102 | Investor Guide to Europe 2014
leased area at the latest fifteen days prior to the termina-
tion of the lease agreement, the lease agreement will be
renewed for a term of one year with the same conditions.
- any clause in a lease agreement which is against the
benefit of the tenant other than determination of the
lease amount is deemed invalid. However this rule will
come in force in July 1st, 2020.
-a clause which imposes the tenant to increase the rental
in foreign currency annually is prohibited, thus the lan-
dlord may only increase the annual rentals only after the
expiration of the 5th year of the lease term. However this
rule will also come in force in July 1st, 2020.
•
In case the parties agree, the lease agreement can be anno-
tated to the relevant land registry and thus the terms and
conditions of the lease agreement continues even if the owner
of the leased property is changed.
•
The new owner of a property, in case there exists a tenant in
the property, may force the tenant to evacuate the property
by informing the tenant in one month commencing from the
acquisition date and must file a lawsuit for evacuation in six
months’ time, provided that he is able to prove that he or his
close relatives (the persons are numerous clauses as stated in
the law) need the property.
TaX
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Direct acquisition of a property
•
The acquisition of a property gives rise to real estate transfer
tax (RETT-tapu harcı), stamp duty, notary fee and value added
tax (VAT).
•
Real estate acquisitions in Turkey are subject to RETT, a charge
of 4 per cent (2 per cent for the transferee and 2 per cent for
the transferor) would be applied either on the purchase price
of the real estate or on the official value of the real estate for
real estate tax purposes. Whichever is higher, higher amount
would be taken into account in the determination of the
RETT base. Despite 2 per cent RETT liability of the transferor
imposed by law, in practice, 2 per cent tax liability of the trans-
feror would be borne by the transferee in addition to his RETT
liability of 2 per cent. Hence, 4% RETT related to the acquisi-
tion of the real estate would be paid by the transferee.
•
Stamp duty of 0,948% would arise when a promise to sale
agreement is signed between the potential buyer and the
seller in relation to the acquisition of real estates over the
amount stated in the contract. If the parties have not consi-
dered signing a contract before the notary public, stamp duty
and notary fees would not arise. Also, contracts that are not
including any monetary amount are not subject to stamp duty
of 0,948%.
•
Real estate transactions taken place within the context of com-
mercial activities (i.e. sales of real estate owned by companies)
in Turkey are subject to VAT. The sales of real estates owned
by non-commercial individuals are not subject to VAT. i.e. real
estate transaction between individuals, are not subject to VAT.
•
In certain circumstances, VAT exemption would be applied for
the acquisition of the real estate from companies. If the hol-
ding period of a real estate in the balance sheets of companies
is at least two years, the sale of such real estate is exempt from
VAT. Companies who are engaging in business of real estate
trading cannot benefit from such VAT exemption for such
trading assets.
•
Current VAT rates applied on real estate transaction are as
follows;
a)
The sale of flat, house or residence owned by compa-
nies, which have usable space with less than 150 m2 or
equal to 150 m2, is subject to VAT of 1%
b)
The sale of flat, house or residence owned by compa-
nies, which have usable space with more than 150 m2, is
subject to VAT of 18%
c)
The sale of office premises owned by companies are
subject to VAT of 18%, regardless of its usable space size.
d)
The sale of land owned by companies is subject to VAT
of 18% regardless of its size.
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acquisition of shares in a company holding a
property
•
Acquisition of shares of the company holding real estates
would not trigger RETT of 4%. The term of real estate com-
pany has not been defined in Turkish legislation.
•
Share purchase agreements are subject to stamp duty of
0,948% over the amount stated in the agreement. Share trans-
fer agreements of limited liability companies would need to be
made before the notary public, so that the notary public fees
of 0,113% per signature (not exceeding 25,874.70 TL) would be
paid over the amount of the share price.
•
Share transfers made by a company via share certificates or
temporary share certificates (ilmuhaber) are exempt from VAT.
Share transfers of an individual are not subject to VAT. Another
VAT exemption in relation to the real estate transactions is
that; the acquisition of participation interest (shares that is not
represented by share certificates or temporary share certifi-
cates) of any company, is exempt from VAT as long as its hol-
ding period of time in the balance sheet of the company would
be at least two years. Companies that are engaging in business
of participation interest trading cannot benefit from such VAT
exemption, for such trading assets. The sale of participation
interest held less than two years are subject to 18% VAT.
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asset deal vs. share deal
•
Acquisition of the shares is more favourable than direct
acquisition of real estates in terms of tax savings. However
share deal would cause the transfer of any business liability of
the company to the acquirer. Therefore detailed due diligence
study would be required to avoid undertaking undisclosed lia-
bilities of the target company which may or may not be related
to the immovable.
