VAT Exemption for Foreigners Buying a New Home or Workplace in Turkey: KDV Article 13(i), Foreign Currency and 3-Year Rule

1. Article 13(i) is a VAT rule, not a property-ownership or citizenship rule

KDV Law No. 3065 Article 13(i) creates an exemption for specified first deliveries of residences and workplaces. The exemption concerns VAT charged on the developer/seller’s taxable first delivery.

It does not create title eligibility, a residence permit or Turkish citizenship. Those questions are governed by property, immigration and citizenship laws.

An investor should therefore keep the VAT analysis separate from the USD 400,000 citizenship threshold and the USD 200,000 property-residence rule.

2. A non-resident foreign individual can qualify

The provision covers foreign natural persons who are not settled in Türkiye for Income Tax Law purposes. The status test is therefore linked to Turkish tax residence rather than merely possession of a foreign passport.

A foreign citizen who has established domicile in Türkiye or otherwise become a full taxpayer can lose eligibility even while remaining a foreign national.

The seller should obtain the prescribed documents before applying the exemption.

3. Tax residence must be checked before signing a VAT-free sales promise

Income Tax Law Articles 4 and 5 determine whether a foreign person is settled in Türkiye. Domicile, length of stay and temporary-purpose exceptions matter.

The Revenue Administration has expressly ruled that a foreign person with a permanent Turkish residence and full taxpayer status cannot use Article 13(i) merely because the person is not a Turkish citizen.

Our tax-residency guide explains that classification.

4. The property must be the first delivery

The exemption is designed for the first delivery of a residence or workplace. A second-hand apartment bought from an individual or prior owner does not become VAT-exempt under Article 13(i).

Developers and intermediaries should prove the transaction chain and whether a prior taxable delivery occurred.

A title deed showing no prior owner is helpful but not always the only tax evidence; construction and delivery history should be checked.

5. The building must be constructed as a residence or workplace

The VAT General Implementation Communiqué covers buildings constructed as housing or workplaces. The building permit and legal project classification are relevant.

Units described as residence, shop, office, bureau, residence-style unit, apart unit, time-share and similar categories can fall within the rules where the detailed conditions are met.

Bare land is not a “first delivery of a residence or workplace” for this exemption.

6. The property must meet construction and delivery requirements

The Communiqué requires the qualifying building to have the necessary construction permit and to be actually ready for the buyer’s use; for units where construction servitude can be established, the required property-right structure must exist.

Where condominium ownership has already been established, the Communiqué contains specific proof rules for actual delivery.

An unfinished project should not be marketed as automatically VAT-exempt without checking the current tax conditions.

7. The purchase price must be brought to Türkiye in foreign currency

Article 13(i) requires the consideration to be brought to Türkiye in foreign currency. The purpose is to connect the exemption to foreign-currency inflow.

The buyer can transfer foreign currency directly or use the prescribed banking route. The Communiqué also recognises circumstances in which foreign currency brought to Türkiye and paid to the seller in Turkish lira can satisfy the rule when properly documented.

The source, amount, timing and recipient should be traceable.

8. Bank evidence should reconcile with the sales price

The seller’s exemption file should include bank receipts showing foreign currency brought into Türkiye and payment to the seller. The amounts should reconcile with invoices and the property transaction.

Payments split among several accounts or made by related persons can require additional proof of the buyer’s funding.

Do not rely solely on a signed receipt from the developer where the Communiqué requires banking evidence.

9. Cash foreign currency can require customs evidence

Where physical foreign currency is brought into Türkiye rather than transferred through a bank, customs documentation can become necessary under the exemption procedure.

The buyer should declare and document cash correctly at entry instead of trying to recreate proof months later.

Anti-money-laundering and banking source-of-funds checks remain separate from VAT eligibility.

10. The seller has its own exemption and VAT-refund documentation duties

The seller must declare the exempt transaction and can seek refund of input VAT under the Communiqué subject to required documentation.

The seller therefore has a strong reason to demand the buyer’s eligibility records and payment proof before invoicing without VAT.

A buyer should not treat the exemption as something that can be claimed informally after completion if the seller failed to structure the transaction correctly.

11. The exempt transaction is notified to the land registry

The seller informs the title office that the sale is exempt under Article 13(i). A restriction/annotation is placed in the title registry concerning the consequences of disposal within three years.

The annotation should be checked after title transfer.

An investor planning financing or later resale should understand that the annotation is a real transaction constraint.

12. The current resale restriction is three years

The VAT General Implementation Communiqué now states a three-year period. The rule was increased from one year to three years with effect from 1 May 2022.

The three-year period is calculated by reference to the corresponding date under the Communiqué.

After the three years expire, the specific unpaid-VAT/deferment-interest requirement for early disposal no longer applies.

13. Sale within three years requires payment before the new title transfer

If the buyer disposes of the exempt residence or workplace within three years, the VAT not collected at the original transaction plus deferment interest calculated under Law No. 6183 must be paid to the tax office where the property is located.

The title office does not complete the new transfer until the tax-office document confirming payment and transfer eligibility is presented.

This should be included in any early-sale price and closing timetable.

14. Incorrect exemption can make buyer and seller jointly liable

Article 13(i) provides joint liability where the exemption was applied even though its conditions were not satisfied. Uncollected tax, tax-loss penalty and late-payment consequences can be pursued according to the statutory rule.

A buyer who gives inaccurate residence or funding information therefore exposes both sides to tax risk.

Eligibility should be documented rather than assumed from nationality.

15. VAT exemption and citizenship-by-investment can coexist but have different conditions

A USD 400,000 citizenship property can also potentially satisfy Article 13(i) VAT exemption if the buyer and first-delivery conditions independently exist.

Citizenship requires its own title restriction, eligible property type, investment value and TKGM procedure.

Our citizenship-by-investment guide explains that separate route.

16. Owning a VAT-exempt property does not automatically grant residence status

The property-based short-term residence permit has its own immigration rules and current value requirement. Tax exemption does not replace the Migration Management assessment.

A buyer can qualify for VAT exemption yet fail a residence-permit condition, or vice versa.

Plan tax, title, immigration and citizenship goals separately.

17. Legal and tax due diligence should be completed before the deposit becomes non-refundable

Before signing, verify: buyer tax-residence eligibility; first-delivery status; building permit/property classification; developer authority; VAT rate if exemption fails; foreign-currency funding path; three-year restriction; title encumbrances; and any citizenship/residence objective.

The sales contract should state whether the advertised price includes VAT and what happens if the tax authority later finds the exemption unavailable.

Bakırcı & Keskin Hukuk Bürosu has physical offices in Istanbul and Mersin. Foreign property transactions throughout Türkiye can be coordinated from these offices together with appropriate tax professionals.

Conclusion

Article 13(i) is valuable but highly conditional. A non-resident foreign buyer can obtain VAT-free first delivery of a qualifying new residence or workplace when the purchase price is brought to Türkiye in foreign currency and the procedure is documented correctly. The buyer must then respect the three-year disposal rule or pay the original VAT plus deferment interest before an early title transfer.