Value Added Tax (VAT), in general terms, is a tax which is paid by the buyer to the product/service provider when the product or service is delivered. Situations/transactions that generate VAT are clarified in the related law and they are, in general, delivery and services under commercial, industrial, agricultural and independent businesses.
Fundamentally, general rate of VAT is regulated in accordance with the Value Added Tax Law no. 3065 dated 10.25.1984 and it is determined as 18% in Decree of The Council of Ministers no. 2007/13033. In this decree, respective rate of VAT is detailed and differentiated specific to transaction/activity.
When we consider housing industry, it can be seen that it is not possible to make a classification according to the types of activity and there are tax rates with different exceptions used according to the type of activity and transactions. Accoring to the Law, in article 1, since deliveries as part of a commercial activity results in VAT, in the delivery of real estate properties, we can take this as a prerequisite in order to mention VAT. Except for exceptions declared in the law (situations which VAT is not apllied) for all kinds of land, territory, building and real estate properties of commercial character, no specific rate is defined, therefore; it can be understood that they are also contingent upon the general VAT rate which is 18%.In the same decree, the rate of VAT is determined to be 1% for real estate property deliveries having usable space up to 150 square meters, construction contract businesses made for residential building societies, social security institutions established according to laws and businesses made for municipalities which are only up to 150 square meters. In this case, for real estate property deliveries having up to 150 square meters area and which are included in the scope of the law, article 1, the rate of VAT is 1% and for real estate property deliveries whose net area is more than 150 meter square, the general rate of VAT is applied as 18%. However, by additional decrees of the Council of Ministers in the year of 2016, the rate of VAT for real estate property deliveries having up to 150 square meters area is regulated again. In accordance with this regulation, in metropolises which are in the scope of Metropolis Municipality Law, for a land with a luxury and first class construction built on it, the rate of Vat is 8% if its building license is given between the years of 2013 and 2016 and the land unit value is between 500 TRY and 1000 TRY. If the land unit value is more than 1000 TRY, the rate of VAT is determined to be 18%.(this rate will be implemented as 8% to the date of 09.31.2017 in accordance with additional decree decision with the number of 2017/9759)
For housing construction projects, which will be built since the date of 2017, the rate of VAT of the real estate properties is determined to be 8% whose land unit value is between 1000 TRY and 2000 TRY, if it is above 2000 TRY the rate is determined to be 18% (this rate will be implemented as 8% to the date of 09.31.2017 in accordance with additional decree decision). In the scope of the Disaster Law, reserve construction areas, areas which are defined to be risky and areas with risky buildings are exempted from these increased tax rates.
According to the laws which are explained above, we understand that the tax rates are determined by taking the area of the land on which the structure or the residence is built as a basis. In these regulations, for the residences with customer group is wide and having small length in meters (less than 150 meter square), by identifying a more charming rate; it is thought that the decreasing demand is canalized but the area diffractions can be increased. In metropolises, while for lucury, qualified, small yardage residences (less than 150 meter square) with low customer group the rate is determined to be 18%; for these real estates it is determined to be 8% up to the year 2017 and month September with a 10% decline.If related lucury-graded real estate properties are included in the scope of the Disaster Law (Urban Renewal), it can be exempted from this rate and the rate will be applied as 1% regulated by the statutory provision.
In real estate sector of our country, especially in property market having great importance, with the impact of recent crises, new campaigns are launched as a result of balanced request though increasing housing stock. Payback period is enlarged for the credits obtained, interest rates is struggled to be decreased and new legislative regulations about value added tax come into prominence. Since real estate sector includes long-termed processes, the sector may not be able to respond to any change as fast as other sectors. For this reason, predictions stay ambiguous about how the process attracts the requests and in first place, these regulations can be accepted as encouraging.