An amendment was made to the Decision Regarding the Determination of Value Added Tax (VAT) Rates Applicable to Goods and Services on 29.03.2022. This information note addresses the changes introduced regarding the VAT rates applicable to residential properties.

1. What Are the Amendments Regarding VAT Rates Applicable to Real Estates Constructed Within the Scope of Urban Transformation?

With the amendment, the phrase “residential deliveries up to 150 m²” has been changed to refer specifically to the portion up to 150 m² of the net area of residences constructed within the scope of urban transformation projects.

Accordingly, the VAT rate applicable to the portion of such properties up to 150 m² has been determined as 1%. However, the portion exceeding 150 m² will be subject to a VAT rate of 18%.

VAT Rate Applicable to Real Estates Constructed Within the Scope of Urban Transformation

A property with a net area of 151 m² and a value of TRY 3,020,000

Net AreaFirst 150 m²Remaining 1 m²Sales PriceTRY 3,000,000TRY 20,000VAT Rate1%18%VAT AmountTRY 30,000TRY 3,600

2. How Is VAT Calculated for Real Estates with a Net Area Below 150 m²?

Following the amendment, the different criteria previously applied in determining the VAT rate for residential properties with a net area up to 150 m² have been abolished.

According to the amendment dated 29.03.2022, the VAT rate applicable to the portion of real estates up to 150 m² has been determined as 8%. The portion exceeding 150 m² will be subject to a VAT rate of 18%.

For example, if a residence with a net area of 120 m² has a net sales price of TRY 1,000,000, VAT will be calculated at the rate of 8%, resulting in a VAT payment of TRY 80,000.

VAT Rate Applicable to Real Estates with a Net Area Above 150 m²

A property with a net area of 170 m² and a value of TRY 1,700,000

Net AreaFirst 150 m²Remaining 20 m²Sales PriceTRY 1,500,000TRY 200,000VAT Rate8%18%VAT AmountTRY 120,000TRY 36,000

3. How Is VAT Calculated for Land/Plot Acquisitions Under the New Amendment?

With the amendment, a change has also been introduced regarding VAT calculations applicable to land and plot sales.

Before the amendment, VAT applicable to land and plot sales was calculated at 18%, whereas this rate has been reduced to 8%.

For example, for a plot with a net sales price of TRY 1,000,000, the VAT amount has decreased from TRY 180,000 before the amendment to TRY 80,000 after the amendment.

4. From Which Date Do the Amendments Enter Into Force?

According to the relevant provision included in the Presidential Decision, the effective date of the amendment is the beginning of the month following the month in which the amendment was published.

Accordingly, the amendment published in March 2022 became applicable as of 01.04.2022.

5. Are Real Estates Constructed Under Construction Permits Obtained Before This Decision Affected by These Amendments?

According to the published amendment text, these amendments shall not apply to buildings constructed within the scope of construction permits obtained before 29.03.2022.

Submitted for your information and evaluation.