ISSUES THAT FOREIGNERS SHOULD BEWARE OF WHEN ACQUIRING TURKISH CITIZENSHIP THROUGH PURCHASE OF REAL ESTATE
Government of Turkey has further promoted investing in real estate through legal reforms recently, which also created a better climate for foreign investors. To further attract the attention of foreign investors, investment thresholds have been lowered by the government at 2018, facilitating investors and their families to acquire Turkish citizenship by investing at least USD 250,000. Under sub-paragraph (b) of the second paragraph of Article 20 of the Regulation on the Implementation of the Turkish Citizenship Law (“Regulation”), foreign nationals can acquire Turkish citizenship through a Presidential Decree.
6 Investment Tools to Acquire Turkish Citizenship
Turkish Citizenship by Investment Program offers foreign investors 6 investment tools to choose from. These options regulated through the Regulation are as follows:
1. Making a fixed capital investment of at least USD 500,000 or equivalent of foreign currency.
2. Purchasing real property in Turkey valuing at least USD 250.000 or equivalent of foreign currency, provided that an annotation is placed in the land registry records that it will not be sold for three years.
3. Providing employment for at least 50 citizens in Turkey.
4. Depositing at least USD 500,000 or equivalent foreign currency in banks operating in Turkey, provided that they are retained in the banks for three years.
5. Purchasing government debt instruments of at least USD 500,000 or equivalent of foreign currency, provided that they are held for three years.
6. Purchasing REIFs or VCFs of at least USD 500.000.
The Regulation on the Amendment of the Regulation on the Implementation of Turkish Citizenship Law (“Amending Regulation”), published in the Official Gazette on January 6, 2022, has stated that investments can only be made in foreign currency and not in Turkish Lira. In terms of some investment forms, before the transaction is made, the monetary amount brought in foreign currency shall be sold to the Central Bank of the Republic of Turkey through a bank operating in Turkey.
Purchasing real property of at least USD 250.000 is the most preferred way in practice. Basically, the application process consists of two phases: (i) the application for residence permit, and (ii) the application for citizenship. In line with this regulation, investors have the opportunity to acquire Turkish citizenship together with their spouse, and with children under 18 years old, as well as children who are over 18 years old but remain dependent due to a medical condition.
This article aims to outline the conditions with regards to the acquisition of Turkish citizenship through purchase of real property in Turkey (option (b)) and to reflect the application procedures and facts to take into consideration in light of the latest practice.
Suitable Property Selection and Process of the Sale for Turkish Citizenship
The General Directorate of Land Registry and Cadastre has published a guide for the Regulation as an annex of the Circular numbered 1799 (2019/5). Thereby the rules and procedures in relation to transactions on acquiring Turkish citizenship through the acquisition of property, which a foreigner must beware of, are set forth.• The nature of the property is examined separately for the sale transactions and for the preliminary sales contract transactions.
• In sales transactions, there are no restrictions on the nature of property to be acquired through sales. It can involve a residence, workplace, land, field, garden, etc., with the exception of obtaining preliminary permits for the acquisition of an agricultural land, the undertaking to submit an agricultural project within two years, and the undertaking to submit a construction/building license project to the relevant municipality or other authorities in the case of acquisition of building plots without buildings within two years.
• Regarding joint ownership of a property, the statement that “I am aware of the legal pre-emptive right of other shareholders” shall be included in the bill of sale, and the relevant parties shall be informed about the transaction.
• For preliminary sales contract transactions, the contracts to be drawn up before a notary public are only eligible for properties with ownership of condominium or floor easement.
• At the time of commitment, the independent unit that the promiser undertakes to purchase needs to be registered in the name of the promiser. In other words, the promise of a promise is not possible. Furthermore, making a commitment for more than one preliminary sales contract for an independent unit is not possible.
Restrictions for Property Acquisitions of Foreigners
• There are some restrictions for property acquisitions of foreigners.
• The country of the foreign buyer must be among the countries cleared by Turkey for property acquisition as specified in Article 35.
