THE REAL PROPERTY ACQUISITION OF FOREIGN LEGAL ENTITIES IN TURKEY 25 December 2020

1. Foreign Legal Entity Concept

When determining the foreign legal entities, it is necessary to examine them in the form of partnerships, associations and foundations.  Although partnerships are legal entities established for the purpose of sharing profits in this respect, there is no profit purpose in associations and foundations. The provisions of the Turkish Commercial Code determine whether a partnership carries foreigners under Turkish law. According to this, partnerships established under Turkish law and with the headquarters in Turkey are considered Turkish partnerships, while partnerships outside Turkey are considered foreign.  The branches of abroad-based partnerships in Turkey are registered as Turkish commercial enterprises and carry the nature of the foreign center.

2. Real Property Acquisition by Foreign Legal Entities

The right of foreign persons and legal entities to obtain real property is regulated under the provisions of the Property Law No. 2644 (“Law”). The acquisition of real property by foreign legal entities is particularly important in terms of foreign partnerships. According to the Law, only foreign partnerships are allowed to acquire real property in Turkey while foreign associations and foundations are not allowed. According to paragraph 2 of Article 35 of the Law;

Commercial companies with legal entities established in foreign countries according to the laws of their own country may only acquire real property and limited real rights under the provisions of special laws. Non-these commercial companies shall not acquire real property and shall not be granted a limited real right to their benefit. The restrictions contained in this clause shall not apply in establishing real security in favor of these commercial companies and real foreign nationals.

Under the Law, these foreign commercial companies have been deemed obliged to submit their projects in unbuilt real property they purchase to the approval of the relevant Ministry within two years (Art. 35/4). In addition, the President of the Republic shall have the authority to determine, limit, partially or completely halt or prohibit the real property and limited real rights acquisition of these foreign partnerships; including country, individual, geographical area, duration, number, rate, type, quality, area and quantity (Art. 35/3).  

When the regulation is examined, it is observed that foreign legal entities in Turkey that may acquire real property and have limited real rights on their property are limited to commercial companies with legal entities that are incorporated in accordance with the laws of their country of nature. Furthermore, these partnerships are made possible to obtain real property only under the provisions of special laws. The provisions of the special laws mentioned are the Law on the Promotion of Tourism No. 2634, the Law on Industrial Zones No. 4737 and the Turkish Petroleum Law No. 6491.

3. Special Law Provisions

1. The Law on The Promotion of Tourism

Tourism enterprises are defined in Article 3 of the Law on The Promotion of Tourism numbered 2634 as the commercial enterprises that are operated in the tourism sector, whether together or separately by Turkish or foreign nationals, natural persons or legal entities. The use of real property for tourism purposes is regulated in accordance with Article 8 of the Law on The Promotion of Tourism. Accordingly, it is stipulated that the real property located in cultural and tourism protection and development zones and tourism centers, beneficial for tourism purposes by the Ministry of Culture and Tourism and notified to the relevant Ministry and will be allocated to the Ministry. The Ministry has been authorized to allocate real property to natural persons and legal entities of Turkish and foreign nationality. In addition, it has been accepted that the acquisition of real property in cultural and tourism protection and development areas and tourism centers can be exempted from the restrictions on foreign nationals under the Village Law No. 442 and the Property Law No. 2644 with the Presidential Decree.

2. The Law on Industrial Zones

The purpose of the law in Article 1 of the Industrial Zones Law No. 4737  was defined as “regulating the principles regarding the establishment, management and operation of industrial zones in order to increase foreign capital inflows”. Pursuant to the provision of Article 198 of the Decree Law No. 703 dated 02.07.2018, it has been amended to regulate the principles regarding the establishment, management and operation of industrial zones. Under this law, the industry zone refers to the manufacturing regions that will be established to make the country's economy competitively international, to ensure technology transfer, to increase production and employment, to speed foreign capital inflow and to create an industrial space suitable for large-scale investments, especially in terms of production costs. Under Article 3 of the same law, the Ministry of Science, Industry and Technology may propose the establishment of industrial zones based on the application of the institutions and organizations or the managing company or by choosing a location ex officio. The President may allow the establishment of industrial zones in places determined by the Board upon the recommendation of the Ministry. It is mandatory that the managing company to be established prior to the submission of the Board's decision to the President of the Republic. Areas designated as an industry zone may not be used in any way for any other purpose. This matter is annotated to the land registry. The land in the areas designated as the industrial zone is registered on behalf of the Treasury and allocated by the Ministry of Finance to the Ministry for use as an industrial zone.

3. The Turkish Petroleum Law

Article 10 of the Turkish Petroleum Law No. 6491 states that the right to use the land required for the petroleum operation in or around the exploration or operation license can be used by renting, establishing easement right or obtaining permission to use and registering in its license by the petroleum right holder under an agreement if the land is subject to the private property; under an expropriation in case of disagreement or from the Ministry of Finance if the land belongs to the Treasury or is under the jurisdiction and disposal of the Stat. However, if the right to use based on the agreement lasts more than three years, the expropriation of private property will be requested by the land owner or the petroleum right holder.