On a person’s death their property passes to the heirs as a matter of law; the reflection of that transfer in the official registers does not, however, occur automatically. Changing the name in the land registry, opening bank accounts for use, transferring vehicles and company shares, and completing the duties relating to inheritance and transfer tax each require separate formalities. The process known in practice as the devolution of an inheritance denotes precisely this body of formalities.
The scope of the process is not confined to documenting the status of heir. Tax legislation, land registry legislation and the law of succession are operated together in the same file; a deficiency at one stage may also block the others.
In this note we address the order in which the devolution formalities are carried out, the procedures before the land registry and the banks, the filing of the inheritance and transfer tax return, the method by which the tax is calculated, and the particular features of files containing a foreign element.
The Scope of Inheritance Devolution Formalities
Inheritance devolution formalities comprise all the legal and administrative activities carried out with a view to registering, in the names of the heirs, the items of property that enter the estate upon the death of the deceased. Within that framework it is necessary to obtain the certificate of inheritance, to conclude the duties relating to inheritance and transfer tax, to update the land registry records, and to complete the procedures required in order for transactions to be carried out in respect of bank accounts and other assets.
The process is not limited to the transfer of immovable property. Bank accounts, motor vehicles, company shares, claims and similar elements also fall within the same scope. The debts of the deceased and their tax obligations are likewise included in the assessment of the estate.
Passing of the Estate to the Heirs
For the purposes of the Turkish Civil Code No. 4721, the inheritance devolves upon the heirs upon the death of the deceased without any formality being required. From the moment of death the heirs become entitled to the values in the estate and take over the rights and debts of the deceased in the capacity of universal successors.
The estate comprises immovable property, bank accounts, vehicles, company shares, claims and other items of economic value, as well as the debts of the deceased. The passing of the inheritance therefore means not merely a change in the ownership of assets but also the transfer of the obligations relating to the estate to the heirs.
Upon the opening of the succession, joint ownership arises among the heirs. Until the division is completed, entitlement to the values in the estate remains collective. Nevertheless, in order for transactions to be carried out before land registry directorates, banks and other official institutions, practice generally requires that the certificate of inheritance should have been obtained and that the inheritance tax formalities should have been concluded.
In What Order Are the Devolution Formalities Carried Out?
For the devolution to take place, successive legal and administrative stages must be completed in order. First the status of heir is documented, then the duties relating to inheritance and transfer tax are performed, and at the final stage the official formalities in respect of the values in the estate are carried out.
In practice these formalities are conducted before land registry directorates, tax offices, banks, vehicle registration units and other institutions concerned.
Obtaining the Certificate of Inheritance
The first link in the process is obtaining the certificate of inheritance. The certificate of inheritance is the official document indicating who the entitled persons are and the share of each of them.
The certificate may be obtained from a notary or from the Civil Court of Peace. Where, however, the file contains a foreign element, where there is an inconsistency in the population records, or where a legal assessment must be made, the application must be directed to the Civil Court of Peace.
Land registry directorates, banks and other official institutions require this document to be produced in most transactions.
Filing the Inheritance and Transfer Tax Return
For the heirs, a duty to declare arises in respect of inheritance and transfer tax by reason of the property of the deceased.
Within the scope of that duty, an inheritance and transfer tax return is submitted to the relevant tax office. The return sets out the immovable property, bank accounts, vehicles, company shares and other items of property included in the estate.
Where the return is not filed within the period, a tax penalty and default interest may arise.
Obtaining Tax Clearance
In order for land registry formalities and certain applications to official institutions to be concluded, the clearance formality in respect of inheritance and transfer tax must have been completed.
Where the necessary steps have been concluded following the examination carried out by the tax office, a document evidencing that tax clearance has been given may be issued for submission to the institutions concerned.
This step is decisive in practice, particularly in files in which immovable property is to be registered in the names of the heirs.
