Real estate investment funds in Turkey (gayrimenkul yatırım fonu, GYF) and real estate investment trusts (gayrimenkul yatırım ortaklığı, GYO) are the two regulated vehicles for pooled investment in Turkish property under the Capital Markets Board (Sermaye Piyasası Kurulu, SPK): the fund is a pool of assets without legal personality, managed by a licensed portfolio management company and sold only to qualified investors, while the trust is a joint stock company whose shares are offered to the public and traded on Borsa Istanbul. This article explains what each vehicle may hold and may not do, how a fund is set up and run through its manager, custodian and appraisers, how a trust is formed and listed, how the corporate tax exemption works and which conditions were attached to it in 2023 and 2025, how distributions and unit gains are withheld for a foreign investor and repatriated, what an investor checks before subscribing and how a fund investment can support a Turkish citizenship application, and how an investor exits and a fund is wound up.
- A fund keeps at least eighty percent of its total value in real estate investments, may borrow up to half of its value and is registered as the owner in the land registry.
- Fund units are sold only to qualified investors; trust shares are offered to the public and listed.
- The corporate tax exemption now applies only to vehicles that operate a real estate portfolio and, from 2025 income, only if at least half of the real estate gains are distributed on time.
- Gains on fund units held for more than two years bear no withholding; distributions by funds and trusts have carried a zero rate at source under the decision in force.
- An investment of at least five hundred thousand US dollars in fund units, held for three years, is one of the routes to Turkish citizenship by investment.
Two vehicles: the fund and the trust
The fund (GYF) is created by a portfolio management company (portföy yönetim şirketi) licensed by the Board, under fund rules (içtüzük) the Board approves, and has no legal personality of its own; it is treated as a legal person only for the purpose of holding real estate, so that the properties it buys are registered in the land registry in the name of the fund. Its assets are held by a portfolio custodian (portföy saklayıcısı), a bank or the central securities depository, separately from the manager's own assets, and its investors hold participation units (katılma payı) that may be sold and transferred only to qualified investors (nitelikli yatırımcı), the institutions and the individuals whose financial assets exceed the threshold the Board sets. The fund invests in real estate, real estate rights, approved projects, shares of real estate trusts, real estate certificates and units of other real estate funds, and keeps at least eighty percent of its total value in such real estate investments, with the remainder in money market instruments and, within a limit, the shares of Turkish companies.
The trust (GYO) is a joint stock company formed under the Commercial Code with the Board's permission and governed by the Board's communiqué on real estate investment trusts: it must offer a part of its shares to the public and list them on Borsa Istanbul within the period the communiqué sets, keeps the greater part of its portfolio in real estate, real estate projects and real estate rights, may borrow within a multiple of its equity, and reports as a listed company through the Public Disclosure Platform under Turkish financial reporting standards. Its investors are shareholders, with the general assembly, dividend and minority rights that company law gives, and they buy and sell on the exchange rather than redeeming from the issuer.
Both vehicles are limited to the same activity: they acquire, hold, let and sell property and real estate rights, and they do not act as construction contractors or operate the properties as businesses, letting a hotel or a shopping centre to an operator rather than running it. Every acquisition, sale and lease is supported by a report from an appraisal company licensed by the Board, and the portfolio is revalued at least at every year end; the valuation, not the manager's estimate, sets the unit value of a fund and the net asset value of a trust. Our practice page on the Turkish real estate lawyer covers the property side; this article covers the vehicles.
Setting up and running a fund: manager, custodian, appraisers and investors
A sponsor who wants a Turkish fund does not form it; a licensed portfolio management company does, either an independent manager that will run the fund for a fee or a management company the sponsor establishes and licenses itself, which requires the Board's licence, minimum capital, licensed portfolio managers and internal control, and takes months. In our practice the sponsor engages an existing manager under a management agreement that fixes the fee, the investment committee and the sponsor's role in it, the reporting and the terms on which the sponsor may replace the manager, because the manager is the fund's legal face: it signs the purchases, holds the land registry authority, files with the Board and answers to the investors. The fund rules and the issue document (ihraç belgesi) set the investment policy, the term, the redemption or distribution mechanics and the fees, and are approved by the Board before units are offered; the units are then offered to qualified investors within the period the Board allows.
