Turkey’s citizenship by investment program has become more attractive for investors with the recent changes in the country’s legislation. Now, foreign investors can fast track their citizenship processes without meeting the condition of minimum period of residency. The country also has advantages over other countries like Grenada and Montenegro, which also offer CBI programs while maintaining E1/E2 treaties with the U.S.
ELIGIBILITY REQUIREMENTS FOR TURKEY’S PROGRAM
Anyone can apply to the CBI program as long as applicants have a clean criminal record. The amended Regulation of Implementation of the Turkish Citizenship Law, which became effective on Sept. 19, 2018, lets foreign investors acquire Turkish citizenship by either making a real estate investment of at least $250,000 or by making a cash investment.
If they choose to make a cash investment, they have the following three options to invest in:
Deposit $500,000 in a Turkish bank recognized by the Council of Bank Audit and Regulation.
Invest $500,000 in Turkish government bonds recognized by the Undersecretary of Treasury.
Invest $500,000 in fixed capital recognized by the Ministry of Industry and Technology.
If applicants choose the real estate route, they will need to invest a minimum of $250,000 in real estate after a capital markets board-licensed company appraised it to be worth at least as much. The applicant must maintain the property investment for at least three years. A prospective investor should expect to spend an additional $25,000 to cover the fees of local attorney, due diligence, filing, and administrative processing costs. The following list shows eligible investors and investments:
Foreigners may acquire any real estate in areas where private property is allowed (residential, commercial, land lot, agricultural, etc.).
If the real estate acquired does not include any previously-built construction, the owner must apply to the relevant public administration within two years to develop a project.
A foreigner can acquire real estate anywhere in Turkey of up to 30 hectares.
Foreigners cannot acquire and lease real estate within prohibited military zones or military security zones.
WHY INVESTORS SHOULD CONSIDER THE TURKISH PROGRAM
Turkey’s CBI program became even more attractive for investors when the government further reduced the minimum property investment requirement from $1 million to $250,000 in September 2018. Within a year of this change, 2,611 foreign investors and 9,962 dependents successfully obtained Turkish citizenships. According to the official Turkish Statistical Institute, the number of houses sold to foreigners jumped by 11.1% and reached 11,068 in the first quarter of this year, despite a short-term stagnation in the housing market due to the coronavirus pandemic.
Turkey’s CBI program is one of the most cost-effective and applicant-friendly programs on the market that allows investors and their dependent family members to obtain second citizenships in exchange for contributing to the country’s economy. The investors are neither required to speak the local Turkish language nor need to be present in Turkey during the citizenship application process. A conservative estimate for the duration of the whole process, from start to finish, is less than six months. The chart below depicts the entire application process:
When investors obtain Turkish citizenship, they and their families become eligible for free medical care and educational opportunities. Moreover, since Turkey allows dual citizenship, applicants do not have to give up their original citizenship. Male investors who obtain Turkish citizenship through the CBI Program are exempt from compulsory military service. Also, investors do not need to declare their wealth after getting Turkish citizenship.
If investors do not wish to reside in their properties, they can use a licensed real estate agent to assist them in negotiating rental-guarantee purchases. This way, an investor can collect rental income while holding on to the property. The ability to liquidate the property after the restricted holding period provides investors with opportunities for capital gains. If they sell the property after five years of the purchase, the profit will be exempt from any capital gains tax.
Turkey provides all the basic amenities that investors may desire in an attractive market: a huge economy, unique cities with beautiful coastlines, proper residency opportunities, rich culture and history and a vibrant demographics along with stable tourism.
Therefore, investors should note that the current CBI advantages in Turkey, compared to similar countries, might not remain the same for long.
Another advantage for investors is that successful applicants will be eligible for the E-1 and E-2 visa programs of the U.S. and will enjoy visa-free travel to more than 110 countries worldwide. Under this treaty, the parties agree to international law standards for expropriation and compensation, free financial transfers, and procedures, including international arbitration, for the settlement of investment disputes.
TAKING ADVANTAGE OF E1/E2 TREATIES
These treaties allow applicants to be able to establish a business in the U.S. and work there for three to five years. The E1/E2 visas are nonimmigrant intent visas. They are, however, continually renewable, if the business is both profitable and has created employment for eligible people in the U.S.One of the main benefits of the E2 visa is that while the applicant can only work in their specific business, their spouse can work anywhere he or she pleases. This particular feature of the E2 visa has been one of the main reasons for the recent resurgence of applications for the CBI programs in general, and Turkey’s CBI program in particular.