Land Registry, Bank and Other Institutional Formalities
Once the certificate of inheritance has been obtained and the tax formalities concluded, the official formalities relating to the values in the estate may be undertaken. At this stage the following may be carried out:
- Opening the bank accounts for use by the heirs,
- Devolution of immovable property in the land registry in the names of the heirs,
- Membership formalities relating to company shares,
- Transfer of motor vehicles,
- Applications to other official institutions,
- Opening of safe deposit boxes,
Although the documents required by each institution may differ, in practice the certificate of inheritance, the death certificate and the documents relating to inheritance tax are generally requested.
Devolution of Immovable Property in the Land Registry
The transfer into the names of the heirs of immovable property registered in the name of the deceased is termed devolution in the land registry. Although immovable property passes to the heirs as a matter of law upon the opening of the succession, so long as the necessary alteration is not made in the register the heirs may encounter various obstacles when actually disposing of the property.
Updating the land registry records is therefore of great importance in practice. During the formality the certificate of inheritance, the documents relating to inheritance and transfer tax and the other official documents must be to hand.
Registration of Immovable Property in the Names of the Heirs
Immovable property registered in the name of the deceased is registered in the names of the heirs in accordance with the shares set out in the certificate of inheritance.
As a result of the formality, ownership is transferred to the heirs and the necessary alteration is made in the register. That registration does not, however, mean that the inheritance has been divided. Until the division takes place, the property continues to be subject to joint ownership among the heirs.
If they so wish, the heirs may, following the devolution, additionally carry out a division or complete the formalities for conversion into co-ownership in shares.
Documents Required for Land Registry Formalities
In practice the following documents are generally requested during devolution in the land registry:
- The death certificate of the deceased,
- The certificate of inheritance,
- The identity documents of the heirs,
- The document evidencing tax clearance in respect of inheritance and transfer tax,
- Any power of attorney and documents evidencing authority to represent,
- The land registry record details of the property.
In files containing a foreign element, documents bearing an apostille, sworn translations or documents certified by a consulate may also be required.
Procedure Before the Land Registry Directorate
The devolution formality is conducted before the land registry directorate of the place where the property is situated.
Following the application, the land registry directorate examines the certificate of inheritance and the other documents. If no deficiency is identified, ownership of the property is registered in the names of the heirs.
In respect of certain properties it is possible for additional documents or the opinion of an institution to be requested. Properties held in shares, agricultural land and transactions containing a foreign element may in practice be subject to a more detailed examination.
Conversion From Joint Ownership to Co-ownership in Shares
Upon the opening of the succession, joint ownership is as a rule established among the heirs.
Under that regime the heirs have no defined and independent shares; entitlement to the immovable property in the estate is collective. Acts of disposal relating to the property therefore require, in most cases, that the heirs act together.
If they so wish, the heirs may subsequently convert joint ownership into co-ownership in shares by means of a division agreement or land registry formalities.
Division Options After Devolution
The completion of the devolution formality in the land registry does not mean that the inheritance has actually been apportioned.
After the devolution the heirs may:
- Divide the property among themselves,
- Move to co-ownership in shares,
- Sell the property and apportion the proceeds among themselves,
- Where no agreement can be reached, bring an action for the dissolution of co-ownership (partition).
In files in which no settlement can be reached among the heirs, the division is most often concluded through the courts.
Devolution of Bank Accounts and Other Assets
The devolution process is not confined to immovable property. Formalities must also be carried out in the names of the heirs in respect of bank accounts opened in the name of the deceased, safe deposit boxes, vehicles, company shares, investment accounts and other items of property.
Banks and financial institutions first require the certificate of inheritance and the documents relating to inheritance tax before the heirs may carry out any transaction. In some cases it may also be required that all the heirs apply together or that a joint transaction be carried out.
Transfer of Bank Accounts to the Heirs
The rights over accounts held in the name of the deceased pass to the heirs upon death. In order for the heirs to be able to carry out transactions on those accounts, however, they must submit the necessary documents to the bank. In practice banks generally require:
- The death certificate,
- The certificate of inheritance,
- The identity documents of the heirs,
- The document evidencing tax clearance in respect of inheritance and transfer tax,
Once the documents are complete, the account balances may be paid to the heirs in proportion to their shares or left to the joint disposal of the heirs.
