THE OBLIGATION OF FOREIGN INVESTORS TO EXCHANGE FOREIGN CURRENCY

FREQUENTLY ASKED QUESTIONS

There has been a new requirement to exchange foreign currency from the Turkish Central Bank with related regulations such as Article 13 of the “Capital Movements Circular of the Central Bank of the Republic of Turkiye”, “the Regulation on the Implementation of the Turkish Citizenship Law”, and “the Implementation Instructions for the Sales of Foreign Exchange” in real estate purchase transactions where foreigners are buyers.

According to the regulation, the technical details of which are explained in the texts of the circular, foreign investors will first have to sell their foreign currency to the Central Bank through a bank, and then submit the “Foreign Currency Purchase Certificate” issued by the bank to the land registry office.

This practice came into effect as of January 24, 2022, and “Foreign Currency Purchase Certificate” is required for real estate acquisitions by foreign real persons. **

In this study, Frequently Asked Questions and answers of the application, whose details are explained with the circulars, have been compiled.

** All issues that may be encountered regarding the implementation are explained in detail with the circulars numbered 2022/1 and 2019/5.

Head of Foreign Affairs Administration

1. Is it obligatory to exchange foreign currency in sales transactions where foreigners are buyers?

Answer:

There has been a new requirement to exchange foreign currency from the Turkish Central Bank with related regulations such as Article 13 of the “Capital Movements Circular of the Central Bank of the Republic of Turkiye”, “the Regulation on the Implementation of the Turkish Citizenship Law”, and “the Implementation Instructions for the Sales of Foreign Exchange” in real estate purchase transactions where foreigners are buyers.

In this context, people who do not have citizenship ties with the Republic of Turkiye must pay for the real estate they will buy in Turkiye in foreign currency.

Before the title deed transactions, foreign currency needs to be sold to a bank by stating its justification, and then needs to be sold by the bank to the Central Bank. The payment is made in Turkish Lira to the interested parties.

• Where should the currency be exchanged?

Answer:

Currency must be exchanged at a bank operating in Turkiye, and at the Central Bank by said relevant bank. For this reason, it is not possible to use foreign exchange offices or foreign currency exchanged by hand in real estate purchase transactions.

• How much should I exchange?

Answer:

Pursuant to Article 3 of the “Capital Movements Circular of the Central Bank of the Republic of Turkiye”, foreign currency equal to the entire sale price must be exchanged.

• What is “Foreign Currency Purchase Certificate”?

Answer:

Foreign Currency Purchase Certificate is a document showing that the foreign currency was sold to a bank operating in Turkiye to be sold to the central bank before the sale is made by the foreign buyer at the land registry office.

• What information should the Foreign Exchange Purchase Certificate contain at least in order for it to be accepted by the land registry office?

Answer:

The information that should to be included in the Foreign Currency Purchase Certificate are as follows; the name, surname, passport number or foreign identity number of the person on whose behalf the foreign currency was exchanged, the US dollar equivalent of the foreign currency bought (in any case, the TL equivalent is included), and a statement stating that this transaction is carried out within the scope of Article 13 of the Circular on Capital Movements.

• Should the foreign currency be exchanged by the foreign investor (Buyer) at the bank?

Answer:

The foreign exchange purchase does not necessarily have to be made by the foreign buyer. It can be done by both the buyer and the seller of the relevant real estate, or their proxies or representatives.

• Can I change the currency before the real estate purchase transactions?

Answer:

It is not possible to exchange the foreign currency after the purchase transaction is made at the land registry office. The foreign currency must be exchanged before the title deed transactions and the Foreign Currency Purchase Certificate must be submitted to the land registry office before the sale.

• Is there an obligation to exchange foreign currency for citizenship transactions as well?

Answer:

In case the buyer is a foreigner, both for the acquisition of citizenship through real estate, or for purchases that will not be subject to citizenship, it is obligatory to exchange the foreign currency to a bank operating in Turkiye and to the Central Bank by the relevant bank.

