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The Process of Tax-Free Vehicle Purchase For Foreigners in Turkey

When buying a car in Turkey, one has to pay three (3) types of taxes: Special Consumption Tax (SCT), Value Added Tax (VAT), and Motor Vehicle Tax (MTV). While the general rate of VAT is 18%, SCT is the most burdensome of these taxes. Since the right to buy a car in Turkey is not limited to Turkish citizens, this article will focus on the conditions and tax exemptions for non-Turkish citizens.

What is a Tax-Free Vehicle For Foreigners?

The tax system in Turkey imposes some taxes on car purchases. There are taxpayers of these taxes as well as those who can benefit from tax exemption. Cars purchased with tax exemption are called “blue-plate vehicles” since they are registered with a blue license plate. While the tax exemption of blue-plate vehicles is in question for SCT and VAT, it does not cover tax types such as annual road tax or bandrol tax.

Who Can Benefit From This?

Buying a new vehicle from an authorized car dealer first-hand is possible without paying the SCT and VAT. However, such a vehicle can only be purchased by persons who are called diplomatic members per the Ministry of Customs and Trade.

This situation is regulated under Article 6 of Law No. 4760 on Special Consumption Tax as an exception for tax liability:

“The initial acquisition, import, or delivery of goods listed in the attached (I), (II), and (III) schedules of this Law for their own needs by the diplomatic missions, consulates of foreign states in Turkey, and international organizations granted tax exemption through international agreements, as well as by their members with diplomatic privileges, are exempt from tax. Additionally, the initial acquisition, import, or delivery of goods in Turkey for personal needs by non-Turkish nationals serving in the executive staff of international organizations in Turkey, within the duration of their assignment, are also tax-exempt, provided that these transactions are conducted in the framework of host government agreements or other agreements to which our country is a party.”

This provision has been structured in the aforementioned manner.

In addition, according to the international treaties to which Turkey is a party and Turkish legislation, among the people who can buy a car tax-free;

• Holders of 1st, 2nd, 3rd, and 4th class Ministry of Foreign Affairs identity card (CD-B Plate)/(MA/MZ Plate),
• Foreign personnel associated with NATO (MA/MZ Plates),
• Foreign lecturers and students (except for language students)(MA/MZ Plates),
• Foreigners retired abroad and resident in Turkey (MA/MZ license plate),
• Foreign athletes affiliated with federations (MA/MZ Plates),
• Employees of foreign press organizations based abroad in Turkey (MA/MZ license plate),
• Foreigners with a work permit from the Ministry of Labour of the Republic of Turkey (MA/MZ Plate),
• Foreign experts temporarily working in various Ministries within the scope of European Union programs and projects (MA/MZ Plates) are counted.

The “MA” and “MZ” license plates mentioned here are temporary entry license plates known as guest license plates in Turkey. These tax-free vehicles, which are different from the tax-free vehicle purchases of diplomatic representatives, can only be used by themselves or their families during the period the person is in Turkey, provided that there is no change in the status mentioned above.

Who Can’t Benefit From This?

While the individuals eligible for the tax-free vehicle program have been mentioned above, it is explicitly stated that only they and their families are entitled to benefit from this program, excluding all other third parties.

Another group ineligible to benefit from the tax-free vehicle program consists of individuals who hold dual citizenship, in addition to Turkish citizenship, of another country. These individuals already possess Turkish citizenship and, therefore, cannot avail themselves of this specific situation, which is applicable exclusively to certain categories of foreign nationals.

Furthermore, foreign nationals who do not possess Turkish citizenship, reside and work in Turkey, and do not fall within the above categories are also precluded from taking advantage of this tax-free car acquisition.

The Process

What Are The Documents Required When Purchasing a Tax-Free Vehicle?

Buying vehicles defined as blue license plate vehicles differs from the vehicle purchase procedure of Turks. In the car purchases of foreigners who can benefit from the above-mentioned tax-free vehicle application, except for the diplomatic person;

• The sale of the car between another foreign citizen who wants to buy the vehicle used by the foreign national is realized at the consulate of the seller.
• Foreign citizens who directly benefit from the tax exemption can buy a new vehicle in the presence of a notary public.

The provision regarding the sale and transfer of vehicles, as stipulated in the first paragraph of Article 3 of Law No. 5086 on Second Hand Vehicle Sales to Foreign Nationals in Turkey, which is organized and in effect for foreign nationals, is as follows:

“Upon presentation of a document indicating that there are no outstanding motor vehicle taxes on the registered vehicle, sales and transfers to foreign real and legal persons are conducted by notaries based on the registration document issued in the name of the vehicle owner. These sales are exempt from stamp duty and fees. The sales and transfers made by notaries are reported to the traffic registration directorate where the vehicle is registered on the same day.“

This provision outlines the procedure for vehicle sale and transfer.

In terms of these sales transactions, there are documents required for the smooth operation of the official procedure and the realization of the sale. These documents are basically as follows;

• Passport,
• Residence/work permit,
• Notary certificate,
• All documents belonging to the vehicle,
• Tax receipts.

Are There Any Regular Wages That Must be Paid in Addition to Tax?

Owners of vehicles with diplomatic license plates, known as blue license plates, do not pay tax. However, owners of guest vehicles (MA/MZ), which are allocated for foreign citizens and their families, pay vehicle stamps to banks or tax offices in January and July each year according to the vehicle’s model, year, and engine volume.

What is The Advantage of Buying a Blue License Place Vehicle in Turkey?

If we explain the situation with a short example:

• The sale price of brand X’s latest model vehicle with a blue license plate is 6.000.000 TL
• The sales price of the same X brand latest model vehicle with tax in Turkey is 21.000.000TL
• The bank guarantee fee (deposit) for the vehicle purchased with a blue license plate is 4.000.000 TL
• Cost of the vehicle purchased with tax – the cost of the vehicle with blue license plate is 21.000.000 – (6.000.000 + 4.000.000) = 11.000.000 TL

If we calculate the amount deposited as a deposit with a deposit deposited as a bank guarantee fee, the amount deposited as a deposit can be taken back by the foreign citizen when the registration of the blue-plate vehicle is closed;

• 11.000.000 + 4.000.000 = 15.000.000 TL will remain in one’s pocket.

Conclusion

It is seen that the only foreign citizens who can buy a first-hand and new vehicle tax-free are those who have diplomatic status. The vehicle purchased by these persons can be used only by the person or their family, and the diplomatic person can also purchase a vehicle for their spouse in this way.

In addition to the above-mentioned cases, in accordance with international treaties and Turkish legislation, it is regulated that the buyer’s tax liability is eliminated in the sale of second-hand vehicles from foreigners to foreigners, except for foreign nationals who are considered diplomatic persons. In this respect, when it comes to long-term settlement, preferring this system is more advantageous than renting a car or taking a taxi daily.

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References & Sources

• Republic of Turkey Ministry of Trade, General Directorate of Customs, Passenger Guide for Land Vehicles with Foreign Plates.
• Special Consumption Tax Law No. 4760.
• Value Added Tax Law No. 3065.
• Law No.5086 on the Sale of Used Vehicles to Foreigners.

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