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What are the tax and fee exemptions in urban transformation projects?

Tax and fee exemptions in urban transformation refer to the exemption of property owners, contractors, tenants, holders of limited real rights, and certain public institutions from specific taxes, fees, and charges in transformation projects carried out under Law No. 6306 on the Transformation of Areas Under Disaster Risk. The main purpose of these exemptions is to facilitate the renewal of structures under disaster risk, reduce the transformation costs for property owners, and prevent the transformation process from being hampered by unnecessary financial burdens.

In urban transformation projects, the most common expenses faced by property owners include title deed fees, notary fees, stamp duty, municipal fees, revolving fund fees, various fees charged during licensing and project processes, bank and insurance transaction tax on loan transactions, and inheritance and transfer tax in some special cases. Law No. 6306 and its Implementing Regulation stipulate that a significant portion of these expenses may not be collected under certain conditions.

These exemptions are extremely important in practice. Because in the urban transformation process, the property owner demolishes their old, risky building, signs a contract with a contractor for the new building, completes the transfer and registration procedures in the land registry, goes through the building permit and occupancy permit processes, uses credit in some cases, and registers their new independent unit. If taxes and fees were collected at every stage, the transformation would create a serious financial burden. This is why the legislator has granted special financial facilities for transactions within the scope of Law No. 6306.

Article 7, paragraph 9 of Law No. 6306 stipulates that certain sales, transfers, registrations, mortgage establishments, and other transactions related to conversion within the scope of the law are exempt from notary fees, land registry fees, municipal fees and charges, inheritance and transfer tax, revolving fund fees, stamp duty, and BSMV (Banking and Insurance Transactions Tax) for certain credit transactions. This scope is also explained in detail in the information texts of the Ministry's provincial directorates.

Legal Basis for the Exemption

The fundamental basis for tax and fee exemptions in urban transformation projects is Article 7 of Law No. 6306 and Article 16 of the Implementing Regulation of Law No. 6306. The regulation states that tax, fee, and charge exemptions under the law will be applied regardless of whether existing structures in the application area comply with zoning regulations. This provision is particularly important in the transformation of old structures that violate zoning regulations; because the mere existence of a permit, occupancy permit, or zoning violation in the existing structure does not automatically result in the rejection of the exemption.

Article 16 of the Implementation Regulation also stipulates that in risky areas, reserve building areas, and parcels containing risky buildings, if the construction is carried out by real persons or private legal entities, no fees or charges will be collected by the municipalities for new construction areas up to one and a half times the existing construction area. If the new construction consists of both residential and commercial units, the exempted area will be applied according to the square meter ratios of the residential and commercial units within the building.

Therefore, urban transformation exemptions should be considered at two separate levels. The first level includes transactional exemptions related to title deeds, notary fees, stamp duty, revolving funds, and similar matters. The second level is a special exemption regarding municipal fees and charges for new construction areas up to 1.5 times the size of the existing construction area.

Which Taxes, Fees, and Charges Are Not Collected?

The following are the basic taxes, fees, and charges that should not be collected under Law No. 6306 and its Implementing Regulation:

Notary fees,

Land registry and cadastral fees,

Some fees collected by municipalities,

Stamp duty,

Inheritance and transfer tax,

BSMV (Banking and Insurance Transactions Tax) on monies received as interest due to loans,

Revolving fund fees,

Certain fees determined by the municipal council regarding risky buildings and the new buildings to be constructed in their place.

The items that should not be collected are explicitly listed in Article 16, paragraph 12 of the Implementing Regulation: notary fees, land registry and cadastre fees under Law No. 492 on Fees; certain municipal fees under Law No. 2464 on Municipal Revenues; stamp duty under Law No. 488 on Stamp Duty; inheritance and transfer tax under Law No. 7338 on Inheritance and Transfer Tax; and fees collected under the name of BSMV (Banking and Insurance Transactions Tax) and revolving fund fees under Law No. 6802 on Expenditure Taxes.

The information texts published by the provincial directorates of the Ministry of Environment, Urbanization and Climate Change also state that notary fees, land registry fees, municipal fees, stamp duty, inheritance and transfer tax, revolving fund fees, and BSMV (Banking and Insurance Transactions Tax) are among the items that should not be collected within the scope of this regulation.

