TÜRKİYE Law and Practice Contributed by: Serkan Gül, Nazım O Kurt and Türkay Avanaş, Hergüner Bilgen Üçer Attorney Partnership
2.9 Condemnation, Expropriation or Compulsory Purchase Turkish law permits the government to take land if there is a public need. The transfer can either take place voluntarily or the government can file suit to condemn a piece of private property and, in due course, assume ownership. Volun - tary transfers can be in exchange for cash or for another piece of government-held property. If the parties cannot come to an agreement on the consideration for a voluntary exchange, the government can file suit to establish the value of the land to be condemned. In a condemnation suit, the court appoints an expert to establish the value of the land to be condemned, and the par - ties can contest the expert’s valuation in open court. The court then establishes the value of the land and, upon payment of this sum, orders the registration of the land in the name of the condemning agency. The condemnation com - pensation may be split into instalments, and, if this is ordered, registration may begin after the payment of the first instalment. In practice, developed land is rarely condemned. 2.10 Taxes Applicable to a Transaction Transfers of real estate through asset deals are subject to title deed registration fees, VAT, and income/corporate income tax. Share sales are subject to VAT and capital gains taxes. However, VAT, income tax and capital gains tax are subject to exemptions that are relatively easy to satisfy. Title Registration Fees Title registration fees of 4% of the value of the asset are assessed on sales of real estate by asset sale. These fees are generally split equally between the parties.
VAT If the seller is a legal entity, VAT is assessed on the transferred property at 20% for office space and commercial property and at 1%, 10% or 20% for residential property, depending on the total square metres and/or the value per square metre. Capital Gains Tax Income tax is assessed on the selling asset- holder. For individuals, the applicable rate is between 15% and 40% but capital gains tax is not assessed for individuals who are not profes - sionally engaged in the trade of real estate and who have held the sold property for five years or longer. For corporations, the capital gains tax In share sale transactions, VAT, and capital gains, tax exemptions apply as long as the transferred shares have been held by the selling entity for two years or more. Share purchase agreements are exempt from stamp tax with a recent change in the law. 2.11 Legal Restrictions on Foreign Investors rate is 25%. Exemptions Foreign legal entities may not acquire real prop - erty in Türkiye unless they are allowed to do so under special laws, such as the Petroleum Law, Tourism Law or the Industrial Zones Law. To overcome this legal barrier, investors often choose to establish Turkish SPVs. Turkish-incor - porated companies with 50% or more foreign share ownership and/or management control are subject to approval by the governorship before they can acquire real property in Türkiye. Turk - ish-incorporated companies in which foreign ownership is under 50% and where manage - ment is not under foreign control can acquire
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