Foreign investors are increasingly looking at Turkish real estate for investment purposes and for their investment migration needs. We explore the inheritance laws, gift taxes and inheritance taxes that could apply for Turkish real estate investors depending on their circumstances.
Turkish Citizenship by Investment
The Turkish citizenship by investment programme has been drawing in hundreds of foreign investors, some purchasing real estate to lease it out and obtain their second passports and others to reside in full-time and make Turkey their new home. Launched in 2016, Turkey’s CBI programme began to grow in popularity when government officials reduced the investment amount from US$ 1 million to US$ 250,000 in 2018. Investors flooded in from the Middle East and beyond, making the Turkish citizenship scheme one of the investment migration’s fastest growing programmes.
Whilst there are many considerations for real estate investors when going into the Turkish real estate market there are also some other key issues which need to be addressed – such as succession laws, gift taxes and inheritance taxes. These are some key issues that will arise when prospective real estate investors are exploring the option of investing in Turkey.
Inheritance Laws in Turkey
It is quintessential to have a will, but many of us leave that task unticked and unattended to in the hopes that death will knock on our door in many decades.
For those who do not have a legal will that designates the distribution of their real estate upon death, then according to Turkish Inheritance Law it will be shared out to the deceased’s next of kin. In case there are no legal successors, the Turkish government assumes ownership.
First in line of succession are the deceased’s children and spouse, if there are no children then parents and then siblings are next in line. Grandparents follow in the line of succession and by grandparents and their grandchildren.
There are limitations on the amounts that can be passed onto the surviving spouse. This is set out under reserved portions; in such case the surviving spouse can only inherit up to the amount that is outside the reserved portions.
- The reserved portion of a surviving spouse with no children is 50%
- If the deceased has children, it is 75 % of the total legal portion
- If the deceased has no children, the reserved portion of the inheritance for the deceased parents is 50 %
- If the parents are deceased the reserved portion for siblings of the deceased is 25 %
Gift Taxes in Turkey
Many High-Net-Worth Individuals who are nearing the latter part of their life are often advised to explore gifting portions of their wealth during their lifetime to mitigate the inheritance taxes that the recipients may be subject to. This though will depend on how the gift taxes regime is structured in the respective country. In Turkey this is subject to a progressive gift tax that can range from 10% to 30% depending on the value of the gift.
Gifts, including real estate, can be given to a recipient whilst the asset owner is still alive. We outline the tax brackets below in Turkish Lira (TRY) with EUR estimates as at June 2021.
First 380.000 TRY (EUR ~37,000) is subject to 10%
Next 900.000 TRY (EUR ~89,000) is subject to 15%
Next 1.900.000 TRY (EUR ~188,000) is subject to 20%
Next 3.600.000 TRY (EUR ~356,000) is subject to 25%
Over 6.780.000 TRY (EUR ~671,000) is subject to 30%
Read more: 4 Reasons to Set-Up an Offshore Trust
Inheritance Taxes in Turkey
The Turkish inheritance laws and taxes do not differentiate between locals and foreigners. The governing principle regarding the jurisdiction over real property is ‘lex rei sitae’, which means that the property is regulated and governed by the laws where the real estate is located. Moveable assets of the deceased though will be subject to the deceased’s home country laws and depending on their particular situation and residence (physical and fiscal) amongst others.
We outline the tax brackets below in Turkish Lira (TRY) with EUR estimates as at June 2021.
First 380.000 TRY (EUR ~37,000) is subject to 1%
Next 900.000 TRY (EUR ~89,000) is subject to 3%
Next 1.900.000 TRY (EUR ~188,000) is subject to 5%
Next 3.600.000 TRY (EUR ~356,000) is subject to 7%
Over 6.780.000 TRY (EUR ~671,000) is subject to 30%