The custodian holds the fund's cash and securities, checks the manager's transactions against the fund rules and the law, verifies the unit value and the fee calculations, and reports breaches to the Board; the appraisal company values each property before it is bought, sold or let and at every year end, with the report delivered within days and kept for ten years; and the auditor audits the fund's accounts. The fund may use loans or interest-free financing up to half of its total value, with the terms reported to the investors, and may create or receive building rights and time-share rights over its properties. The manager's duties are owed to the investors, and a manager that departs from the fund rules or the communiqué answers to the Board and in damages.
Most Turkish real estate funds are closed-ended for a term, with units redeemed at the end or at the windows the rules set, because real estate cannot be sold to meet daily redemptions; the investor's liquidity is therefore the fund's distribution policy and the transfer of units to another qualified investor. A foreign investor subscribes through a Turkish bank account after the identification the anti-money-laundering rules require, and the custodian records the units; where the investors come through a feeder vehicle abroad, the feeder is the qualified investor of record and the Turkish side looks no further than it, while the feeder's own law and the treaty position are the investors' concern. Our practice page on real estate consultancy in Turkey covers the asset selection.
The trust: company law, the Board's rules and the public offering
A trust is incorporated as a joint stock company whose articles follow the Board's model, with the Board's permission obtained before the trade registry registers it, or converted from an existing company with the Board's permission; it must then offer the proportion of its shares the communiqué requires to the public within the period set from its registration and list on Borsa Istanbul, failing which it loses its status. Its board of directors includes independent members under the corporate governance principles, its portfolio is valued by licensed appraisers, its transactions with related parties follow the Board's rules on their pricing and disclosure, and its financial statements are published quarterly on the Public Disclosure Platform. A trust may borrow more freely than a fund, within a multiple of its equity, which is why development-heavy portfolios sit in trusts rather than funds.
The trust pays no corporate tax on its exempt income under the conditions described below, distributes dividends under the Commercial Code and its own dividend policy, and is subject to the takeover, disclosure and insider rules that apply to every listed company. A foreign investor buys and sells its shares through a Turkish brokerage account with the central registry, like any listed share, and a foreign sponsor who wants control holds the majority of the shares and appoints the board, subject to the listed minority's rights; sponsors' shares are often privileged shares that nominate board members.
The choice between a fund and a trust is made by the investor base and the strategy: a sponsor with a dozen institutional investors and a letting strategy uses a fund, which is cheaper to run, private and confined to qualified investors; a sponsor who wants retail capital, exchange liquidity or a development programme uses a trust, which costs a listed company's compliance. Both are formed with the Board's permission, both are supervised by it and both can be penalised by it. Our practice page on the Turkish business and commercial lawyer covers the company law side.
Taxation: the exemption and its two conditions
The Corporate Tax Law exempts the income of investment funds and investment trusts established in Turkey from corporate tax, so that rents and capital gains accumulate in the vehicle untaxed and the tax falls, if at all, on the investor. Two conditions have narrowed the exemption for real estate vehicles. Since the 2023 tax year the exemption is confined to funds and trusts whose main activity is operating a portfolio of real estate, real estate projects and real estate rights; a vehicle formed under the real estate communiqués but holding something else, such as an infrastructure portfolio, is outside it. And for income earned from 2025 onwards, a fund or trust keeps the exemption only if it distributes at least half of the gains it earns from the real estate it owns to its unit holders or shareholders by the end of the second month following the month in which its corporate tax return is due; a vehicle that misses the distribution loses the exemption for all of its income of that year, not only the real estate gains, and the tax not assessed is treated as lost, with the tax loss penalty and late payment interest.
The distribution condition has changed the economics of accumulation: a fund that used to roll its rents into new acquisitions now distributes half of its real estate gains in cash within the deadline, and the Board's and the Revenue Administration's guidance define which gains count, with the general communiqué treating rents and gains on sale as real estate gains and the vehicle's other income outside the base. A board decision to distribute is not enough; the amounts must be paid, or placed at the investors' disposal, within the deadline. The domestic minimum corporate tax introduced for 2025 adds a second layer: corporate tax may not be less than ten percent of the corporate income before deductions and exemptions, and the real estate gains of an exempt trust are not deducted from that base, so an exempt trust bears the ten percent on them even while the exemption holds. Practice may vary by authority and year.
