Exception from VAT Applied to Non-Residents in Turkey, Duration of Sale Ban on Housing and Workplace Deliveries Extended


The Law No. 7394 on the Evaluation of Immovable Property belonging to the Treasury and Amending the Value Added Tax Law and the Law on Amending Certain Laws and Decrees (“Law”) was published in the Official Gazette dated April 15, 2022 and numbered 31810. One of the regulations envisaged in the Law is to amend the sales ban period regarding the value added tax (“VAT”) exemption applied to foreign real and legal persons and Turkish citizens living abroad in certain situations.

What does the law say?

The Law envisages some amendments to the Value Added Tax Law No. 3065 (“VAT Law”). One of these changes is related to the VAT exemption that can be applied to foreign real and legal persons and Turkish citizens living abroad in house and workplace sales.

In accordance with the VAT Law, VAT exemption is applied to foreigners and Turkish citizens residing abroad for more than 6 months, provided that the sales price is brought to Turkey in foreign currency at the first delivery of residences or workplaces.

While it was possible for people who took delivery of residences and workplaces by taking advantage of this exception, to sell these real estates after 1 year from the date of title deed registration without bearing any financial burden related to the exception, this period was increased to 3 years with the change.

Accordingly, if the sale takes place within 3 years from the date of title deed registration, the VAT not collected on time, together with the deferred interest, will be paid by the transferor.

The effective date of the amendment is May 1, 2022.

Conclusion:

It is aimed to increase the duration of the sale/transfer ban applied to people who buy residences and workplaces within the scope of VAT exemption from 1 year to 3 years, reducing the attractiveness of this exception and preventing the abuse of VAT exemption in practice.


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