Turkey: Erdoğan gov’t updates conditions for granting Turkish citizenship to remedy foreign exchange deficit

Source: nordicmonitor.com

Published: 7 January 2022

The Turkish government has made significant changes to a regulation that grants Turkish citizenship in return for investment, the acquisition of property or a deposit of money in Turkish banks, which it has been implementing for a while to meet its foreign exchange needs.

According to an announcement by President Recep Tayyip Erdoğan in the Official Gazette on Thursday, foreigners who want to become citizens of the Republic of Turkey will have to agree that they will not withdraw the money they deposit in Turkish banks or sell their properties for at least three years. The new regulation also promises new opportunities for investors who provide employment. Contrary to the old regulation, the amounts to be taken into account will be calculated only in US dollars or their equivalent in another foreign currency; thus, the expression “Turkish lira” has been removed from the regulation. This also means that the volatility of the Turkish lira against foreign currencies has been accepted by the government despite official statements to the contrary.

According to the new regulation, the Ministry of Industry and Technology will determine whether a foreigner makes a fixed capital investment of at least $500,000 or its equivalent in a foreign currency. 

Those who want to acquire citizenship through the purchase of a house or other real property will have to put an annotation in the land registry that their immovable properties worth at least $250,000 or the equivalent a foreign currency will not be sold for three years.  

Nordic Monitor previously reported that Turkey had launched a campaign to encourage the sale of real estate to foreigners to meet its foreign exchange needs. In addition, it was also announced that a one-year residence permit would be granted to foreigners who buy a house in Turkey, regardless of price. Turkish citizenship was promised to foreigners who bought real estate priced at $1 million. In 2019 this limit was reduced to $250,000, leading to an increase in housing sales.

In 2019 and 2020, according to official statistics, 7,500 foreigners acquired citizenship by purchasing real estate in Turkey. In the first six months of 2021 alone, 10,000 people obtained the right to acquire citizenship. The top 10 countries whose nationals have become Turkish citizens are Iran, Afghanistan, Iraq, Yemen, China, Palestine, Jordan, Lebanon, Egypt and Pakistan.

Foreign nationals who are deemed to have employed at least 50 people by the Ministry of Labor and Social Security will also be able to apply to become Turkish citizens.

Foreigners who are determined by the Banking Regulation and Supervision Agency to have deposited at least $500,000 or the equivalent in foreign currency in banks operating in Turkey can also become citizens, provided that they do not withdraw the funds for three years.

Similarly, an individual who invests at least $500,0000 or its equivalent in mutual funds or real estate funds belonging to banks in Turkey will be able to become a citizen after confirmation by the authorities.

The most important change in the new regulation is that the money to be deposited in banks will be converted into lira and purchased by banks. In other words, they will contribute to meeting the foreign exchange needs of the Turkish Central Bank, which is currently struggling to contain a currency crisis.

Many people claim that these practices will make Turkey a black money paradise. Not being asked about the source of the money transferred to Turkey is one of the most criticized issues. Critics also state that similar practices are implemented by some European countries to encourage investment, but instead of granting citizenship, a residence permit is provided and the source of the funds is questioned by the authorities. It is also known that a considerable portion of the money brought into Turkey by foreigners does not come through banks, but by cash in suitcases. Unregistered money becomes legal by buying real estate or depositing it in a bank. As the economic crisis grows, how the incoming money enters the market loses its importance.

Turkey has hosted a record number of foreigners in recent years due to migration and by providing citizenship in return for money.

The number of foreigners living legally in Turkey in 2021 increased to a record level. According to official statistics obtained by Nordic Monitor, there were a total of 1,300,220 foreigners with residence permits in Turkey in 2021, compared to 886,652 in 2020. The most common type of residence permit was a short-term residence permit granted to 954,812 people. Foreigners who own real estate in Turkey and tourists who extended their stay most frequently applied for short-term residence permits. There are 114,732 people in Turkey with student residence permits. Foreign nationals who are married to a Turkish citizen or have children with them benefit from a family residence permit, which was given to 89,595 people in 2021.