Why Turkey may be one of the most appealing Citizenship by Investment programs
Flag Theory Weekly Letter – Friday January 25th, 2019
Walking down the streets of Istanbul, you really get the feeling that this is a place where the economy is roaring, despite it having hit some blips over the last few years. People are hustling, construction keeps on booming, and businesses are still opening. The government has also taken the initiative to introduce some very attractive measures for attracting much-needed foreign capital into the country, as a means of counterbalancing the currency crisis it faced in 2018. These will be explored in more detail below.
Turkey is a fascinating country – its location between Asia and Europe has made it a constant crossroads of historical cultures, influences, and great civilizations. This confluence of East and West makes Turkey a special place.
Since January 2017, Turkey has been granting citizenship to foreigners that invest in the country. In 2018, the government lowered the investment requirements, which make this program really attractive.
Turkey Citizenship by Investment Options
- Fixed capital investment of a minimum $500,000 (prior to the amendment the amount was $2,000,000) in a Turkish corporate entity;
- Purchase of real estate property in Turkey with a minimum value of $250,000 (prior to the amendment the amount was $1,000,000) (such property shall also have an annotation of no-sale for at least 3 years at the relevant title registry);
- Generate employment for at least 50 individuals in Turkey (prior to the amendment the amount was 100 individuals);
- Deposit a minimum of $500,000 to banks that operate in Turkey (prior to the amendment the amount was $3,000,000) with the condition to keep the deposit at the bank for at least 3 years;
- Purchase minimum of $500,000 public borrowing vehicles of Turkey (prior to the amendment the amount was $3,000,000) and keep them for at least 3 years.
- Purchase a minimum of $500,000 of Turkish real estate participation fund shares or Turkish capital investment trust fund shares (prior to the amendment such amount was $1,500,000) and keep those for at least three (3) years.
The two most popular picks are the bank deposits, as well as the real estate investment.
In cases of citizenship applications through such investment options, the government currently allows supported residence and citizenship applications of the spouse and children (under 18) of the investor – without any further investment.
Making the Investment – What to Choose?
Bank deposit. The deposit can be made in USD or TL. The transfer should be made and then the bank will place a lock of 3 years and issue a letter against the time deposit of USD 500,000. The interest rate varies by the day, but at the time of writing is 5.10% against 500k yielding approximately 66,000 USD after a period of 3 years and if the deposit is made in TL, the yield is 25%. Just a few months ago the rate against for a 3 year time deposit in Turkish Lira was 29%.
Another aspect to consider is the simplicity of this investment option – whereas a real property investment involves a considerable level of paperwork and permits, delaying the citizenship application – the bank deposit option is straightforward. You only need to open the deposit account, transfer the funds and obtain relevant certificates from the bank. Furthermore, we work with one of the largest banks in MENA – headquartered in Qatar, as well as one of the East Asian giants. Your funds will be safe. Without a doubt, it is the quickest and most hassle-free investment option available.
Capital investment – you can make a capital investment in a Turkish company, but if it’s a privately held company, you may have liquidity issues after the 3 year period when you decide to exit. One clever play might be to find a company which is about to IPO or see a trade sale.
Real Estate – this is a popular investment option, especially given the growth in the Turkish market over the past few years. The investment needs to be made in a full title deed – avoid properties which may be in the construction phase as there is additional risk; you won’t receive the deed for some time and because of this, there may be a delay in your passport application.
There should be a record from an independent appraiser on the value of the property on the day the investment was made. It should be $250,000 in USD (the value in USD is more important than in Lira!), in other words, the amount the property was purchased for taken at the daily spot rate of Lira to USD (currently 5.7:1 at time of writing).
It should also be noted that the real estate investment need not be made in one property but can be a combination of several deeds. There is no specification we could find as to what type of property should be invested in (commercial, residential, industrial, etc.).
Interested investors might want to explore ‘mid-term’ investment options, or investment properties in areas set to mature in the next 3 years or so. We have several real estate agents on the ground who will be happy to take you through a tour of properties in several upcoming areas of the city, which are due to appreciate in the coming years. There are also guaranteed rental properties which guarantee a certain amount of rent for 25 months. You can easily see that this investment generates income (from rent) and capital appreciation when you sell the property after 3 years.