• Is another document required for citizenship (Conformity Letter) transactions other than the Foreign Exchange Purchase Certificate?

Answer:

In citizenship (Conformity Letter) transactions, the Foreign Exchange Purchase Certificate and the approved bank receipt showing that the said amount has been sent to the account of the seller, will be requested by the land registry offices.

While it is obligatory to present the Foreign Currency Purchase Certificate to the Land Registry Directorate before the real estate purchase transaction, it is possible to submit the immovable payment receipt (money transfer from the buyer to the seller) together with the “Foreign Currency Purchase Certificate” before the real estate purchase transaction, or before the commitment transaction, and at the latest before the conformity letter is issued.

1. -Can the currency be changed to the bank after it is first transferred to the seller’s account?

Answer:

Currency may be sold first by the buyer to the seller’s account and then by the seller to a bank for exchange to the central bank. The critical point here is that the Foreign Exchange Purchase Certificate must be issued before the transaction. **

**For example, from the foreign bank account of the foreign national J.S., the sale price of the independent section no. 5, parcel no. 101, in Aydın province, Didim district, Çamlık mah, 270.000 USD is transferred to the Ziraat Bank Didim Branch of the Turkish citizen BZ, the real estate seller. After the transfer of this amount (270.000 USD) to the foreign national J. S. by the real estate seller, B. Z., the “Foreign Currency Purchase Certificate” showing that it was sold to this bank, to be sold to Central Bank for exchange, and the approved bank receipt for the foreign currency transfer sent by the foreign national J.S. must be submitted to the Land Registry Directorate.

Briefly; Foreign currency purchase transaction and receipt date priorities may change, including Foreign Exchange Purchase Certificate, plus approved TL payment receipt or approved (USD Foreign Exchange) payment receipt, plus Foreign Currency Purchase Certificate.

1. Are the payments made before the effective date of the application valid?

Answer:

Payment receipts made before the effective date of the application will continue to be accepted in transactions.

There is no need to issue a Foreign Exchange Purchase Certificate for these transactions.

However, for these payments, the approved bank receipt must be submitted to the land registry office.

It is not possible to accept payments made by hand payment or similar methods.

1. -How are the receipts before the effective date of the application evaluated, and how is the value declared to the title deed calculated?

Answer:

In cases where the sales price is deposited into the account of the buyer before the effective date of the application, it will not be possible to exchange foreign currency in return for the price, so there is no need to request a Foreign Currency Purchase Certificate if this situation is documented with an approved bank receipt.

In this case, the sales value to be stated in the official promissory note should not be less than the value deposited in the buyer’s account, and in cases where a payment is made in foreign currency to the buyer’s account, the Turkish Lira value to be found at the effective selling rate of the Central Bank of the previous receipt should be taken as basis. **

**For example; in case the sales price of the real estate is deposited with receipts of 1.000.000 ₺ dated 11.11.2021 and 500.000 ₺ dated 15.12.2021, the official bill price will be 1.500.000 ₺, whereas if deposited with the receipts of 100.000 USD dated 11.11.2021 and 50,000 USD dated 15.12.2021, 100,000 x 9,8135 (Central Bank Rate dated 10.11.2021) = 981.350 + 50.000 x 14.2213 (Central Bank Rate dated 14.12.2021) = 711.065 ₺, which will be 1.692.415 ₺ in total.

1. Is the base value of expenditure in the title deed transaction the Turkish Lira value in the Foreign Currency Purchase Certificate?

Answer:

Those concerned are obliged to submit the Foreign Exchange Purchase Certificate proving that the foreign exchange, which is the sales price, has been sold to a bank, to the title deed administration.

The Turkish lira amount registered in the Foreign Exchange Purchase Document is declared to the land registry as the sales price by the persons concerned.

1. Will the provisions of this circular be applied in the applications we have made to the Land Registry Directorate before this regulation (before 24^th January 2022)?

Answer:

The provisions of this circular will not be applied for the applications that have been processed by the Land Registry Directorate before January 24, 2022. In other words, the procedures will be completed according to the current legislation at the time of application.