Closing costs breakdown of property purchase by foreigners
Purchasing property in Turkey comes with interesting benefits such as becoming a Turkish citizen, enjoying full medical coverage, having access to pension programs, and enjoying free education reimbursement plans.
Thanks to the Turkish citizenship by investment program that was launched in 2017, foreigners can purchase property in Turkey. The current quote is $250,000 in property to be eligible for the program.
That being said, investing in property is a lot more than pointing at a random piece and buying. You need to know where you wish to purchase and why. For example, most foreigners prefer to purchase property in leading provinces such as Antalya, Bursa, and Ankara.
Besides location, the price also plays an important role in the selection process.
The closing costs are very important and can be broken down as follows:
- Real Estate Valuation Report which varies between 1.500 TL and 4.000 TL.
- Taxes and Legal fees: By law in Turkey, the VAT rates are set at 1%, 8%, and 18%. Residential property in a net area of less than 150m2 will generally pay 1% VAT while those with a net area of more than 150 m2 will part with an 18% VAT. For residential property that is between 500 TL/M2 and 1000 TL/M2, an 8% VAT is expected. Commercial properties are set at 18% regardless of m2. That being said though, an investor can enjoy VAT exemption as long as they meet conditions stated by law. For example, if you don’t have a residence address in Turkey, you may be eligible for the exemption. Also, the building to be bought must have a building license and the money for purchase has to be deposited from abroad.
- Title Deed Fee (TAPU Harci). This fee is set at 4% of the sales price. Depending on the sale terms, it can be split between the buyer and the seller or it can be paid entirely by the buyer (usually happens when buying from an individual).
- Circulating Asset payment: This payment depends on the provenience and varies between 90 TL and 450 TL.
- Service Fee which is determined by the Ministry annually. As of 2020, the decided service fee is 750TL.
Besides the closing costs for property purchase, there are after-sale costs to consider. A yearly property tax is levied on all properties and varies between small and big cities. For example, the yearly property tax for residential properties in big cities is set at 0.2% while that in small cities is set at 0.1%. For commercial properties, it is set at 0.4% for big cities and 0.1% for small cities. For a piece of land in a big city, you will be looking at a 0.6% tax while a small city will call for a 0.3% tax. For farms in big cities, the tax is set at 0.2 % while in small cities; it is set at 0.1%.
There is also compulsory Insurance (DASK) which covers things such as natural disasters. This fee varies between 100 TL and 300 TL (depending on the property size) and is paid annually.
Other fees to consider include the Agency fee (standard at 3%; but some agencies offer this service for free), rental income tax as well as the notary public and translator fees.