Tax and Fee Exemptions Introduced by Law No. 6306 and VAT Advantages

Although a large part of Türkiye is under the risk of natural disasters, especially earthquakes, most of the existing buildings are not resistant against possible disasters, thus socio-economic problems are experienced and State is faced with financial burdens unexpectedly that are difficult to overcome. Law No. 6306 on the Transformation of Areas Under Disaster Risk ("Law") and the Implementing Regulation of Law No. 6306 ("Regulation") have been prepared in order to create healthy and safe living environments in accordance with the norms and standards of science and art in areas under disaster risk and in lands and plots where risky buildings are located outside these areas. The Law and the Regulation are based on the understanding of "not to be wounded" rather than "to heal wounds" after a disaster occurs; thus, they ensure that an important and effective step is taken for the realisation of the principle of "social state of law" in the Constitution.

In order to eliminate destructive consequences of the disaster risk and to make urban transformation possible and attractive, a number of economic opportunities were also foreseen with the Law. With the important amendment made on 29.11.2018, it has been regulated that the first sales, contracts, transfers, registrations and applications to be made within the scope of Law are exempt from notary fees, title deed and cadastral fees, fees to be levied by municipalities, stamp tax, inheritance and transfer tax, revolving fund fee and other fees, and the amount to be received as collateral due to the loans extended are exempt from banking and insurance transactions tax. Accordingly, notary and title deed fees do not arise in the first sales to be made from the land owner to the contractor before the transformation and in the first sales to be made from the contractor to the consumer after the transformation. Again, construction agreements to be prepared for the transformation of these areas are exempt from stamp tax.

In addition, with the Decision No: 3470 published in the Official Gazette on 30.01.2021, VAT was determined as 1% for construction contracting works related to the houses to be built in new construction areas up to 1.5 times the existing construction area of the real estate owners within the framework of the transformation projects for risky structures within the scope of Law. Also, with the Decision No: 3470 published in the Official Gazette on 29.03.2022, VAT was determined as 1% for delivery of houses up to 150 m2 in net area which are built within the framework of the transformation project in reserve building areas, risky areas and places where risky structures are located.

These important innovations introduced by Law, case law and Decisions create a great advantage for contractors, real estate owners and consumers for transactions to be carried out within the scope of Law and save the parties from a great financial burden. At the same time, the fact that this issue, which will provide great benefit to public with transformation of the relevant areas, has made risky areas and structures extremely attractive in terms of real estate investments, is also very important for sector.

Tax and Fee Exemptions Introduced by Law No. 6306 and VAT Advantages

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