Turkey Publishes List of CIP Amendments: “Will Disrupt Buy-Sell Business Models” of Foreign Developers

Ece Selin Temel
Istanbul


According to the new instructions from the General Directorate of Land Registry and Cadaster managed by the Ministry of Environment, Urbanization, and Climate Change, a new set of rules will apply to real estate acquisitions for the purpose of citizenship acquisition as of 01.01.2023.

Although some changes are more formal and technical regulations, such as utilizing the “registered e-mail system” between banks and title deed offices to avoid forged documents and avoid usage of physical paper, there are essential changes that will disrupt the business models of companies and the real estate preferences of investors.

The changes regarding restrictions on purchasing high-value properties with shares (multiple investor acquisition) show that government wants to decrease the number of purchases from luxury properties or decrease the demand in cities with luxury properties.

The changes regarding Turkish companies with foreign shareholders may be the most drastic ones because they would disrupt buy-sell business models established by foreign initiatives. Even the foreign shareholder who becomes a Turkish citizen with the CIP is not exempt from the new restrictions; the company’s properties can not be used for citizenship anymore. They would have to sell to a Turkish company/person and wait three years to be able to use it for citizenship. I believe this change in the law is open for litigation as it radically affects property rights. This article in the law shows that government has a preference for who will or will not continue to gain revenue from the program.

Lastly, we can interpret the new regulation about notarized sales contracts as the government wishing to limit the number of acquisitions by this route of investments to be able to control and avoid misuse of notarized sales contracts. It’s no secret that if there’s a soft spot for evasion of the law, it’s this route of investment.

Below is a summary of the new rules for Turkish citizenship by investment, which will take effect on January 1st:

Number of properties

  • The number of properties an applicant may purchase is not restricted
  • Applications filed on the basis of preliminary sales contracts are only possible for properties with condominium ownership or construction servitude.
    • Applications must fulfill the required amount of US$400,000 through a single contract. If a CBI applicant is buying multiple properties at a combined price exceeding US$400,000, authorities will only approve applications if the same contract covers all the properties.
  • If the value of properties acquired through purchase does not amount to the US$400,000 minimum, completing the required minimum through preliminary sales contracts is not possible.

Acquisition of jointly owned properties

  • It is not possible to apply for citizenship on the basis of purchasing shares in a property unless all the shares are purchased by the same foreign national.
  • A property registered to more than one person can form the basis for citizenship qualification only if all shares are purchased by a single foreign national.

Property valuation report

  • CBI applicants must obtain the property valuation report at most three months prior to the notarization of the preliminary sales contract. In this case, a separate property valuation report before the annotation in the Land Registry Office is not required.
  • A new valuation report is not required separately in the case of a sale based on annotated preliminary sales contracts.

Currency purchase certificate

  • If the buy transfers the sales amount before the issuance of the currency purchase certificate, the transfer must be made in foreign currency. If the buyer transfers the amount after the issuance of the currency purchase certificate, the transfer must be made in Turkish lira.

Parties of the sale

  • A property may be the subject of a CBI application only once.
  • A foreign natural person must not have transferred second-hand properties subject to a sale or preliminary sales contract to a Turkish citizen or company within the preceding three years.
    • Acquisitions arising from contracts of work (e.g., construction-in-return-for-a-flat contracts) are excluded from the scope of this article.
  • Properties subject to a sales or preliminary sales contract must not be registered to a legal entity whose authorized person is a foreign national.
    • Company shareholders who acquired Turkish citizenship through investment will, for these purposes, be considered foreign nationals.

Mortgages

  • In the event of a purchase of property through a foreign-currency loan, the amount remaining after deducting the amount of the loan from the sales price must amount to no less than US$400,000.

Ece Selin Temel AuthorSubscriber

Ece Selin Temel is a Managing Partner at Istanbul-based international law firm LP Legal.

follow me