Special Tax Base Practice in Real Estate Transactions

 

One of the key issues frequently encountered by businesses engaged in real estate trading is the special tax base practice. When a real estate seller purchases a property from a person who is not a VAT taxpayer or acquires it through a VAT-exempt transaction and subsequently sells it to a third party, the sale is carried out for a certain consideration. The difference between the sale price and the purchase cost of the property is defined as the special tax base.

Within this framework, for properties acquired without paying VAT, the VAT to be calculated on the sales invoice is applied only to the difference between the purchase and sale prices. However, the special tax base method does not apply to the sale of second-hand properties that were acquired with VAT included.

To be eligible for the special tax base application, no substantial changes must be made to the essential characteristics of the property. Routine maintenance, repair, or minor renovation works are not considered substantial changes. In addition, the seller must hold a valid authorization certificate to apply this method.

For example, renovating a residential unit by repainting and renewing its plumbing system does not constitute a substantial alteration. On the other hand, if a company whose primary line of business is not real estate trading sells a property that it purchased years ago as an investment, the special tax base application cannot be applied.

 

 

Process of Issuing a Sales Invoice Under the Special Tax Base

 

To issue a sales invoice under the special tax base method, a new sales invoice must first be created. After entering the required invoice details, the VAT rate should be set to zero and the invoice should be saved.

Following the invoice creation, the special tax base option is added during the official submission stage. At this step, when sending the invoice electronically, the appropriate special tax base exemption code defined by the Revenue Administration must be selected. In this way, although the VAT rate is indicated as 0%, the tax calculation is effectively applied to the difference between the purchase and sale amounts.