Value added tax applies to the vehicle's property transactions at the ordinary rates, with the exemptions the VAT Law provides for particular transfers, and is a cost or a credit in the fund's accounts like any trader's; the sale of fund units and trust shares is outside VAT. Stamp tax applies to the fund's leases and contracts under the general rules. The vehicle's exempt income is not the end of the tax analysis for the investor, whose position is described next. Our practice page on the tax lawyer in Turkey covers the vehicle-level filings and the general communiqué.
Withholding, the foreign investor and repatriation
Tax reaches the investor through withholding at source. The income of funds and trusts, exempt from corporate tax, is subject to a withholding whose rate is set by presidential decision and has stood at zero for real estate funds and trusts under the decision in force since 2009, so that the distributions a trust pays and a fund makes have left the vehicle without deduction; the rate is a decision, not a statute, and is checked before each distribution. The investor's own tax then follows the investor's status: a Turkish resident individual and a Turkish company declare the income under their own rules, and a foreign investor without a permanent establishment in Turkey is taxed only through whatever withholding applies.
Gains on fund units are taxed through the withholding regime for financial instruments: a gain or distribution on real estate fund units held for more than two years bears a zero rate, and units held for less bear the general rate for fund units, which the presidential decisions have revised repeatedly and which stands at seventeen and a half percent since March 2026; the bank or intermediary that holds the units applies the withholding and it is final for a foreign individual. A foreign shareholder of a trust receives the dividend at the rate applied by the trust and, where a double taxation treaty applies, obtains the treaty rate on production of a residence certificate, apostilled and translated, through the paying institution or by refund. Gains on the sale of listed trust shares are within the same withholding regime, where the rate for the shares of listed companies other than securities investment trusts is zero.
Repatriation is free: the capital, the distributions and the sale proceeds are converted and transferred abroad through the bank under the foreign exchange legislation, with the bank recording the original inflow and the tax on the outflow; the documents are the subscription or purchase records, the custodian's or the brokerage's statements and the withholding receipts, which the home tax authority will ask for as well. Our note on tax residency for foreigners in Turkey covers when a foreign investor becomes a Turkish taxpayer on worldwide income, which changes this analysis, and our practice page on the Istanbul Finance Center the regime for financial institutions established there.
Before subscribing: due diligence, the citizenship route and investor protection
An investor's due diligence on a fund reads the fund rules and the issue document for the strategy, the term, the fees, the redemption mechanics and the manager's powers; the manager's licence and record with the Board; the custodian and auditor agreements; the appraisal reports for the properties already held, with the land registry extracts showing the fund as owner and the encumbrances; the leases that produce the income, with their terms, tenants and increase clauses; the borrowing; and the related-party transactions, because a fund that buys the sponsor's own properties at the sponsor's valuation is the pattern behind most disputes we see. For a trust the same questions are answered from the public disclosures, the audited statements and the material event notices, and the appraisal reports are published.
A fund investment of at least five hundred thousand US dollars, or its equivalent, in units of a real estate investment fund or a venture capital fund, held for at least three years and confirmed by the Board, is one of the investment routes to Turkish citizenship under the regulation implementing the Citizenship Law, alongside the purchase of real estate and the capital and deposit routes; the units are blocked for the period, the Board issues the conformity certificate, and the application proceeds, after the short-term residence permit, through the provincial population directorate. In our practice the fund route suits an investor who wants citizenship without managing a property, and the fund is chosen for its term, which must cover the holding period, and its distribution policy; the citizenship rules and the thresholds are set by regulation and have been changed more than once. Our practice page on Turkish citizenship by investment covers the application.
Investor protection rests on the structure rather than on promises: the custodian's separation of the assets, the appraisal by licensed companies, the Board's supervision and sanctions, the fund rules that bind the manager, the disclosure to investors and the manager's liability. An investor who suffers loss through the manager's breach of the rules has a claim against the manager and may complain to the Board, which can fine, suspend or replace a manager; where the investor is a qualified investor the Board's view is that it bears the investment risk, so the claims that succeed are those about breaches of the rules, undisclosed conflicts and valuations, not about returns.
