As of March 23, 2021, there are some important changes in the rules of the Turkish citizenship through investment. Overwhelming majority of those changes are related to real estate investments. Thus, the foreigners who are planning to make real estate investments in Turkey for the sake of acquiring the Turkish citizenship have to be much more careful after those changes, because they bring about some critical restrictions on the eligibility of the real estate investments for the citizenship applications. In other words, unfortunately, the citizenship procedures are now more complicated. This is why the foreign investors now need to cooperate with legal experts more than ever to complete their investments and citizenship applications smoothly.
The recent changes are as follows:
- Even before than changes, it was already not permitted to buy a real estate from a foreigner. The foreign investors who make investment for the purpose of acquiring the Turkish citizenship had to buy real estate from Turkish persons and this rule still applies. But now there is an additional rule stating that it will also not be permitted to buy a real estate from the spouse and children of a foreigner. As per the literal meaning of this new rule, it will not be possible for a Turkish person who is married to a foreigner to sell his/her real estate to a foreign investor who seeks the Turkish citizenship. Also, a foreign investor will now have to check if the Turkish property owner is married to a foreigner or not which sounds disturbing for both sides.
If understood this way, this rule is an exceedingly restrictive rule for the natural born Turkish nationals. Because of this, I believe, the legislator actually meant something else with this new rule and it must be interpreted in a different way. However, we could not have any clarity about this point yet. So, I should admit that this new clause is currently confusing. We will be able have further clarification about it soon.
- If a real estate is sold by a foreigner to a Turkish person and then by that Turkish person to a new foreign investor, it is not a problem for the last investor, and he/she can use that real estate for the citizenship application. However, there is a new and crucial restriction on this possibility now: If the previous foreigner property owner (the one before the Turkish property owner) has the same nationality as the eventual foreigner property owner (the last investor), then the last investor is not able to use that real estate for the citizenship application even though he/she actually buys the real estate from a Turkish person. But there is additional condition for this restriction to be effective: The sale between the previous foreigner property owner and the Turkish property owner has to be after 12.01.2017. If the first transfer of property was before that date, then there will not be any problem for the last investor.
Let’s exemplify it:
There was an Egyptian (Ahmad) who owns a property in Istanbul. He sold it to a Turkish person/company on 15.01.2017. Then on June, 2021 another Egyptian (Rashad) decided to buy that real estate from the current Turkish property owner. In this event, Rashad will not be able to apply citizenship through this real estate. If Rashad was not Egyptian but Moroccan, or if the first sale was not on 15.01.2017 but on 11.01.2017; Rashad would be able to use this property for the citizenship purpose.
- If a foreign investor buys real estate from a Turkish company, there should not be anybody from the investor’s nationality among the partners of that company. That is to say, the investor has to check the recent partnership structure of the Turkish real estate company from which he/she buys the real estate. Previously, there was such a restriction only for companies in which the investor, his/her spouse or children are partners. Now, the scope of the restriction has expanded.
Let’s exemplify it:
Ahmad (Egyptian) buys a flat from XXX Ltd. Company in Istanbul. There are two partners of XXX Ltd. Company: Selim (Turkish) and Rashad (Egyptian). Then, Ahmed will not be able to use this real estate for the citizenship application because of Rashad’s presence within the company as a partner.
Maybe the most important change is that a real estate which has been once used as an eligible investment for the citizenship application cannot be used again for another citizenship application. Nevertheless, if just a share of that real estate has been used for the citizenship purpose, then that share will not be eligible again but other shares will be eligible.
There is another sensitive and vague rule which can create some risk for the foreign investors: If the real estate which has been used for the citizenship application is sold to the previous owner again after the 3 years period of blockage expires, then the Turkish Citizenship Office can initiate an inquiry about that sale to understand if there is a prearranged fraudulent sale between the parties. If the Turkish authorities conclude that the sale was prearranged and fraudulent, then they can cancel the citizenship retroactively.
I personally criticize this new rule. First of all, the right to sell the real estate after 3 years is granted to the foreign investors by laws. So, it should not matter if the real estate is sold back to the previous owner or somebody else. Second, the rule does not give any further details. We cannot know how this inquiry will be held and according to which criteria the authorities will conclude that there is a fraudulent sale. The current language of the rule is against the basic principle of “legality of sanctions.” I hope there will be more clarity in the future about this restriction. At the moment, the safest option for the foreign investors who acquired the Turkish citizenship and whose 3 years period has expired is not to sell their real estate back to the previous owners.
- As it is known, the preliminary real estate sale contracts are considered as eligible investments for the Turkish citizen application. Such contracts are made for the real estate projects under construction which cannot be subject to the sale contracts yet. If the preliminary real estate sale contract has been used for the citizenship purpose, and if the real estate project has not been completed until the 3 years period of blockage expires, then the investor is able to sell (transfer) his/her contract to a third party (another investor). It normally does not harm the citizenship procedures which the foreign investor accomplished. But the new restrictions changed this situation. If such a sale occurs, the Turkish Citizenship Office can initiate an inquiry about that transfer to understand if there is a prearranged fraudulent transfer between the parties. If the Turkish authorities conclude that the transfer of the preliminary real estate sale contract was prearranged and fraudulent, then they can cancel the citizenship retroactively.
All of my critics for the restriction explained in number 6 are valid for number 7 too.
- During the sale of a real estate, the foreign investor will have to declare that there is no incorrect and cheating document submitted and if there is any, he/she will bear all responsibility. Actually, even without such a declaration, there was a legal basis for the Turkish authorities to cancel the Turkish citizenship granted to a foreigner in case of the submission of any incorrect or cheating document. But with the imposition of such a declaration, the Turkish authorities produce the evidence of the investor’s general responsibility at first hand. In this regard, the foreign investors must especially refrain from manipulative real estate price evaluation reports.
In conclusion, I should admit that the new changes have brought about significant amount of extra burden for the foreign investors and their lawyers. With the new changes, the Turkish citizenship through real estate investment procedures require much more due diligence efforts. Moreover, some of the new rules can be criticized because they are unnecessarily restrictive and vague. The uncertainty to be created by those rules will exhaust the foreign investors and the lawyers until the things become more clear. This is why it would be much safer for the foreign investors to work with the competent legal experts in this field. Their legal should make a diligent preliminary study on the intended investment first and then confirm its compliance with the legal requirements.
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