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Turkey Publishes Guide on the Tax Exemption for Sales of Immovable Property and Participation Shares — Orbitax Tax News & Alerts

Turkey's Revenue Administration has announced the publication of a guide on the tax exemption for the sale of immovable property and participation shares. This includes guidance on the scope, purpose, and necessary conditions for the exemption to be applied, the definition of immovable property and participation shares, etc. Some of the key points are summarized as follows.

For immovable property, a 50% tax exemption is available on the proceeds (gains) from a sale provided that the property has been held for at least two full years and certain other conditions are met. With respect to gains from a sale made before 5 December 2017, a 75% tax exemption applies. In general, all corporate taxpayers, including non-resident companies, can benefit from the exemption. However, taxpayers engaged in the trade and leasing of immovable property are excluded. Construction companies are also generally excluded, although an exception is provided so that the exemption may be claimed if constructed property is used for the construction company's own purpose and is sold after the minimum two-year holding period. Lastly, immovable property held for at least two years is also generally exempt from VAT.

For participation shares, a 75% tax exemption is available on the proceeds (gains) from a sale provided that the shares have been held for at least two full years, with the remaining 25% of the gain subject to tax. This exemption is available for shares in joint-stock companies, including shares of qualifying investment trusts, as well as shares in limited companies, and partnerships shares in limited partnerships, business partnerships, ordinary partnerships, and cooperatives. Qualifying priority rights are also eligible for the 75% exemption. Gains obtained from the sale of participation shares held by taxpayers engaged in securities trading for commercial purposes, and not for participation purposes, are generally excluded from the scope of the exception regardless of the holding period. However, shares acquired by taxpayers dealing with securities trading in order to participate in the management of other companies may qualify for the exemption. The exemption is also limited in relation to gains from the sale of shares of holding companies.