Exemption from Land Registry Fees

One of the most important exemptions in urban transformation projects is the exemption from title deed fees. This is because the transformation process involves many title deed transactions such as the transfer of the old property, the registration of the new building, the transfer of independent units, the initial sale of independent units allocated to the contractor, the registration of new independent units to the owners, and the establishment of mortgages. Under normal circumstances, these transactions can result in high title deed fees.

Under Law No. 6306, the first sale, transfer, registration, and mortgage establishment of properties subject to transformation before the transformation, as well as the first sale, transfer, registration, and mortgage establishment of new structures resulting from the transformation to the owners, the contractor undertaking the work, and those who have been using the risky structure as tenants or holders of limited real rights for at least one year, can benefit from exemption from title deed fees. The General Directorate of Land Registry and Cadastre's Circular No. 2024/1 also clarifies that transactions within this scope are exempt from title deed fees and some other financial burdens.

However, the exemption from land registry fees is not unlimited. For example, in parcels where a risky structure has been identified but which are not declared as a risky area or reserve building area, the land registry fee exemption in the first sales transactions before transformation will only apply to the portion of the land corresponding to the risky structure on the ground; fees will be collected for the remaining portion. Therefore, especially in large parcels, the ratio between the ground area of ​​the risky structure and the parcel area should be carefully examined.

Title Deed Tax on Transfers Made to Contractors

In urban transformation projects, contractors often acquire specific independent units or land shares under a construction contract in exchange for land shares. Whether these transfers to the contractor are exempt from land registry fees is a frequently debated issue in practice.

Article 7, paragraph 9 of Law No. 6306 exempts the initial sale, transfer, registration, and mortgage transactions of new structures resulting from urban transformation projects from tax and fee exemptions. The General Directorate of Land Registry and Cadastre (TKGM) Circular also states that the initial sale, transfer, registration, and mortgage transactions carried out by contractors, the Ministry, the Presidency, TOKİ (Housing Development Administration), İller Bankası (Provinces Bank), administrations and their subsidiaries, and real estate investment partnerships will benefit from tax, fee, and charge exemptions under certain conditions.

However, not every transaction made in favor of the contractor should automatically be considered within the scope of the exemption. The transaction must genuinely be the result of a transformation application under Law No. 6306. Furthermore, the transfer must be of the nature of an "initial sale/transfer," its connection to the transformation must be documented, and the necessary documents must be submitted to the land registry office. In subsequent sales by the contractor to third parties, the scope of the exemption should also be evaluated based on whether the transaction is an initial sale, whether the building falls within a risky area/reserve building area/risky building, and the date of the transaction.

Notary Fee Exemption

Many notarial transactions are carried out during the urban transformation process. Documents such as construction contracts in exchange for land shares, construction contracts in exchange for building rights, sales promises, power of attorney, notices, undertakings, consent forms, and protocols can be drawn up at a notary office. Notary fees for these transactions can incur significant costs.

Law No. 6306 and its Implementing Regulation stipulate that notary fees shall not be collected for transactions that meet the conditions within the scope of the Law. The Regulation explicitly includes notary fees collected pursuant to Article 38 of Law No. 492 on Fees within the scope of this exemption.

However, for a notarial transaction to benefit from the exemption, the document must genuinely be related to an urban transformation project. For example, a construction contract in exchange for land shares between property owners and a contractor on a plot identified as a risky structure could fall within this scope. Conversely, a general real estate sale or other commercial contract unrelated to transformation cannot be exempted simply because one of the parties is the same property owner.

When conducting transactions at a notary public, it is important that the risk assessment document, title deed, relevant administrative document, document indicating that the property is within the scope of urban transformation, and the contract text explicitly refer to Law No. 6306. Otherwise, the notary fee may be collected; in this case, a refund request may arise later.

Stamp Duty Exemption

Stamp duty exemption in urban transformation projects is particularly important for contractor contracts and official institutional transactions. Since construction contracts in exchange for land are high-value agreements, they can normally generate significant stamp duty. Law No. 6306 has included documents prepared for these transactions, as well as documents prepared for payments related to the procurement of goods and services by official institutions, within the scope of stamp duty exemption.

The Implementing Regulation also stipulates that stamp duty levied on documents subject to stamp duty under Law No. 488 on Stamp Duty should not be collected, provided that the conditions are met in Article 7 of the Law.

