Any questions: Legal April 2011

Thursday, March 31, 2011

Any questions: Legal April 2011

I keep hearing the word "iskan" when discussing property with agents. What is this and why is it important when I buy property in Turkey?

An iskan (Yapi Kullanim Izin Belgesi) is an official document that the local authority (belediye) issues to certify that a property has been built in accordance with its building licence. It is a sign off by the local authority that the property is fit for occupation as specified in the iskan itself. Before issuing the iskan document to a property, the local authority concerned inspects, amongst other things, the waste and clean water facilities, electrical wiring and general compatibility of any materials used with the compulsory standards.

A habitation licence implies, on the other hand, that the property-owner has been built in an area open for development and that it has been built under a valid building licence.

The current law on iskan prohibits local authorities from providing water and electricity to properties without an iskan in place. If a property-owner rents out a property without an iskan they would be liable to a fine. Also, owners of a property without an iskan would find it very difficult to borrow against such property.

I'm buying a villa in Fethiye and a friend has advised me to get a "charge" over the title deed. What exactly is this, do I really need one and how would I get one?

When buying property you should ensure that you are parting with your money in return for some sort of collateral from the seller. Most buyers put too much reliance on contracts that are not even properly notarised. In the absence of proper collateral, contractual terms offer little help when it comes to recovery of any sums that may have been paid under such terms.

Asking the seller to allow a legal charge (ipotek) to be put on the title of the property you are buying is a good way of securing the monies you will have paid until the property is ready or your military clearance comes through. In order for a legal charge to be created on the property, you and the current owner of the property will need to sign a formal deed at the land registry.

Taxes payable in relation to such a charge is just over one per cent of the value of the charge. If you wish to use a lawyer's services, you will also need to pay his fees. To sum up, although it may be an expensive way of securing the monies you pay to purchase a property, you should seriously consider a legal charge as collateral, especially if you are paying a significant sum before transfer of title.

I have a company in Turkey which I used to buy some land. I have not built anything on the land yet and now want to transfer it into my own name. Will my company have to pay tax on the transfer - the initial funds were invested by me and no profit will be generated.

The least complicated way of transferring the property from your company to your own name would be by way of sale and purchase of the property.

There are a number of different taxes which may be payable in connection with such a transaction. The first one is the corporate tax (kurumlar vergisi) which is paid on any income derived from such a sale. If your company, as the seller, is not going to be making any profit, then no tax would be levied.

Another tax which would be payable is the purchase tax (alim satim harci). Purchase tax is currently levied at a rate of 3.3 per cent of the sum declared as the purchase price. The tax office will levy this tax both to you personally and to your company in equal shares. If for any reason it becomes necessary for a written agreement between your company and you in person to be signed, you will then be liable to pay damga vergisi , which will be levied at a rate of 0.85 per cent on the purchase price.


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