VAT EXEMPTION ON THE SUPPLY OF IMMOVABLE PROPERTY

VAT LAW NO. 3065

Within the Scope of Article 13/i

VAT EXEMPTION ON THE SUPPLY OF IMMOVABLE PROPERTY

A Comprehensive Legal Guide for Foreign Investors and Turkish Citizens Residing Abroad

Necmettin Barman Law Office

Istanbul Bar Association

Within the Scope of Article 13/i of VAT Law No. 3065

VAT Exemption on the Supply of Immovable Property

Under Article 13/i of Value Added Tax Law No. 3065, a value added tax exemption may be applied to residential and commercial properties acquired in Türkiye by foreign natural persons and Turkish citizens residing abroad, provided that certain conditions are met.

Our office represents clients wishing to benefit from this exemption throughout the entire process. We complete the applications, correspondence and document-procurement procedures in full and deliver to our clients the official letter to be used for the exemption.

I. Legal Basis and Scope

1. Statutory Regulation

Under Article 13/i of VAT Law No. 3065, the value added tax exemption applies where all of the following conditions are satisfied:

• The property is the first supply of a building constructed as a residence or workplace;

• The purchase price is brought into Türkiye in foreign currency;

• The purchaser is a foreign natural person who is not deemed resident in Türkiye;

• Or the purchaser is a Turkish citizen who has lived abroad for more than six months under a work or residence permit.

Important Note: The exemption applies only to first supplies. It does not apply to second-hand property sales.

II. Persons Eligible for the Exemption

A. Foreign Natural Persons

Foreign nationals who satisfy all of the following conditions may benefit from the exemption:

• They are not resident in Türkiye;

• They do not earn income in Türkiye through a workplace or permanent representative;

• They bring the sale price into Türkiye in foreign currency.

B. Turkish Citizens Residing Abroad

Turkish citizens who satisfy the following conditions may benefit from the exemption:

• They have lived abroad for at least six months under a work or residence permit;

• They are not deemed resident in Türkiye;

• They bring the sale price into Türkiye in foreign currency.

III. Principal Conditions for Applying the Exemption

1. First-Supply Requirement

The exemption applies only to the first sale made by the developer or contractor. It is not available for the acquisition of second-hand immovable property.

2. Requirement to Bring the Price in Foreign Currency

The following requirements concerning the sale price must be fulfilled completely:

• The sale price must be transferred from abroad in foreign currency.

• The transfer must be evidenced by a bank receipt.

• A foreign currency purchase certificate must be issued.

3. Three-Year Non-Transfer Obligation

If a property acquired under the exemption is transferred to a third party within three years of the title deed transfer, the value added tax that was not collected at the proper time will be collected from the purchaser transferring the property, together with a tax-loss penalty and late-payment interest.

Warning: The VAT exemption does not mean exemption from other taxes, such as income tax or title deed fees. The exemption becomes valid only if it is expressly stated in the relevant sale agreement and invoice and all statutory procedures are completed in full. If the property is transferred within three years, the previously uncollected VAT and late-payment interest will be recovered from the person concerned.

IV. Application Process Before the Tax Office

The most critical stage in applying the VAT exemption is the tax office’s determination that the person is not resident in Türkiye and the issuance of an official letter confirming this. The process comprises the following steps:

V. Documents Required for the Application

A. For Foreign Nationals

• Copy of passport

• Entry and exit records

• Documents showing that the applicant is not resident in Türkiye

• Official document showing residence abroad

• Sale agreement or title deed information concerning the property

• Power of attorney

• Identity information

• Bank documents concerning the foreign-currency transfer

B. For Turkish Citizens Residing Abroad

• Work or residence permit

• Certificate of residence abroad

• Entry and exit records

• Passport

• Sale agreement

• Power of attorney

• Identity document

• Foreign-currency transfer documents

VI. Scope of Services Provided by Our Law Office

Under Article 13/i of Law No. 3065, our office provides clients with the following services in full:

• Eligibility analysis

• Procurement of documents and preparation of the application file

• Submission of the application to the tax office

• Follow-up of correspondence between public authorities

• Procurement of the tax office’s official letter

• Management of the process through completion of the title deed transfer

• Delivery to the client of the official document forming the basis of the exemption

The entire process is handled completely under a power of attorney.

VII. Risk Management and Legal Protection

If the exemption is applied incorrectly or its conditions are subsequently breached, the following sanctions may arise:

• Full payment of the value added tax not collected at the proper time;

• A tax-loss penalty;

• Late-payment interest.

These amounts are collected directly from the purchaser who acquired the property. The process therefore clearly requires technical knowledge of tax law and practical experience. Our office structures each file and performs the necessary legal review so as to protect clients against future tax risks.

VIII. Conclusion

Article 13/i of VAT Law No. 3065 offers a significant tax advantage to foreign investors and Turkish citizens living abroad. Nevertheless, strict formal and documentary requirements must be fulfilled completely for the exemption to become valid.

Our law office manages the process from beginning to end, handles the procedures before the tax office under a power of attorney, and procures and delivers to clients the official letter on which the exemption is based.

For detailed information and legal advice, please contact our office.