Therefore, construction contracts, protocols, undertakings, certain official application documents, and documents directly related to the transformation of a risky building under Law No. 6306 may be exempt from stamp duty. However, the content of the document is crucial. The contract must clearly relate to the transformation work; it must indicate the parties, the property, the connection to the risky building or application area, and the scope of Law No. 6306.

In practice, the most frequent problems arise with subcontracting agreements, contracts between the contractor and subcontractors, project consultancy agreements, or third-party sales agreements. Each of these documents must be evaluated separately. The exemption of the main transformation contract does not automatically mean that all commercial contracts remotely related to the project are exempt from stamp duty.

Municipal Fees and Charges

Municipal fees and charges are significant cost items in urban transformation projects. Building permits, project approvals, zoning procedures, road and sewer connection fees, parking fees, occupancy permits, and certain fees determined by municipal council decisions can place a substantial burden on property owners or contractors.

Article 7, paragraph 10 of Law No. 6306 stipulates that in risky areas, reserve building areas, and parcels containing risky buildings, municipalities shall not collect fees or charges for new construction areas up to one and a half times the existing construction area, regardless of the change of function, when construction is carried out by natural persons and private legal entities. The Ministry's provincial directorate texts and the Implementing Regulation also explicitly reiterate this rule.

The "1.5 times the existing construction area" rule is very important here. For example, if the existing construction area of ​​the old building is 1,000 m², the new building may be exempt from municipal fees and charges for areas up to 1,500 m². If the new building is 2,000 m², a difference in fees and charges may be applied for the excess 500 m². If the new building consists of both residential and commercial units, the exempted area will be applied according to the square meter ratios of the residential and commercial units in the new building.

Therefore, when calculating municipal fee exemptions, the existing construction area of ​​the old building, the total construction area of ​​the new building, the residential/commercial distribution, the change of function, and the building permit documents must be carefully examined.

Revolving Fund Fee Exemption

Revolving fund fees may be charged for land registry and cadastral transactions, certain institutional procedures, and technical applications. However, exemption from revolving fund fees is also provided for transactions covered by Law No. 6306.

The Implementation Regulation stipulates that all fees collected by institutions and organizations under the name of revolving fund fees, and all fees determined by the municipal council decision regarding structures identified as risky and the new structures to be built in their place, should not be collected.

This regulation is particularly important in land registry transactions. In practice, it has been observed that some land registry offices may charge a revolving fund fee even if no land registry fee is collected. If the transaction truly falls under Law No. 6306 and meets the exemption conditions, an exemption should also be requested regarding the revolving fund fee.

Inheritance and Transfer Tax Exemption

One of the lesser-known items among the exemptions for urban transformation projects is inheritance and transfer tax. The Implementing Regulation includes inheritance and transfer tax, collected under Law No. 7338 on Inheritance and Transfer Tax, among the taxes that should not be collected.

It is important to note that this exemption is not a general inheritance tax exemption covering all inheritance transactions. The exemption should be evaluated within the conditions stipulated in Article 7 of Law No. 6306 and in connection with conversion transactions. Automatic inheritance tax exemption is not applied to every inherited property simply on the basis that a conversion might occur in the future.

If an exemption from inheritance and transfer tax is to be requested within the context of urban transformation, the connection of the transaction to the transformation application under Law No. 6306, the status of the risky building/risky area/reserve building area, and the nature of the title deed/registration transaction must be documented.

Exemption from Banking and Insurance Transaction Tax on Credit Transactions

In urban transformation projects, property owners or tenants using risky buildings may need to take out loans. Under Law No. 6306, funds received as interest on loans granted for these purposes to property owners, and even those who are not property owners but have been residing or operating their businesses as tenants or holders of limited real rights in these buildings for at least one year, are exempt from Banking and Insurance Transactions Tax (BSMV).

This exemption specifically reduces the cost of credit. However, the loan must genuinely be used for urban transformation purposes. The loan agreement, bank letter, risky building certificate, documents proving ownership (owner or tenant/holder of limited real rights), and documents demonstrating the purpose of the loan must be kept.

For loan exemptions, the condition of "using the risky building for at least one year" is important for tenants and holders of limited real rights. The General Directorate of Land Registry and Cadastre Circular states that in cases where this cannot be determined from the records, it is necessary to document, with a letter from the relevant administration, that the tenant or holder of limited real rights has been using the risky building for at least one year.

Can tenants and holders of limited real rights benefit from the exemption?