• Property acquisition by foreign real persons is only possible within the scope of legal restrictions stated at Article 35 of the Land Registry Law 2644. For example, Syrian nationals cannot acquire property in Turkey under their name, therefore, they cannot apply for citizenship through acquisition of property.
• Foreigners may not acquire properties in military forbidden zones further to the Military Forbidden Zones and Security Zones Law No.2565.
• Besides, acquisition by foreigners is not possible at the places included in strategic areas and special security zones defined by the President as areas where foreign real and legal persons may not acquire properties.
• Foreign real person can acquire up to 30 hectares of land and no more than 10% of a district’s area subject to private ownership.
• There should be an analysis on whether the real property to be purchased has a condition that prevents the sale, such as a mortgage or a foreclosure. This information can be obtained from the General Directorate of Land Registry and Cadastre.
Anyhow, there is no limitation on the number of properties that can be acquired through sale or be subject to promise of sale. It is important that the values set forth on the dates specified in the Regulation are met.
Accordingly, the acquisition of one or more than one property from a Turkish citizen or the conclusion of a preliminary sales contract with a Turkish citizen is possible in order to reach the total amount of USD 250,000. It is worth noting that the foreign person has a right to request Turkish citizenship if only the sale is made by a Turkish citizen. In other words, the immovable/immovables subject to sale or preliminary sales contract must not be registered to any foreign real person (including their spouse and children). Besides, after the acquisition of Turkish citizenship through sale or preliminary sales contract, the same immovable or immovable share cannot be used for another citizenship acquisition again.
Valuation of Property for Turkish Citizenship
A property valuation report indicating the property’s current market value is required to be submitted in order to verify that the value requirement of USD 250,000 under the Regulation has been met. Accordingly, the fact that the property value in the sale transaction of USD 250,000 is not enough on its own. In addition to this, the current value stated in the property valuation report should not fall below USD 250,000. To calculate the USD equivalent of the value specified in TRY in the valuation report, the TCMB’s exchange rate on the last working day before the date of the report will be used.
Values Required to Meet for Turkish Citizenship
In short, it can be said that there are three types of values are required to meet the value of USD 250,000 set forth in the Regulation:
1. the sale price/prices declared on the bill of sale and/or the value/sum of values specified in the preliminary sales contract
2. the value/sum of values specified in the valuation report
3. the transfer/payment of price made
If one of these three values fails to meet the amount specified in the Regulation, it will create a procedural problem.
After committing not to sell the immovable for 3 years, by the Land Registry Directorate, transaction documents are sent to the authority that will issue a “Certificate of Conformity”. When the Certificate of Conformity is issued, a cover letter is sent to the General Directorate of Migration Management and the General Directorate of Population and Citizenship Affairs as required, and information is provided to the relevant people via e-mail. After receiving the Certificate of Conformity, residence permit application is submitted to the Provincial Directorate of Migration Management and citizenship application is submitted to the Provincial Directorate of Civil Registration and Citizenship Affairs.
Agents and Agencies for Turkish Citizenship
In order to make the eligible property selection, foreign investors may choose to work with agents and agencies, whose expertise and knowledge in the Turkish real estate market will ensure that the purchase for investment will be secured and valued. An agreement should be made through an intermediary company/person whose reliability is assured. Accordingly, agents or persons who mediate purchases of real estate for foreigners in Turkey are likely to ask for a high commission. On the contrary, in the domestic real estate market in Turkey, the terms on who can sell real estate and how much commission they will make are determined by legal regulations. According to the latest regulation, a real estate agent receives a maximum of 4 percent commission, with 2 percent from the buyer and 2 percent from the seller in sales to locals. However, there is no standard commission rate for sales to foreigners. A willing person can enter into this business, and can demand a commission at a rate he wants.
Hence, current standards of commission rates are not clear. Anyone can demand whatever commission they want. However, in practice, 10-15 percent commissions are common in sales to foreigners.
It should not be overlooked that each citizenship application is unique and has its own considerations. Even a minor issue in form of a small detail that is not taken into account can become problematic in the process, so that it can prolong the process and may result in a loss of interest. For this reason, in order not to face an unjust treatment, it is important to pay attention to the dynamics of the process and changing issues in practice.
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