In residential deliveries, the current VAT rates Dear readers, we started the day with tax regulations published in the Official Gazette numbered 32241 on the morning of July 7. Following these regulations, the VAT rates were increased, with the rate of 18% being raised to 20%, and the rate of 8% being raised to 10%.

After these regulations, it is useful to briefly summarize the current situation in the construction sector, which produces discounted rate housing.

Question: What is the current VAT rate for residential and commercial property deliveries in the construction sector?

Answer: There is no single applicable rate for residential deliveries in the construction sector. In fact, there are many rates available. The VAT rate varies depending on factors such as the date of the construction permit, the type of the relevant residential unit, net area in square meters, etc.

The current rates are as follows:

For land and plot deliveries, the VAT rate will be 10%. For commercial property deliveries, the VAT rate will be 20%. For residential deliveries, the situation is a bit more detailed: For construction projects that obtained a building permit before 01.04.2022: In constructions carried out within the scope of the “Law on Transformation of Areas Under Risk of Disaster” (Law No. 6306), the VAT rate will be 1% for residential units with a net area of up to 150 m², and 20% for residential units with an area exceeding 150 m².

If the residential unit is not within the scope of urban transformation (Building permit obtained on or after 01/01/2017): For residences located outside metropolitan municipality boundaries or For residences that are not classified as luxury or first-class constructions, or for residential units with a unit land value of up to 1,000 TL per square meter, the VAT rate of 1% will continue to be applied. For residential units with a net area exceeding 150 m², the VAT rate will be 20%.

For construction projects that obtained a building permit after 01.04.2022: Within the scope of urban transformation projects in reserved construction areas, risky areas, and areas where risky buildings are located, the VAT rate will be 1% for the portion of residential units with a net area of up to 150 m², and a gradual VAT rate of 20% will be applied for the portion exceeding 150 m².

If the project is not within the scope of risky buildings, a VAT rate of 10% will be applied for residential units with an area of up to 150 m², and a gradual VAT rate will be applied for the portion exceeding 150 m². In other words, a rate of 10% will apply to the portion up to 150 m², and a rate of 20% will apply to the portion exceeding that area in square meters.