Yes, they can benefit under certain conditions. Law No. 6306 also includes, for certain exemptions, individuals or private legal entities who have been using the risky building as tenants or holders of limited real rights for at least one year, in addition to the owners. These individuals may be eligible for exemptions if they purchase, acquire, register, mortgage, or use credit for a new building as a result of the transformation.

However, the tenant or holder of limited real rights must prove their status. Evidence may include a lease agreement, address registration certificate, electricity, water, and gas bills, tax certificate, business license, limited real right title deed, or a letter from the relevant authority. If proof of at least one year of use cannot be provided, the exemption request may be rejected.

Therefore, during the urban transformation process, tenants and business owners need to keep their documents in order, not only for eviction and relocation assistance, but also for financial exemptions.

Exemption in Case of Consolidation with an Empty Plot

In urban transformation projects, plots containing risky buildings are sometimes combined with vacant plots to create a larger project area. In this case, whether the entire exemption applies to the newly formed plot is an important consideration in practice.

According to the Implementation Regulation, if a parcel containing a risky building is merged with vacant parcels for development purposes, or if the building rights of this parcel are transferred to another parcel through a transfer of development rights, the exemption from title deed fees and charges will be proportional to the ratio of the area of ​​the parcel containing the risky building to the area of ​​the new parcel resulting from the merger or the transfer of development rights. With the regulation amendment dated February 4, 2026, the phrase "transfer of development rights" was also added to this paragraph.

The TKGM Circular also states that if a risky building plot is merged with plots not covered by the Law, a land registry fee exemption should be applied in proportion to the ratio of the risky building plot to the new plot area.

Therefore, in mixed-plot projects, exemption calculations must always be done proportionally. Otherwise, the request for exemption for the entire plot may be rejected, or insufficient fees may be collected later.

Is there a VAT exemption?

One of the most confusing issues in urban transformation is VAT. Law No. 6306 explicitly lists land registry fees, notary fees, stamp duty, municipal fees, inheritance and transfer tax, BSMV (Banking and Insurance Transactions Tax), and revolving fund fees among the tax and fee exemptions; however, an automatic VAT exemption covering all urban transformation transactions is not included in this list.

Therefore, the statement "no taxes are paid in urban transformation" is incorrect. VAT is subject to a separate tax regime. The delivery of a residence, the delivery of a workplace, the construction contract, the net area, the building permit date, the delivery date, the nature of the residence, and relevant Presidential decrees can all affect the VAT rate. Therefore, a separate, transaction-based assessment should be made regarding VAT.

The practical distinction is this: the fee and tax exemptions in Law No. 6306 provide strong protection regarding items such as land registry fees, notary fees, stamp duties, and municipal fees. However, in terms of VAT, different legislation applies depending on the nature of the sale or construction service. Therefore, contractor agreements should clearly state who is responsible for the VAT, which rate will be applied, and whether VAT is included in the prices.

What documents are required for exemption?

Individuals wishing to benefit from tax and fee exemptions in urban transformation projects must document that the process falls under Law No. 6306. The following documents are important in practice:

Risk assessment report for buildings

Document confirming that the risky building assessment has been finalized

Land registry record,

The text "Risky area" or "Reserve building area" is a standard designation

Demolition permit or demolition certificate,

Building permit,

Contractor agreement,

Construction contract in exchange for a share of the completed building

Independent unit sharing table,

The relevant administrative document,

A usage permit valid for at least one year for the tenant or holder of limited real rights

Letter regarding the purpose of the loan application

The document shows that the new structure was created as part of the transformation

Technical document regarding the calculation of the ratio, if there is a consolidation or transfer of development rights.

The TKGM Circular states that if an exemption is sought for new buildings constructed in an area declared as a reserve building area or a risky area, it must be documented with a letter from the Ministry/Presidency unit that the new building is located in a reserve building area or a risky area.

Refund of Unjustly Collected Fees and Taxes

In practice, fees or taxes may be collected for transactions that should be exempt under Law No. 6306. This is particularly common with land registry fees, revolving fund fees, notary fees, stamp duty, and municipal fees. The owner or contractor may be obliged to pay because they cannot document the exemption during the transaction or because the relevant institution interprets the exemption narrowly.