Here’s a quick calculation on the investment numbers based on a real property* with no rent increase year over year.
*These are projections, not guarantees – however, in some properties a 24 month rent guarantee is possible, and of course you could look for properties with existing tenants under longer lease agreements. This 24 month guarantee comes with new properties, meaning it’s hypothetically possible that the property remains empty, but the management company is still obligated to pay you! Typically closing cost is 3% to 6% (usually 3% paid by the seller in broker fees) and a 2% closing cost as a tax.
Of course, you don’t need to sell after 3 years, and could choose to hold onto the property for further rental income and appreciation. Even after just 2 more years and a bit of rent increase, the numbers are attractive.
If you want to tweak these numbers, feel free to use this calculator.
How to get citizenship in Turkey
Step 1 – Investment
First, you need to make the investment to be eligible for citizenship – unlike other citizenship by investment programs which first give a letter of approval before a cash outlay.
If through a bank account deposit:
- Gathering required documentation, translation and notarization.
- Opening a bank account at a bank operating in Turkey. We work with one of the largest banks in MENA for that purpose.
- Money transaction.
- Obtaining the required certificate of conformity from the relevant authority (Bank and the Banking Regulation and Supervision Agency).
If purchasing real estate:
- Gathering required documentation, translation and notarization.
- Obtaining the approval to purchase as per the immovable property purchase restrictions for foreigners.
- Money transaction.
- Obtaining relevant clearances regarding tax etc.
- Transfer transactions at the land registry.
- Obtaining any additional documents that may be required by the land registry.
- Obtaining the required certificate of conformity from the relevant authority (Land Registry and the Ministry of Environment and Urbanization).
Step 2 – Residency Permit
A residency permit is needed as per Article 31/1(j) of the Law on Foreigners and International Protection.
Generally in order to make a residency permit application, you should enter into Turkey with a valid visa or by using visa exemptions. You will need a tax ID, health insurance, and pay a small fee.
After gathering the required documentation, an application can be done online to arrange an appointment to submit the residency application with the special residency application office for investment purposes .
After 4-5 days, you will obtain the residency permit document.
Step 3 – Citizenship Application
Once you obtain a residency permit, you will be ready to submit the Turkish citizenship application to the Population and Citizenship Services Office. You will need the following:
- Completed preliminary examination form
- Identity registration of foreigner (this is a civil document obtained from the foreigner’s home country)
- Marriage Certificate (if applicable)
- Certificate of Criminal record
- Valid residence permit
- Supporting documents relating to the aforementioned investment requirements.
- Receipt of the service charge
- PoA (Power of Attorney) to authorize our legal team to handle all procedures with regards to the citizenship application
Unless additional documentation is requested, both the residence permit and citizenship applications are, in general, approved within 4-5 days each (total 8-10 days) following the submission of the documents to the office.
Why you may be interested in obtaining a second passport in Turkey
If investing in property
- Freedom to choose your property. Unlike other programs in which you can only purchase government-approved property developments, in Turkey you can freely invest in any property of your choice – and get a second passport.
- With the 40% devaluation in Lira to US Dollar, you can find really good real estate deals for a bargain price.
- Many properties guarantee the rent for a 4-year period – they are confident in their ability to rent out the home.
- 0% VAT if the wire sent to purchase the property is in US Dollars (not paid in Lira).
If making a bank account deposit
- Cost-effective way to obtain a second passport
- High interest rates
- Simple and straightforward process
- No expensive government fees such as in other economic citizenship programs via real estate investment.
- You get a passport with visa-free entry to South America, Southeast Asia and much of Europe.
- Turkey is an emerging economy – and there is no restriction against buying in a high-growth area such as Istanbul.
- Although currently unlikely, Turkey might join the Schengen Area and the European Union at some point in the future.
If you are interested in obtaining citizenship in Turkey – we can assist you with the whole process, including assisting with opening bank accounts, finding and purchasing a property, advising on and gathering all required documentation, obtaining health insurance and filing residency and citizenship applications. Contact us for further information.
If you want to explore other options, you can check out our Passports.IO jurisdiction comparison application, where you can compare citizenship by investment options side by side.
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