1. Introduction
The real estate sector has become one of the most strategic areas of investment in Turkey for both individual and institutional investors. Particularly for institutional investors, Real Estate Investment Funds (REIFs) stand out due to their tax advantages and legal safeguards. Regulated by the Capital Markets Board of Turkey (CMB), these structures offer transparency, diversification, and professional management.
2. Legal Structure and Establishment Process
Real Estate Investment Funds are established under the Capital Markets Law No. 6362 and the CMB Communiqué on Real Estate Investment Funds. These funds are asset pools without legal personality and are managed by an authorized portfolio management company.
To establish a REIF:
- Approval must be obtained from the Capital Markets Board,
- A fund charter (internal regulation) must be drafted,
- The founding portfolio management company must be licensed,
- Independent audit and custody institutions must be designated.
Funds may be offered to the public or exclusively to qualified investors.
3. Tax Advantages
REIFs benefit from several tax incentives and exemptions under Turkish law:
a) Corporate Tax Exemption
REIFs are exempt from corporate income tax. Income derived from rent, real estate sales, and other sources is not subject to corporate tax.
b) Withholding Tax Advantage
Income from fund participation units is subject to 0% withholding tax (Temporary Article 67 of the Income Tax Law), maximizing net returns for investors.
c) No Capital Gains Declaration
Profits from the sale of fund participation units are not subject to individual tax declaration. Withholding tax is final.
d) Stamp Duty Exemption
Documents relating to the fund’s internal regulation and unit transactions are exempt from stamp duty.
4. Legal Protections for Foreign Investors
REIFs in Turkey are open to foreign investors, with the following legal assurances:
- The principle of freedom to invest allows foreign investors to acquire fund units without restriction.
- Property rights are constitutionally protected.
- Turkey is a party to multiple bilateral investment treaties and double taxation agreements, which protect and facilitate capital flows.
- Foreign investors may freely repatriate profits and capital.
5. Operational and Commercial Advantages
- Risks are minimized through professional management.
- Maintenance, leasing, and other operations related to real estate are handled by the fund manager.
- High liquidity allows easy buying and selling of units.
- Investors avoid concentration risk by benefiting from diversified portfolios.
6. Practical Considerations
- The fund charter should be reviewed carefully.
- The management company must be licensed by the CMB.
- Tax and accounting obligations require professional advisory.
- REIFs are regulated collective investment schemes, not merely investment vehicles.
7. Conclusion
Real Estate Investment Funds offer significant opportunities in Turkey due to strong legal infrastructure and tax advantages. For foreign capital, these funds present a secure and attractive entry point into the Turkish real estate market. However, a detailed review of CMB regulations and tax rules is essential prior to investment. Professional legal support is highly recommended.
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