In this case, the first step is to submit a written refund request to the institution that made the payment. For title deed fees, the process should be handled by the tax office and land registry office; for notary fees and stamp duty, by the relevant tax office; for municipal fees, by the municipality; and for revolving fund fees, by the relevant institution.

The provisions of the Tax Procedure Law regarding the correction of tax errors are important. Article 126 of the Tax Procedure Law refers to Article 114 regarding the statute of limitations for corrections; it generally establishes a system where tax errors cannot be corrected after the statute of limitations has expired. In the General Directorate of Revenue's (GİB) legal text, Article 126 is also regulated under the heading "Statute of Limitations for Corrections".

Payment receipts, title deed documents, notarized documents, contracts, risky building certificates, administrative letters, and exemption basis must be attached to the refund application. If the institution rejects the application or fails to respond within the specified time, recourse to the tax court, administrative court, or judicial courts should be considered, depending on the specific case.

Why is it important to include the exemption in the contract?

Tax and fee exemptions must be regulated in urban transformation contracts. Because in practice, disputes arise between property owners and contractors regarding issues such as "who is responsible for the title deed fee?", "who will pay the notary fees?", "who will cover stamp duty if it arises?", and "who will pay the difference if the municipality's fee exemption request is rejected?".

The contract must include the following provisions:

The transaction falls within the scope of Law No. 6306

The exemptions under the law and regulations will be utilized

Who will provide the exemption documents?

If the exemption is not applied, which party will submit the application?

Who will be responsible for refunding unjustly collected fees?

Whether VAT is included in the price,

Who will pay the fees, taxes and charges that are not exempt?

How to calculate the 1.5 times area ratio in municipal fees

Consolidation, transfer of development rights, or responsibility for proportionality in the case of a mixed-use project.

Without these provisions, the parties may hold each other responsible during the payment phase. Especially in contracting agreements, general clauses such as "all taxes and fees are the responsibility of the contractor" or "all title deed expenses are the responsibility of the owners" may not be sufficient. It should be clearly stated which exemptions apply and who will bear the responsibility for any items not covered by the exemptions.

Most Common Mistakes

The most common mistake regarding tax and fee exemptions in urban transformation projects is assuming that the exemption will apply automatically. While the right to an exemption exists, the institution may still demand fees or taxes if this entitlement is not documented during the process.

The second mistake is assuming that all transactions are exempt. The exemption applies only to transactions that meet the conditions stipulated in Law No. 6306. Transactions unrelated to conversion or those that are considered second/subsequent sales may be excluded.

The third mistake is confusing VAT with exemptions from land registry fees or stamp duty. VAT should be considered separately.

The fourth mistake is failing to consider the rule that municipal fees should be 1.5 times the existing construction area. A difference in fees and charges may arise for the excess area.

The fifth mistake is failing to calculate the proportionality when merging or transferring development rights with an empty plot. In these cases, the exemption can only be applied to a portion of the risky building plot, not the entire new plot.

The sixth mistake is failing to apply for a refund of unjustly collected fees within the deadline. Payment documents should be kept, and the refund process should not be delayed.

Conclusion

In urban transformation projects, tax and fee exemptions are one of the most important legal advantages that reduce transformation costs for property owners and project stakeholders. Law No. 6306 and its Implementing Regulation provide for extensive exemptions regarding notary fees, land registry and cadastre fees, municipal fees, stamp duty, inheritance and transfer tax, BSMV (Banking and Insurance Transactions Tax) on loan transactions, revolving fund fees, and certain institutional fees.

However, these exemptions are not unlimited. The transaction must fall under Law No. 6306, be directly related to transformation, qualify as an initial sale/transfer/registration, have documented risky building/risky area/reserve building area status, and the necessary administrative documents must be submitted. The rule regarding municipal fees (1.5 times the existing construction area), the proportional rule in consolidation or transfer of development rights with vacant plots, and the minimum one-year usage requirement for tenants/holders of limited real rights must also be taken into account.

In conclusion, when financial planning for urban transformation projects, not only construction costs, rental assistance, and contractor's share should be calculated from the outset, but also tax and fee exemptions. Exemption clauses should be added to the contract, documents should be prepared before title deed and notary transactions, municipal fee calculations should be checked, VAT should be evaluated separately, and timely applications for refunds should be made for unjustly collected fees. A properly managed exemption process protects property owners and contractors from significant financial burdens; a poorly or inadequately managed process can lead to unnecessary fees, taxes, and refund lawsuits.