Turkey Plans to Limit Tax Exemption REITs Enjoyed for Decades

(Bloomberg) -- The Turkish government is preparing to limit a corporate tax exemption enjoyed for decades by real estate investment trusts as part of an extensive proposal geared at fiscal tightening.

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The trusts, known as REITs, and other real estate investment funds would have to pay a minimum corporate tax on profits made from property sales or rentals, according to a person with direct knowledge of the matter, who asked not to be identified because the matter is private. The Treasury and Finance Ministry declined to comment.

The move, designed to complement the central bank’s tight monetary policy, would bring in an estimated 7.2 billion liras ($221 million) in tax revenues next year and impact dozens of listed companies. A total of 35 REITs and 125 real estate investment funds benefited from the exemptions in 2023, with the annual tax impact reaching 20 billion liras, according to the official.

Turkish REITs have enjoyed corporate tax exemptions for more than two decades, an incentive that helped convert dozens of builders into listed companies. Borsa Istanbul’s REITs index has 47 member companies, with state-run Emlak Konut carrying the most weight. The index has gained 17% this year, trailing the 41% advance of the benchmark stock index.

The government also is considering another measure to impose a tax on capital gains that certain corporations make from their purchases of precious metals, including gold. Under current regulations, such gains aren’t taxed until the metals are resold by the company.

--With assistance from Taylan Bilgic.

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