A Guide to Tax Exemption on Real Estate in Turkey for Foreign Investors: Conditions, Advantages, and Risks

Introduction

Turkey has become in recent years a major attraction for foreign investors, especially in the real estate sector. Part of this appeal comes from the tax incentives offered by the government to foreign buyers, which can significantly reduce the final cost and increase the feasibility of investment.

In this article, we will present in detail the types of tax exemptions and incentives available, the eligibility conditions, and the legal regulations associated with them so that the idea of investing in real estate in Turkey becomes clear and safe for both Arab and international investors.

What Tax Incentives / Exemptions Are Available for Non-Residents When Purchasing Real Estate in Turkey?

VAT (Value Added Tax / KDV) Exemption on New Property Purchases

• The VAT rate is typically 1% for residential properties and 20% for commercial properties such as offices and shops.
• This exemption saves you from paying 1% or 20% of the property value. In exchange, the government places a 3-year restriction on selling the property, according to the latest update for 2028.
• The applicant must not hold residency in Turkey.

Reduced Title Deed Registration Fees (Tapu Harcı)

• Title deed fees in Turkey are 4%.
  • If the property is under construction or ready for delivery but purchased directly from the developer, the fee is 2% on the developer and 2% on the buyer, in addition to the 1% or 20% VAT.
  • If the property is resale or a plot of land, the fee is 4% on the buyer only, and no VAT applies (because resale properties are not subject to VAT).

Capital Gains Tax Exemption After 5 Years

• Selling the property after five years exempts foreign investors from capital gains tax, which is calculated according to the municipal value (rayiç bedeli).
• Example: If the municipal value is 1,000,000 TL and you sell for 2,000,000 TL within five years, you pay capital gains tax on the additional 1,000,000 TL. After five years, no tax applies.

Facilitated Tax Treatment on Rental Income / Profit After Purchase

• Rental income is subject to rental income tax, unless there is a double-taxation treaty between Turkey and the investor’s home country.
• If the investor sells the property after owning it for more than 5 years, no capital gains tax usually applies—providing long-term stability for real-estate investment.

Who Is Eligible for the Exemption? Main Conditions

To benefit from VAT exemption when purchasing a property, the foreign investor must meet the following conditions:

• The buyer must not be a resident of Turkey—meaning they must not have lived in Turkey permanently in the past 6 months.
• The property price must be paid from abroad in foreign currency, transferred through an official Turkish bank.
• The property must be new—a first sale from the developer (not resale / second-hand).
• The buyer must keep the property for at least one full year after purchase to avoid VAT recalculation.
• In some cases, the developer must be a legally registered company in Turkey, especially if it is a local-foreign partnership (as indicated in legal reports on VAT exemption conditions).

Why Did Turkey Implement These Incentives? Governmental & Strategic Motivations

• To encourage foreign investment and attract foreign currency inflows, strengthening the national reserves.
• To support the construction and real estate development sector, creating jobs and stimulating related industries such as design and services.
• To increase demand for new housing projects, accelerating development in emerging areas and reducing pressure on older, crowded districts.
• To attract serious investors whether for living, investment, or residency/citizenship enhancing the link between foreign investors and the Turkish real estate market.

How Is the Process Applied in Practice? Steps Investors Must Follow

• Ensure the property is new (first sale from the developer).
• Pay the property value from outside Turkey in foreign currency through a registered Turkish bank.
• Obtain an official invoice from the developer stating that the property is VAT-exempt under Article 13/i of the VAT Law.
• Submit all required documents to the title deed office, including the VAT-exemption invoice, proof of bank transfer, and passport/ID.
• Keep the property for at least one year. Selling it earlier cancels the exemption, making VAT payable.

What Is Not Covered by the Exemption? Notes & Warnings

• Second-hand properties (resale) do not qualify for VAT exemption. Purchasing a property from a private owner does not grant VAT exemption.
• If the buyer sells the property within one year, VAT becomes payable retroactively.
• Not all property types are eligible—some sources state that land or non-residential properties may not qualify.
• Payment must be made in foreign currency from outside Turkey; paying inside Turkey or in Turkish Lira may eliminate eligibility.
• All documents must be complete (passport, proof of non-residency, bank transfer proof, official developer invoice). Missing a single document may result in denial.

Annual Property Taxes and Other Taxes After Purchase

It is important for investors to note that the exemption applies only to VAT during the purchase process. After ownership, annual taxes may apply, such as Property Tax (Emlak Vergisi) according to local regulations.

Rental income is subject to rental income tax, unless there is a double-taxation agreement with the investor’s home country.
If the property is resold within 5 years, capital gains tax may be imposed.

What Is the Role of Al-Hafiz Real Estate Company and How Does It Support Investors?

Al-Hafiz Real Estate is considered one of the leading real estate companies in Istanbul—not only for offering strong investment opportunities, but also for its professional structure in monitoring the legal aspects of real-estate transactions.

The company has a specialized legal team, including licensed lawyers and experts in foreign ownership laws and real estate taxation, offering investors added security throughout the purchase process and relieving them from the burden of complex procedures.

This team reviews contracts, verifies the legal status of properties, follows up VAT-exemption files, and provides consultations on ownership conditions, Turkish citizenship through investment, and title deed transfer. They also represent clients before official institutions when needed.

Thus, when choosing Al-Hafiz, the investor is not only selecting a property but also a trusted partner who ensures a clear, safe, and reliable investment process.

Recommendations to Follow

• Ensure the property is eligible (new + first sale) before payment.
• Document all bank transfers—payment must come from outside Turkey in foreign currency.
• Obtain an official developer invoice proving VAT exemption.
• Avoid selling the property within the first year to prevent VAT liability.
• If planning to rent or benefit from the property, calculate annual costs (property tax, maintenance, fees).
• Consult a local legal expert or real estate attorney to ensure all documents and procedures are legally accurate.

Conclusion

Tax incentives especially VAT exemption are among the most important advantages that make real estate investment in Turkey attractive to foreign investors.
When legal conditions are met, these incentives significantly reduce purchase costs and enhance net investment returns.

However, strict compliance with all conditions is essential:
non-residency, foreign-currency payment from abroad, and purchasing a new property from a first-sale developer.

By analyzing the legal and economic factors carefully, real estate investment in Turkey through these incentives can be a smart and rewarding opportunity for foreign investors provided it is managed wisely and with the support of specialized experts.