foreign individual purchases property. In Turkey, the Land Registry Department has regional directorates that are split into province or district offices and are all under governmental administration.

2. Property Registration and Delivery

The buyer and seller in most European nations go to a public notary to have the property transferred to the new owner's name. This procedure must be conducted appropriately, according to the public notary. The public notary is also in charge of the delivery, which usually takes the form of a deed of transfer as well as the registration into the property register. In Turkey, however, the entry into the property record is done by a Property Registry Department official rather than a public notary. The presence of both parties (seller and buyer) at the entrance is required by law. It is possible to delegate this authority to another individual, but this needs a notarial deed. It's also a good idea to get the sale authorized by an official notary as a precaution.

In Turkey, a public notary is not required for the delivery of the document of transfer. The sole criterion that applies to delivery is that it must be done in writing. Following the entry and delivery, the property registry produces a 'Tapu,' or evidence of ownership. Ownership is only transferred after the building(s), if still under construction, are completed and the entire sum is paid.

Foreigners are generally not subject to any legal limitations when it comes to acquiring property ownership. The Village Act, as well as the Military Prohibited and Security Areas, play an essential role; Article 87 of the Village Act prevents foreigners the right to possess land outside of a village's center if the land registry division has not yet been completed or if it belongs to the Ministry of Forest. Furthermore, the statute regulating Military Prohibited and Security Locations might be a hindrance, limiting foreigners' ability to purchase property within a certain distance of military stations or strategically vital areas.

More recent legislation, which is strongly tied to the development of Turkey's economic position, the adjustment of rules and laws to EU standards among other things, may amend or even eliminate the primary legislative prohibitions described above.

3. Finally

Buying real estate in Turkey involves many regulations. Not only formal regulations must be taken into account, but foreigners need also to regard the various legal exceptions to acquire real estate. Some key issues that must be treated fairly, reliably, and professionally include zoning plans, the history of the selling party, and the legal constraints imposed by Turkish property legislation. Istanbul Property 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 is happy to help you.

What are the Taxes to Pay When Buying Real Estate in Turkey?

Non-residents are solely taxed on income earned in Turkey and are subject to a variety of other property-related taxes, which are detailed below. In Turkey, the tax year is the calendar year, and if a person spends 183 days or more in any tax year in Turkey, he or she has been deemed a resident.

1. Turkish Transfer Fees

On the sale of a property in Turkey, both the buyer and the seller are charged 1.5 percent in Turkish transfer costs. These costs (which amount to a total of 3 percent of the property's stated value) are dependent on the declared value of the property. The reported value of the property, on the other hand, cannot be less than the 'tax value', which is decided by the local town hall and serves as the basis for the calculation of property taxes. In addition, 1.5 percent is due to the registration of new buildings erected on a property.

2. VAT

The value-added tax (VAT) on the sale of real estate in Turkey is 18 percent. Sales of houses with a net size of less than 150 square meters, on the other hand, are subject to a 1 percent sales tax. It is possible that selling an immovable one after holding it for 730 days (2 complete years) will not be subject to VAT and corporate tax in Turkey if the immovable one is owned by a Turkish corporation. This exemption is also subject to several other requirements.

3. Turkish Stamp Duty

In Turkey, a stamp tax is paid on all sales and leasing agreements. The rates range from 0.15 percent to 0.75 percent, and the amount charged is determined by the contract's value.

4. Local Turkish Property Taxes

Local Turkish property taxes (rates) are due in two equal payments – in May and November – and are collected twice a year. Generally, rates are computed based on the value of the property and are subject to the following thresholds established by the Tax Authorities:

• Residences account for 0.1 percent of the total.
• Buildings that aren't listed 0.2 percent is a small
• 1 % of the land.
• There is no tax imposed on the land that is used for farming.
• Land that has been left vacant (but allocated for construction purposes) 0.3 percent is a small percentage.

5. Turkish Capital Gains Tax (CGT)

Profits generated from the sale of real estate in Turkey are regarded as income in the year in which they are realized. It is subject to taxation at a marginal rate ranging from 15 percent to 35 percent. In 2008, a capital gain of up to TRY 6,800 ($700) is free from capital gains tax. Within 15 days following the sale, the specifics of the disposal must be finalized. Turkey's capital gains tax (CGT) does not apply to property acquired after January 1st, 2007, and held for more than 5 years.

6. Turkish Inheritance Tax (IHT)

The rates of Turkish Inheritance Tax (IHT) range from 1% to 30%. A deduction is made from the taxable value of inherited property to account for the tax on the asset.

