Buying Property Through a Company in Turkey

Foreign investors often consider buying property in Turkey through a company, especially when dealing with commercial properties, multiple real estate assets, or seeking tax advantages. Below is a detailed guide on the process, benefits, and considerations when purchasing property through a company in Turkey.

1. Can a Foreign Company Buy Property in Turkey?

Yes, foreign companies can buy property in Turkey, but there are specific regulations and procedures that need to be followed. The purchase must align with Turkish laws governing foreign investments and the acquisition of real estate by foreign entities.

Key Points:

• The company must be registered in Turkey or a country that has reciprocal agreements with Turkey regarding property ownership.
• The property must be for business purposes (e.g., office space, commercial real estate) unless the company's business activities justify the purchase of residential property.
• Additional restrictions may apply if the property is located in military or strategic zones.

2. Setting Up a Company in Turkey to Buy Property

If you do not already have a company in Turkey, you can establish one specifically for property acquisition. This is a common approach for foreign investors.

Steps to Establish a Company:

1. Choose a Business Structure

• Limited Liability Company (LLC - "Limited Şirketi"): The most common business structure for foreign investors in Turkey. It requires at least one shareholder and can be established with a relatively low capital requirement.
• Joint Stock Company (JSC - "Anonim Şirketi"): Suitable for larger businesses, it requires more shareholders and a higher capital investment but offers advantages in terms of liability and share transfer.

1. Prepare the Articles of Association

• The Articles of Association outline the company’s purpose, structure, management, and regulations. It must include property acquisition as one of the company’s business activities.

1. Register the Company

• Register the company with the Turkish Trade Registry. This process involves submitting the Articles of Association, identification documents, and other required paperwork.

1. Obtain a Tax Number

• After registration, the company must obtain a Turkish tax identification number from the local tax office.

1. Open a Bank Account

• The company needs a bank account in Turkey to manage financial transactions, including the purchase of property.

1. Capital Deposit

• Deposit the required capital into the company’s bank account. For an LLC, the minimum capital is generally 10,000 Turkish Lira, while a JSC requires at least 50,000 Turkish Lira.

3. Process of Buying Property Through a Company

Once the company is established, you can proceed with purchasing property.

1. Property Search and Due Diligence

• Search for suitable properties that align with the company’s business objectives.
• Conduct due diligence, including verifying ownership, checking for encumbrances, and ensuring compliance with zoning laws.

1. Sales Agreement

• Once a property is selected, the company and the seller sign a sales agreement. This contract should be reviewed by a lawyer to ensure it protects the company’s interests.

1. Obtain Necessary Approvals

• Depending on the property’s location and the company’s structure, you may need to obtain approvals from the Ministry of Environment, Urbanization, and Climate Change, especially if the company is foreign-owned.

1. Transfer the Title Deed (Tapu)

• The title deed must be transferred to the company’s name at the Land Registry Office. This is a crucial step to legally establish the company’s ownership of the property.

1. Register the Property

• Register the property with the local municipality for tax purposes and ensure it is listed as a company asset.

4. Advantages of Buying Property Through a Company

1. Tax Efficiency

• Deductions: The company can deduct certain expenses, such as maintenance, renovation, and mortgage interest, from its taxable income.
• VAT Reclaim: In some cases, companies can reclaim VAT paid on property purchases, which is not possible for individual buyers.
• Capital Gains Tax: If the property is held for at least two years, capital gains tax may be lower or exempt when the company sells the property.

1. Asset Protection

• Buying property through a company provides liability protection for the shareholders. If the company faces financial difficulties, creditors can only claim company assets, not personal assets.

1. Business Flexibility

• Companies can more easily manage multiple properties and may benefit from economies of scale in property management and maintenance.
• Companies may also find it easier to enter into joint ventures or partnerships for larger real estate projects.

1. Easier Transfer of Ownership

• Shares in the company can be sold or transferred without the need to sell the property directly. This can simplify succession planning or business restructuring.

5. Legal and Financial Considerations

1. Compliance with Turkish Law

• Ensure that all company operations, including property transactions, comply with Turkish laws and regulations. Non-compliance can lead to penalties or restrictions on property ownership.

1. Accounting and Reporting

• The company must maintain accurate financial records and file annual reports with the Turkish authorities. It is advisable to hire an accountant familiar with Turkish business regulations.

1. Double Taxation Treaties

• Check whether your home country has a double taxation treaty with Turkey. This can affect how income and capital gains from the property are taxed.

1. Legal Representation

• Consider hiring a legal advisor who specializes in both real estate and corporate law to guide the company through the property purchase process and ensure all legal aspects are covered.

6. Common Challenges and Solutions

1. Complexity in Set-Up

• Setting up a company in Turkey involves bureaucratic procedures, which can be time-consuming. Solution: Work with a local legal firm or business consultant who can expedite the process.

1. Ongoing Compliance

• Managing a company involves ongoing compliance with Turkish corporate laws, which may be complex for foreign owners. Solution: Hire local accountants and legal advisors to manage these responsibilities.

1. Currency Exchange Risks

• Fluctuations in the exchange rate between the Turkish Lira and your home currency can affect the cost of the property and its profitability. Solution: Consider hedging currency risks or setting up a foreign currency account in Turkey.

Buying property through a company in Turkey can offer significant advantages in terms of tax efficiency, asset protection, and business flexibility. However, it involves a more complex process compared to buying property as an individual. Proper planning, legal guidance, and understanding the regulatory environment are essential to successfully navigate this process. By following the steps outlined above and working with professionals, you can effectively purchase and manage property through a company in Turkey.