Exit: redemption, sale, liquidation and what remains
An investor leaves a fund by redemption where the fund rules allow it, at the unit value on the valuation date and within the period the rules set for real estate funds, which is longer than for securities funds because property must be sold; by transfer of the units to another qualified investor, recorded by the custodian; or at the end of the fund's term, when the portfolio is realised and the proceeds distributed. A trust's shareholder sells on the exchange. The withholding described above is applied at each exit by the institution that holds the units or shares, and the two-year holding period for the zero rate on fund units is counted from the subscription of each unit.
A fund is wound up at the end of its term, by the manager's decision under the rules with the Board's approval, by the Board's order where the manager fails or the fund can no longer meet the portfolio rules, or where the manager's licence ends and no replacement is found: the manager, or a liquidator the Board appoints, sells the properties under appraisal, pays the debts, files the final tax returns and distributes the balance to the unit holders, and the Board deletes the fund from its register. A trust is liquidated as a company, under the Commercial Code's procedure, after delisting under the exchange's rules, with the Board supervising the real estate sales. In both cases the manager's and the directors' liability, the tax authority's audit period and the investors' claims survive the deletion for the limitation periods, and the records are kept for the ten years the Board requires.
A fund that fails its portfolio rules, its distribution condition or its term does not simply continue: the Board gives the manager a period to cure, and the tax consequences of a missed distribution fall in the year of the failure. The exit planning therefore starts at subscription, with the term, the distribution policy and the two-year holding period matched to the investor's own horizon. Our note on shared title deeds in Turkey covers direct co-ownership, the alternative that investors without access to a fund use for the same purpose. Practice may vary by authority and year.
Frequently asked questions
- What is the difference between a real estate investment fund and a trust in Turkey? The fund is a pool of assets without legal personality, managed by a licensed portfolio management company and sold only to qualified investors; the trust is a joint stock company whose shares are offered to the public and listed on Borsa Istanbul. Both hold and let property under the Capital Markets Board's rules and neither builds or operates it.
- Can a foreigner invest in a Turkish real estate fund? Yes, if they are a qualified investor under the Board's definition, through a Turkish bank or brokerage account after identification; a foreign feeder vehicle may be the investor of record. Trust shares are bought on the exchange like any listed share.
- Is the fund's income really tax free? The fund or trust pays no corporate tax on its income if its main activity is operating a real estate portfolio and, from 2025 income, if it distributes at least half of its real estate gains by the deadline; a missed distribution removes the exemption for the whole year. The minimum corporate tax of ten percent still reaches an exempt trust's real estate gains.
- What tax does a foreign investor pay on fund units? Withholding at the bank: zero on gains and distributions from units held for more than two years, the general fund rate on shorter holdings, revised by presidential decision and seventeen and a half percent since March 2026. Distributions at the vehicle level have carried a zero rate under the decision in force.
- Does a fund investment qualify for Turkish citizenship? Yes. At least five hundred thousand US dollars in units of a real estate investment fund or a venture capital fund, held for three years and certified by the Board, is one of the investment routes under the citizenship regulation.
- How much can a fund borrow and what must it hold? At least eighty percent of its total value in real estate investments, with borrowing of up to half of its total value; the properties are registered in the fund's name and valued by licensed appraisers before each transaction and at every year end.
- How do I get my money out? By redemption where the fund rules allow it, by transferring the units to another qualified investor, or at the end of the fund's term; a trust's shares are sold on the exchange. Proceeds and distributions are transferred abroad through the bank without restriction, after the withholding.
Author: Av. Mirkan Günay Topcu, Managing Partner, ER&GUN&ER Law Firm, Istanbul Bar No. 67874. He advises foreign investors and sponsors on real estate investment funds and trusts in Turkey, management and custody agreements, subscriptions and feeder structures, the tax exemption and withholding position, the citizenship-by-investment fund route and exits. Education: Istanbul University Faculty of Law (2018); Galatasaray University, LL.M. (2022).
Profile: Av. Mirkan Günay Topcu. LinkedIn: Profile. Istanbul Bar Association: Official website. Related practice page: real estate law in Turkey.