Procedure for Safe Deposit Boxes
A special procedure applies to safe deposit boxes registered in the name of the deceased.
The box is opened in the presence of the heirs and the bank officials. A representative of the relevant tax office must also be present at the opening. The tax office representative records in a report the money, items of jewellery, negotiable instruments and other valuables in the box; where considered necessary, a valuation is carried out by a court-appointed expert.
The values so established are included in the inheritance and transfer tax return. Once the tax has been paid, the contents of the box are delivered to the heirs.
Shares and Investment Accounts
Shares, investment accounts, funds and other capital market instruments registered in the name of the deceased also form part of the estate. In order for these assets to be transferred to the heirs, an application must be made to the relevant bank, intermediary institution or investment firm.
At the application stage the following are required:
- Identity documents,
- The certificate of inheritance,
- Account details,
- Documents relating to inheritance and transfer tax,
At the conclusion of the formality the investment accounts may be transferred into the names of the heirs, or the existing assets may be converted into cash.
Vehicles and Other Items of Economic Value
Motor vehicles registered in the name of the deceased and other items of property may likewise be transferred into the names of the heirs. Vehicle devolution is conducted before the vehicle registration units and in practice the following are generally required:
- Registration certificate records,
- The certificate of inheritance,
- Identity documents,
- Documents relating to inheritance and transfer tax,
As regards company shares, commercial enterprises, intellectual property rights and similar assets, separate devolution procedures may be operated before the institutions concerned.
Principles of Inheritance and Transfer Tax
Inheritance and transfer tax is a tax levied on items of property acquired by persons without paying any consideration. This obligation, which applies to values obtained by way of inheritance, is governed by the Inheritance and Transfer Tax Act No. 7338.
Since upon the death of the deceased the immovable property, bank accounts, vehicles, company shares and other values in the estate pass to the heirs, this tax arises for the heirs.
The field of application of the tax is not inheritance alone; gifts and other gratuitous transfers also fall within its scope. The situation most frequently encountered in practice is, however, inheritance tax arising by reason of a succession.
Legal Nature of the Tax
Inheritance and transfer tax is a wealth tax that taxes the gratuitous acquisition of property.
The aim is that items of economic value obtained by way of inheritance or other gratuitous transfers should be taxed to a certain extent. The obligation arises upon the death of the deceased.
The person on whom the tax falls is not the deceased but the heirs who acquire the property.
Subject Matter of the Tax
The subject matter of the tax consists of items of property acquired gratuitously. Within that scope, immovable property inherited from the deceased (a house, a plot of land, business premises), money in bank accounts, motor vehicles, company shares, shares in companies, copyright and claims of every kind fall in particular within the subject matter of the tax.
Taxpayers
The taxpayer is the person who acquires property gratuitously. In acquisitions by way of inheritance the heirs, and in gifts those who accept the gift, are regarded as taxpayers.
Where there are several heirs, each heir comes under an obligation in proportion to their own share.
Exemption Thresholds
Exemption thresholds redetermined each year apply in inheritance and transfer tax. In this connection the following are of particular importance in practice:
- Gratuitous transfers falling below a certain amount being left outside the scope of the tax,
- Exemptions at certain rates being afforded in respect of the surviving spouse and children,
- Certain household goods being exempt from the tax,
Since the exemption thresholds are updated each year having regard to the revaluation rate, the amounts in force on the date of the transaction must be taken as the basis of the calculation.
The Inheritance and Transfer Tax Return
In order for the tax to be assessed, the heirs must file an inheritance and transfer tax return with the relevant tax office. The return notifies the administration of the values in the estate and sets the taxation process in motion.
Although the duty to declare arises separately for each heir, in practice it is also possible for the heirs to file a joint return.