What are Restrictions to the Law on Real Estate Ownership in Turkey?

Restrictions to the Law on Real Estate Ownership in Turkey are listed below.

• Area and Location Restrictions: Individually, foreigners may possess up to 30 hectares (300.000 m2) of immovables for whatever reason. This quantity may be increased to a maximum of 60 hectares by receiving the Council of Ministers' consent (600.000 m2). In military prohibited and security zones, property purchase is not possible. To ascertain if the immovable is located in a prohibited zone, approval from military authorities in the relevant region is necessary.
• Restrictions on the Property's Intended Purpose: Any motive is acceptable for purchasing a property in Turkey. However, different methodologies are used for various reasons. To begin, if you buy constructed real estate (such as a house, a business, or a building), you have complete freedom to utilize it for whatever purpose you want. You could want to buy land that is undeveloped and plan to build a structure or use it for agricultural purposes. In this situation, a real estate development project must be filed to the Ministry of Environment and Urban Planning within two years of the property being purchased. Foreigners who do not have a development project can't buy land that hasn't been built on it.
• Restrictions on foreign companies’ property ownership: Foreign commercial companies that have the status of legal entities and are incorporated according to Turkey’s law can own real estate in the country under special legal provisions. If a company established in Turkey is financed by foreign capital and the majority of its shareholders are foreigners, a foreign legal entity or international corporation owns 50% or more of the capital of the company and has the authority to appoint and dismiss the majority of the company's board of directors the company's right to own real estate is restricted to the extent necessary to carry out the activities specified in the company's contract.

When Was the Property Ownership Law for Foreigners Released in Turkey?

By endorsing bill number 6302 on May 5, 2012, the Turkish government made substantial changes to the Turkish Real Estate Law regulating the requirements that must be completed by foreign people intending to buy real estate in Turkey, removing several limits on foreign ownership. Furthermore, some facilities were offered in terms of the standards that foreigners must meet to buy real estate in Turkey, with limits put on the inhabitants of several of Turkey's bordering nations.

A new convenience has been offered for foreigners who desire to become Turkish citizens, according to an amendment to the Turkish Citizenship Law published in the Official Gazette on December 7, 2018. Foreigners who wish to buy a house that is still under construction can apply for Turkish citizenship after signing a regulatory contract with a notary for the property sale and promising to acquire a property worth at least USD 400.000. To gain Turkish citizenship, a title deed and an appraisal report were required. Customers who wanted to acquire a property from an unfinished project were losing their chance at citizenship since the true worth of the property was not the value reported in the appraisal report because the project was not finished. With the new regulation, this rule is no longer in effect. A notarized property purchase commitment is sufficient when acquiring property from a construction project.

According to a circular issued in the Turkish Official Gazette in recent months, the process of obtaining Turkish citizenship was made easier by lowering the minimum age requirement. Foreigners' fixed capital requirements for Turkish citizenship have been reduced from 2.000.000 to 500.000 USD. The price required to gain Turkish citizenship through the purchase of real estate has been cut from 1.000.000 USD to 400.000 USD. – The maximum number of employees who can work has been cut from 100 to 50.

What are the Top Important Things You Should Know When Investing in Turkey?

The top important things you should know when investing in Turkey are as follows:

• It is important to determine if you may get the right to possess real land or restricted rights in kind.
• Transfer of ownership of the real estate should conform with the rules and regulations in effect in Turkey.
• The entire land size of the property acquired in Turkey should not be greater than 30 hectares in total.
• Find out if the properties subject to purchase are in a security or military zone, or if they are in an area where foreigners are not permitted to purchase the property. This is important since properties in security zones are not permitted to be sold to foreigners.
• The process of visiting the real estate department and gathering adequate information about the property in question, such as whether the landlord has the legal right to sell the property and if the property in question is mortgaged or subject to any other action that would block its sale.
• Avoid signing contracts with legal features and making any payments toward the purchase price of real estate until containing adequate information on the property concerned from the directorates of real estate records, which one may find on the internet.
• In the case of a lack of confidence or seriousness with the seller, it is not advised to proceed with the sale and make a transaction until the investigation of the individuals or firms selling the property has been completed.
• The case must be brought to a Turkish court if there is any discrepancy between the purchasing and selling processes. The Turkish Ministry of Foreign Affairs, as well as any other foreign representation, is not permitted to intervene in the proceedings.