Investment regulations in Turkey are far more solid than many other countries and in compliance with European standards. All legal regulations have been done for securing the banking and financial system in order to secure the investments of both, individuals and corporations.
By the interventions to the legal system following the advises of IMF and EU since 2001, especially banking and finance system of Turkey has been one of the exemplary structures around the world. The most important two interventions were; turning from fixed exchange rate regime, which adapted the Turkish capital market to global market and ensuring the bank deposits by the state, which gave confidence to global investors for their investments in Turkey. These were milestones for attracting global investment to Turkey’s markets in so many fields.
It is an undeniable fact that these interventions have been done after a major financial crisis that Turkey has faced in 2001. On the other hand, the government acted fast and signed a stand-by agreement with IMF and made structural reforms in banking and financial system which still last and have made Turkish capital market overcome the global 2010 crisis much easier than vast majority of the global market. Despite the fact that there has been a more authoritarian regime ruling the politics in Turkey in recent years, structural institutions and solid laws of Republic of Turkey are still and will always be confident warrantors of any investment in all sectors.
Investment in Movable Capital Market
Banking and financial sector has always been a very desirable attraction point for local and global investors. There are many global banks and financial institutions still acting in the market with eyeful profits. Turkey is one of a kind by being a developing country on one side but having a well-established, solid banking and financial sector on the other side. This results with a trustworthy promise of high interests and profit while the interest rates in Europe can even be with negative percentages.
Another attraction for investment in movable capital market is the fact that investors can work with all and any instruments that they can do in global markets. An investor can also cash-out whenever he or she wants and transfer his or her profits to any other country with full freedom. Flexibility is one of the major pluses that attracts investment to Turkey’s Banking and Financial sector and movable capital market for the investors who are looking for a quick return.
Investment in Real Estate Property Market
Investment on real estate property is called concrete investment, literally and figuratively. An investor looking into the market should not look for a quick return but an investment to add value on its own every day, month, year, even decades. There is no doubt that investor looking to move into an emerging market such as Turkey should expect a better yield comparing to more established markets, but real estate property market in Turkey has succeeded to give this return so far and looking to do so.
Development and the real estate property market has been one of the leading sectors of Turkey over last two decades and still does, especially in İstanbul. Residential real estate property market attracted mostly private individuals and major developers following one another. Residential units’ prices escalated incrementally during this term, of course with pauses from time to time as expected and can be seen in any market, but especially major developments and units in prestigious districts did not disappoint their investors. The beauty of investment in residential real estate market is that any investment from 250.000 USD to the limit of the sky can be made and has made a satisfactory return so far.
Commercial properties have also attracted investment with even more advantages comparing to residential, but with higher investment input requirement. To begin with return on income-producing investments, offices in central business district of İstanbul are usually owned by private investors and can be purchased by foreigners as well. Those units usually promise a rent return between 4 to 6% yield with blue-chip tenants which make them a unique form of real estate property investment item compared to other countries.
Another advantage of owning an income-producing commercial property in Turkey is “withholding tax”, which is a unique type of practice in Turkey and practise of investment. Actually, this type of tax is 20% of the gross rent amount, which is under the obligation of the landlord and to be reduced from his or her income tax. But common practise in Turkey is to sign the lease agreement as “ X TL + Withholding Tax” and the tenant pays net rent amount to the landlord and withholding tax, which makes 25% of net rental income to the related tax office on behalf of the landlord. Assuming the landlord’s income tax is in maximum level which is 33%, landlord pays only 8% from his or her rental income.
As a practice, let’s assume the rent amount is 10.000 TL + withholding tax per month. Total rent amount the tenant is responsible for is 12.500 TL / month, 20 % of which is 2.500 TL and is withholding tax, which landlord deducts from his or her income tax that the investor has collected from the investment.
Investment and Legal Advisors
Whether an investor considers an investment in movable capital market or real estate property market, he or she should make sure having the right advisors on your side protecting your benefits both for the commercial and benefits. A small fee for property consultant will ensure the investor’s commercial benefits and project the proper situation of the market to make sure the investor gives the right decision according to the zeitgeist.
Legal advisement from a proper lawyer will make sure the benefits of the investor protected both, in short, and long term. At the end of the day, capital is global and fluid, but laws are local and solid. Every investment may cause a conflict of interest between buyer and seller or landlord and lessee, even with major financial institutions that you may be working with and have massive scales, which may cause disputes even when both sides are in good faith. Proper legal advisement and representation is the best way to protect the investment and right of the investors.
To sum up, Turkey has been and still a haven for proper investors from all scales. Just make sure that you do not fly blind and have the right partner in solution alongside with you for your best benefits and protection of your investment.