Foreign Currency Exchange Obligation for Real Estate Purchases by Foreigners
Preface
The Turkish government introduced new legislation to strengthen the safeguards and financial procedures applying to international buyers of real estate in Türkiye.
Article 13 of the Circular on Capital Movements requires foreign real persons purchasing property in Türkiye to complete the required foreign currency exchange procedure through a bank operating in Türkiye.
The bank processes the foreign currency transaction and issues the relevant Foreign Exchange Purchase Certificate, commonly referred to as the DAB, which is used as part of the title deed transfer process.
This requirement came into effect on 24 January 2022 and applies to real estate acquisitions where the buyer is a foreign real person.
In practical terms, a foreign buyer must arrange for the required foreign currency to be processed through a bank operating in Türkiye before the title deed transfer. The bank completes the required foreign exchange procedure and issues the relevant purchase certificate for use in the land registry transaction.
The Exact Implementation
- The buyer can arrange the Foreign Exchange Purchase Certificate through their Turkish bank by depositing or transferring the relevant foreign currency and requesting the required transaction.
- Alternatively, the buyer can transfer the funds to the seller, who may then arrange the required foreign currency transaction through their bank.
- The buyer can also transfer funds to an authorised representative acting under a valid power of attorney, who can coordinate the procedure on their behalf.
- US Dollars, Euros and Pound Sterling are commonly used for the foreign currency exchange procedure.
The Foreign Exchange Purchase Certificate
The bank issues a Foreign Exchange Purchase Certificate confirming that the required foreign currency transaction has been completed in accordance with the applicable Central Bank rules.
The document should include key information relating to the buyer and the transaction, including:
- The full name of the investor.
- The investor’s passport or identification number.
- The US Dollar equivalent of the foreign currency processed, even where the original currency was Euro or Pound Sterling.
The Title Deed Procedure for Foreign Buyers
The foreign currency requirement changed the way foreign buyers prepare for a title deed transfer in Türkiye. In simplified terms, the process is:
- Transfer the required foreign currency to Türkiye through the appropriate banking channel.
- Arrange the required foreign currency exchange procedure through a bank operating in Türkiye.
- Obtain the Foreign Exchange Purchase Certificate.
- Submit the required documentation as part of the title deed transfer application.
- Use the Turkish Lira amount recorded through the foreign exchange process when completing the relevant title deed declarations.
If the property purchase is being used for Turkish Citizenship by Investment, the foreign exchange documentation becomes part of the wider investment file and must be coordinated with the valuation, payment records, title deed and Certificate of Conformity process.
How the Foreign Exchange Requirement Affects Turkish Citizenship by Investment
The foreign currency exchange requirement also applies when a foreign buyer purchases property for the Turkish Citizenship by Investment programme.
For citizenship-linked transactions, it is particularly important that the Foreign Exchange Purchase Certificate, bank payment receipts, title deed records and valuation documentation all support the same investment structure.
The payment trail must be clear and properly documented. The relevant land registry authorities may require both the foreign exchange documentation and approved bank receipts showing that the qualifying funds were transferred to the seller.
These documents are then reviewed together with the wider property file during the Certificate of Conformity stage.
Can the Buyer Transfer Foreign Currency Directly to the Seller?
Depending on how the transaction is structured, the buyer may first transfer foreign currency to the seller’s bank account. The seller’s bank can then arrange the required foreign exchange procedure.
The important point is that the relevant Foreign Exchange Purchase Certificate must be completed before the title deed transfer where the requirement applies.
Cash Payments and Property Purchases
Cash payments do not provide the documented banking trail required for these transactions. Foreign buyers should therefore structure property payments through recognised banking channels and retain all payment records.
This is particularly important for citizenship-linked purchases, where the authorities review not only the title deed but also the movement of the qualifying investment funds.
How the Declared Property Value Is Affected
The Turkish Lira amount recorded through the foreign exchange process is relevant to the value declared during the title deed transaction.
The parties should therefore ensure that the foreign exchange documentation, sales price, title deed declaration and payment receipts are consistent before the transfer is completed.
Where the purchase is connected to Turkish Citizenship by Investment, this consistency becomes even more important because the qualifying investment value is reviewed as part of the conformity process.
Why the Foreign Exchange Procedure Should Be Planned Before Payment
The foreign currency requirement should be considered before the buyer sends the purchase funds. Problems can arise if payments are transferred through the wrong route, if documentation is incomplete or if the banking procedure is handled only after the transaction has already progressed too far.
Buyers should therefore coordinate the payment structure with their bank and Turkish lawyer before transferring substantial funds.
For citizenship purchases, the property agent, lawyer, bank, valuation process and title deed transaction should all be coordinated so that the investment file remains consistent from the beginning.
