VAT on new-build property in Turkey and the exemption for foreigners

When a buyer compares a new flat from a developer with a resale flat, they sometimes overlook an item that can change the sums: VAT. On new flats it can be a large item, but on the other hand Turkish law allows foreign buyers an exemption from it under specific conditions.

When is VAT charged?

VAT (KDV) is charged when a company or developer sells a new property. A sale between two individuals, such as buying a resale flat from its owner, is usually not subject to it, and only the tapu (title deed) fee applies.

What is the rate?

It depends on the property’s type, net area, status and permit date. The standard rate is 20%, and reduced rates apply to some homes. The developer determines the rate that applies to your unit and states it in the contract and on the invoice. Ask about it explicitly: does the advertised price include VAT or not?

The exemption for non-resident foreign buyers

The VAT Law exempts the first sale of a home or office to a foreigner who is not resident in Turkey, provided all of the following conditions are met:

1. The price is brought into Turkey in foreign currency and converted through the banks with an official exchange certificate.
2. At least half the price arrives before the invoice is issued, and the rest within a year of its date.
3. The buyer does not sell the property within a year of purchase; otherwise the VAT becomes due with late-payment interest.
4. It is the first sale of the property by the developer.

What proves the exemption?

• The currency exchange certificate from the Turkish bank (Döviz Alım Belgesi).
• The receipts for the transfers from abroad.
• Proof that you are not resident in Turkey.

This is why the money trail has to be planned from the start, as we explain in the guide to transferring the purchase price.

Mistakes that cost you the exemption

• Paying in lira from an account in Turkey without proof that foreign currency came in.
• Delayed payments that mean half the price does not arrive before the invoice.
• Selling early before a year has passed.
• Paying in cash or through a third party.

The exemption with instalments

With long instalment plans it can be hard to meet the condition that the full price arrives within a year of the invoice. Discuss the timing of the invoice and the payment schedule with the developer before signing so that you do not lose the exemption. See the guide to instalment plans.

How to compare new and resale

Work out the full cost of each option: the price, VAT if it applies and you are not exempt, the tapu fee and expenses. A new flat that looks more expensive in the listing may actually be cheaper if it is exempt from VAT, and vice versa. All the other costs are in the costs and taxes guide.

Summary

VAT concerns purchases from developers, and its rate varies by unit. A non-resident foreigner can avoid it on the first sale by bringing the price in foreign currency within the required timing and not selling within a year. Plan the banking route before signing, not after.

We review the exemption conditions with the developer together with our clients before signing. Browse new projects or contact us.