Filing the return within the period and in complete form is of great importance; otherwise a tax penalty, default interest and various administrative sanctions may arise.
Time Limit for Filing the Return
The period for filing the return may differ according to the place where the death occurred and the place where the heirs are situated. The general framework is as follows:
- Where the death occurred in Türkiye and the heirs are in Türkiye, four months,
- Where the heirs are abroad, six months,
- Where the death occurred abroad, longer periods,
may apply. The periods begin to run from the date of death.
The Competent Tax Office
In determining the tax office with which the return is to be filed, the last place of residence of the deceased is taken as the basis. Accordingly:
- General rule: The return is submitted to the tax office of the place of the deceased’s last residence in Türkiye.
- Special offices in the metropolitan provinces: Where the last place of residence of the deceased is in a metropolitan province such as Istanbul, Ankara or Izmir, the formalities are conducted not before the general tax offices but within the Inheritance and Charges Tax Offices specially established in those provinces.
- Death occurring abroad: Where the deceased has never had a place of residence in Türkiye, or where their last place of residence was abroad, the return is filed with the tax office of the place where the property in Türkiye (for example the immovable property or the bank account) is situated.
- Foreign element: Where the deceased has no residence in Türkiye and the estate contains foreign elements, the competent office is the tax office of the place where the property is situated, or the specially designated tax office to be determined by the Revenue Administration.
Note: Filing the return with an office that lacks competence, or with the wrong office, may lead to the documents being rejected and thus to the statutory declaration periods being missed and a tax penalty arising. Correctly identifying the competent office is therefore critical.
Documents to Be Annexed to the Return
In practice various documents must be submitted together with the return. These include in particular:
- The death certificate,
- The certificate of inheritance,
- Land registry records,
- Extracts from the population register,
- Vehicle registration details,
- Bank account statements,
- Documents relating to company shares,
- Foreign official documents and their translations,
Where it considers it necessary, the tax office may also request additional information and documents.
Consequences of an Incomplete or Erroneous Declaration
Understating the values included in the estate in the return, or failing to declare them at all, gives rise to various legal and financial consequences. In particular:
- Default interest,
- A tax loss penalty,
- Administrative sanctions,
- Additional tax assessment,
may arise. It is therefore important that all the elements in the estate should be correctly identified and reflected in the return in full.
Calculation and Payment of the Tax
Inheritance and transfer tax is calculated on the amount remaining once the values in the estate have been determined and the statutory exemptions deducted. In the taxation, immovable property, bank accounts, vehicles, company shares and other items of economic value are dealt with separately in order to form the tax base.
The shares of the heirs, the exemption thresholds to be applied and the tariff in force are taken into account in the calculation. The tax so calculated may be paid in instalments within the periods laid down by law.
Tax Rates
The tax is calculated on a progressive tariff. The rates may be applied differently in respect of:
- Acquisitions by way of inheritance,
- Gifts and other gratuitous transfers,
While the rates are kept lower for acquisitions by way of inheritance, higher rates may apply to gratuitous transfers.
Since the tariff and the rates may be updated each year, the rates current at the date of the transaction must be taken as the basis of the calculation.
Determination of the Tax Base
The tax base is found by deducting the exemptions and reliefs allowed by law from the total of the values in the estate. Within that scope the total value of the estate is calculated having regard to:
- The balances held in bank accounts,
- The property tax value of immovable property,
- The market value of vehicles,
- Claims and other items of economic value,
- The value of company shares and investment instruments,
A separate tax base is then formed for each heir on the basis of the proportions of their shares.
Instalments and Payment
It is not compulsory for the whole of the tax to be paid at once. As provided in the Act, payment may be made over 3 years in a total of 6 equal instalments, in the months of May and November of each year.
Paying the tax on time is of importance in practice, particularly so that land registry formalities and other official applications may proceed without interruption.