There are other reasons why certain investors prefer this route. When considering the U.S. as a destination, the first program that comes to mind is the EB-5 program, which is said to be the most efficient way to obtain permanent residency in the U.S., other than the family-based visas. That said, until applicants receive permanent residency, the only way they can travel to the U.S. is if they hold an additional valid visa. Recently, the EB-5 process has been taking too long. In contrast, the processing time of the E2 visa is significantly shorter. Therefore, many applicants use the E2 visa as an interim solution and then apply for the EB5 while they reside in the U.S. with their valid E2 visas. Others expand the scope of their E2 business and make it eligible for the EB5. Yet others find the scrutiny in the source of funds for EB5 very difficult to overcome, the global taxation obligation unacceptable, and the residency requirement unachievable. The nonimmigrant intent E2 visa addresses all of these concerns. There is no global tax obligation with an E2 visa as long as the applicant does not become a U.S. resident for tax purposes. There is no minimum residency requirement in the U.S. Finally, yet importantly, the source of funds scrutiny is much more manageable
Applicants, from countries such as China, India, Vietnam, Russia, and Brazil, who do not have the treaty, could avail themselves of this privilege by becoming a citizen of Turkey. For applicants born in mainland China, the E2 visa is a great alternative to EB-5 because of retrogression. Chinese applicants have to wait for over 15 years to obtain a green card through EB5. On the other hand, with the E2 visa, they can come to the U.S. almost right away. Applicants born in India, have similarly long retrogression periods with EB2 and EB3. For many of them, the path through the popular H-1B to EB2 or EB3 is not realistic, given the waiting times. Getting Turkish citizenship, and thereby becoming eligible for the E2 visa, is perhaps the most viable solution for them. Another group of investors is those who are citizens of countries, who cannot enter the U.S. altogether, due to the travel ban issued for their specific country of citizenship such as Iran, Iraq, Libya, Somalia, Sudan, Syria, and Yemen. If these applicants have a clean record with no criminal background, no ties to terrorist organizations, etc., they could also become citizens of Turkey, and be able to get a visa to come to the U.S.
COMPARISON WITH GRENADA AND MONTENEGRO
Two other countries that have the E2 treaty with the U.S. and at the same time have a CBI program, are Grenada and Montenegro. The period for which E-2 visas are issued is governed by reciprocity schedules. Grenada and Turkey citizens can obtain E-2 visas for 5 years while citizens of Montenegro are limited to 1‑year E-2 visa issuance.
The chart below compares the Turkey CBI program with these other two programs.
Program Features | Turkey | Grenada | Montenegro |
Required min. investment in real estate | $250,000 | $220,000 | €250,000 or €450,000 depending on region of investment |
Alternative cash investment / Donation | $500,000 | $350,000 | None |
Donate money to government instead of investing? | No | Yes, $150,000 | No |
Additional Government Donation | 0 | $50,000 for family of four | €100,000 |
Other Fees (due diligence, legal, bank, passport, etc.) | $25,000 | $25,000 for family of four | €55,000 |
Duration of the process | 2-3 months | 3-4 months | 3-4 months |
Duration the real estate needs to be held | 3 years | 5 years | Applicant can sell as soon as they receive their passport |
Physical presence requirement | Once | None | Once |
Number of countries with visa free travel | 110 | 140 | 120 |
Typical E2 visa period | 5 years | 5 years | 1 year |
Investing in Turkish real estate
The purchased property should meet certain criteria. A capital markets board-licensed company needs to provide a verified expert appraisal report. Additionally, the building license and the title deed should be clear of any restrictions before the sale transfer is finalized.
With several real estate sectors-- residential, office, retail, logistics -- undergoing significant structural change, authorities regard investments in housing as a sound, defensive strategy, supported by long-term urbanization and demographic trends. Urban renewal is a public mission supported by the government aimed at replacing the existing building stock of risky and vulnerable structures with modern and durable redevelopment projects. The purpose is to prevent the loss of lives and property in the event of an earthquake. The Urban Renewal and Development initiative will apply to 7.5 million housing units and has a budget of $400 billion.
The Turkish residential market grew significantly over the last decade. As the demand for new, modern, and earthquake-resistant residential units increased in the housing market, stock in Turkey jumped from 26.7 million to 38.8 million units. The total number of houses sold to foreign nationals to date since 2014 has totaled 168,106 units.
The city of Istanbul has become a key player in the global services economy since 2000 and grade-A office space stock has tripled in the last decade to 7.1 million sqm.
The organized retail market in Turkey has shown impressive developments in terms of shopping mall supply. As of the latest count, there were 439 malls in the country with a total area of 13,481,125 sqm. Istanbul has the biggest share of this with 127 malls and 4,924,599 sqm.
The Turkish citizenship by investment program offers investors the opportunity to acquire new citizenship quickly and simply, without any disruptions to their lifestyles. The grant of citizenship via property investment involves various procedures and requires government approval at several levels. It is, therefore, essential that applicants seek proper advice before filing their formal application.
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