THE LEGAL AND TAX DIMENSION OF THE ACQUISITION OF REAL PROPERTY IN TURKEY BY THE FOREIGN NATIONALS Şaban Erdikler

ACQUISITION OF REAL PROPERTY BY FOREIGN NATIONALS - 1 FOREIGN NATIONALS REAL PERSONS WHO ARE NOT TURKISH NATIONALS TRADE COMPANIES ESTABLISHED OUTSIDE TURKEY (Excluding foundations, associations, public enterprises ) CONDITIONS Legal and actual reciprocity Utilization of the property as work place or residence In areas where there is an application zoning plan or location zoning plan In areas other than the places that are determined as areas of protection by the Council of Ministers (such areas include the areas of irrigation, energy, places of protection, belief and cultural featured areas, strategic areas and prohibited areas for purposes of national security.) ACQUISITION OF REAL PROPERTY BY FOREIGN NATIONALS (Law No Article 35)

ACQUISITION OF REAL PROPERTY BY FOREIGN NATIONALS - 2 REAL PERSONS WHO ARE NOT TURKISH NATIONALS  On the basis of central district or districts, up to 10% of the application zoning plan or location zoning plan (The Council of Ministers is authorized to reduce this ratio)  The total area that a real person is allowed to acquire cannot exceed m² TRADE COMPANIES ESTABLISHED OUTSIDE TURKEY They may acquire real property pursuant to the following private laws: Petroleum Law Law Concerning the Encouragement of Tourism Law Concerning Industrial Zones

ACQUISITION OF REAL PROPERTY BY FOREIGN NATIONALS - 3 They may acquire real property to conduct the activities specified in their articles of association In areas other than the Prohibited Military Zones, Zones of National Security and Strategic Areas (Acquisition of real property in strategic areas are subject to permission of the Chief of General Staff, or the commanderie to be duly authorized by the Chief of General Staff) Acquisition of real property in zones of private security are subject to the permission of the Office of the Governor) ACQUISITION OF COMPANIES WITH JUDICIAL PERSONALITY ESTABLISHED IN TURKEY WITH THE PARTICIPATION OF FOREIGN CAPITAL (Law Numbered 2644 article 36) These principles are also applicable in the following cases: The acquisition of a new foreign partner to the company When the shares of a company with domestic capital are acquired by a foreign partner

APPLICATION -1 At present ( ), foreign nationals acquire a total area of real property amounting to a total of m² in Turkey (Source: TKGM) The amount of foreign capital brought to Turkey for the acquisition of real property is as follows: Million US $ Currently, there exists a reciprocity agreement between Turkey and the citizens of 53 countries. Turkey has not signed reciprocity agreement with 41 countries. The conclusion of the relevant demands may sometimes take time.

APPLICATION-2 In terms of the area of land, number of real property and the number of investors, the highest number of buyers are from the EU countries. (Germany, Austria, United Kingdom, Greece, Denmark) The number of investment in real property by the Gulf Countries, is as follows: Number of Investors Total Area(m 2 ) Number Bahrain United Arab Emirates Kuwait Saudi Arabia

TAXATION TRANSACTIONS TAXES A) Vale Added Tax Code On Lots …………………………………………….%18 On Buildings - Houses (up to 150m 2 ’)…………………………%1 - Bigger that 150m 2 …….………………………..%18 - Places of Business………..……………………%18 (For 3 months, VAT is applied as 8% for buildings and places of business bigger than 150m 2 ) (there are exemptions) B) Title Deed Charges On purchase and sale transactions %1,5 (Separately on both parties) (for 3 months 0,5%) On commitments for the Sale of Real Property…%0,054 On the construction of buildings on lots………….100 TL

TAXATION-2 2- WEALTH TAX Property Tax Over the Appraised Value On Houses …………………%01 On Places of Business ……%02 On Lots …………………….. %03 On Lands …………………… %01 This rate is applied as twofold in metropolitan areas (such as, Istanbul, Ankara, İzmir, Antalya, Bursa, Kayseri, Adana).

TAXATION-3 3. INCOME TAXES A) Rental Income Non-resident real persons are taxed through withholding =>20% (this is final tax) Non-resident corporations are taxed through withholding =>20% (this is final tax) B) Gains Derived from Discharge of Real Property Non-resident Real Persons If the property is kept for more than 4 years : No tax If the property is kept less than 4 years : At rates between % (as of ) Non-resident Corporations A corporation tax of 20% and a withholding of 15% is paid over the gains, that add to a total tax burden of 32%. A reference should be made to the double tax treaties.

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