Default Interest and Penalties
Where the tax is not declared within the period or is paid in part only, various financial sanctions may be applied. In particular:
- Irregularity penalties,
- Default interest,
- Additional tax assessment,
- A tax loss penalty,
may arise. For that reason it is important that the values in the estate be correctly identified, that the return be filed within the period and that the tax be paid within the statutory period.
Succession Matters Containing a Foreign Element
Where the succession relationship contains a foreign element, both the devolution formalities and the inheritance tax process require a more extensive legal assessment. Where the deceased or one of the heirs is a foreign national, where the values in the estate are situated abroad, or where foreign official documents are used, the rules of private international law come into play.
In files of this kind, not only the provisions of the Turkish Civil Code No. 4721 but also the Act on Private International Law and Procedural Law No. 5718 and the relevant international conventions are taken into account.
Heirs Who Are Foreign Nationals
Foreign nationals may also acquire the status of heir under Turkish law.
Heirs who are not Turkish citizens are as a rule entitled to inherit as regards immovable property and other assets situated in Türkiye. Nevertheless, reciprocity, restrictions on the acquisition of immovable property or special legislative provisions may come into play in respect of the nationals of certain countries. In practice, in the case of foreign heirs:
- A tax number,
- Passport and identity documents,
- Sworn translations,
- Population records bearing an apostille,
- Documents certified by a consulate,
are most often required.
Estate Property Situated Abroad
Where part of the values in the estate is situated abroad, it may also be necessary to examine the law of the country concerned. The legislation of that country is determinative in particular as regards:
- Foreign bank accounts,
- Immovable property abroad,
- International investment accounts,
- Shares in foreign companies,
In some cases it may be necessary for separate formalities to be conducted both in Türkiye and in the foreign country by reason of the same succession.
Apostille and Translation Formalities
In order for foreign official documents to be used in Türkiye, it is in most cases necessary to obtain an apostille and to have a sworn translation made. For example:
- Birth records,
- Foreign death certificates,
- Marriage certificates,
- Certificates of inheritance,
- Judgments of foreign courts,
must be duly certified before being used in official formalities in Türkiye. In respect of countries that are not party to the apostille convention, consular certification may be required.
The Private International Law Dimension
In succession matters containing a foreign element, the law of which country is to apply is determined according to the rules of private international law.
Under Turkish law, succession is as a rule governed by the national law of the deceased. Turkish law applies, by contrast, in respect of immovable property situated in Türkiye. In disputes containing a foreign element, headings such as:
- The competent court,
- The applicable law,
- The validity of foreign certificates of inheritance,
- The recognition and enforcement of foreign judgments,
must therefore be assessed separately. In succession relationships in which the laws of more than one country are simultaneously in play, conducting the formalities in due form is decisive in preventing any loss of rights.
Independent Legal Assessment
The devolution process is in the nature of a chain in which the legal and administrative steps are linked to one another. A deficiency in the certificate of inheritance halts the tax declaration, and a failure to obtain tax clearance halts registration in the land registry. Planning the formalities in the correct order and in parallel therefore both accelerates the process and reduces the risk of a penalty.
Where the file contains a foreign element or the estate comprises a large number of items, the risk becomes still more pronounced. A bank account left out of the declaration, or a company share whose value is noticed late, may come back years later as an additional assessment. In an individual file it will be appropriate to address the following points as a matter of priority:
- Drawing up a complete inventory of the estate as at the date of death and leaving no item outside the declaration
- Calculating the declaration period from the outset, having regard to the place of death and the place where the heirs are situated
- Correctly identifying the competent tax office on the basis of the deceased’s last place of residence
- Completing the document relating to tax clearance before registration in the land registry
- Ensuring the participation of all the heirs in acts of disposal carried out during the period in which joint ownership continues
- Identifying, at the outset of the formalities, the need for an apostille, translation and recognition and enforcement in files containing a foreign element
Independent Legal provides advisory services throughout the entire process, from obtaining the certificate of inheritance to the inheritance and transfer tax declaration, and from devolution formalities before the land registry and the banks to the conduct of succession files containing a foreign element.