Asset Deal vs Share Deal (Tax Overview)

In an asset deal, sale of real properties owned by individuals is subject to income tax. Capital gains arising from sale of a real property by individuals are subject to income tax at the marginal rate of 15% to 35% depending on the income gained from the sale transaction. However, real properties owned and held by individuals for more than five years are exempt from the income tax.

Sale of real properties owned by legal entities is subject to corporate tax corresponding to 20% of the income gained from the sale transaction. However, under Article 5 of the Corporate Tax Law, 75% of the income is exempt from income tax if the relevant legal entity owned and held the real property for more than two years, provided that the amount of income exempted from corporate tax is transferred into a special fund account of the company and kept there for 5 years following the year in which the transaction took place. Companies engaged in trading of real property cannot benefit from the corporate tax exemption and their sale of real property is subject to corporate tax even if they hold a real property for more than two years.

Sale of real properties owned by legal entities is subject to VAT corresponding to 18% of the purchase price. Sale of real properties is exempt from VAT if the relevant legal entity owned and held the real property for more than two years. Companies engaged in trading of real property cannot benefit from the VAT exemption. Sale of real properties owned by individuals is exempt from VAT.

In a share deal, transfer of shares will be subject to (i) a corporate tax corresponding to 20% capital gains derived from the transaction, if the seller is a legal entity, or (ii) an income tax corresponding to 15% to 35% depending on the income gained from the transaction, if the seller is an individual. Capital gains derived from the transfer of shares in a Turkish company are (i) 75% exempt from corporate tax, and (ii) 100% exempt from income tax (if the seller is an individual and the company has issued share certificates representing such shares), if the relevant shares have been held for at least two years prior to their transfer. Further tax benefits or exemptions may be applicable due to double taxation treaties.