Understanding Real Estate Investment Trusts (REITs) in Turkey

Real Estate Investment Trusts (REITs) (Gayrimenkul Yatırım Ortaklığı) offer a unique investment opportunity in Turkey, governed by specific regulations outlined by the authorities. In particular Capital Markets Board of Turkey is the regulatory authority for foundation of the REITs in Turkey and subject to strict regulatory approvals. 

These regulations provide a framework for the establishment and transformation of companies into REITs.only investment opportunities but also significant tax advantages in Turkey. In addition to the regulatory framework previously outlined, there are specific tax benefits that make REITs an attractive option for investors.

1. Public Offering Requirement: Following a public offering, it is mandatory for a minimum of 25% of the issued capital to be in the form of publicly traded shares. The public offering process must be completed within three months.
   

2. Tax Advantages: One of the key advantages of investing in REITs is their tax treatment. REITs are exempt from corporate tax on their profits, offering investors the potential for higher returns compared to traditional investment vehicles subject to corporate taxation. This exemption enhances the attractiveness of REITs as an investment option, allowing investors to maximize their returns without the burden of corporate tax liabilities.
   

3. Formation and Transformation: Companies can be established as real estate investment trusts or transform into one by amending their articles of association in accordance with the law and relevant regulations. However, entities exclusively operating infrastructure investments and services must explicitly state in their articles of association that a minimum of 75% of the total assets will consist of infrastructure investments and services. Furthermore, only infrastructure companies can transform into entities solely managing portfolios comprising infrastructure investments and services.
   

Understanding REIT regulations is crucial for companies and investors interested in the dynamic landscape of real estate investment in Turkey, ensuring compliance and facilitating informed decision-making processes.

This information note is prepared by Cem Ozan Metin.