Legal Aspects of Real Estate Transactions in Turkmenistan

1) What legal documents are required for a real estate transaction?

According to the general requirements for the state registration of property rights and related transactions, the following legal documents are required:

1. an application for state registration;
2. documents containing identification details*;
3. title documents confirming the basis for state registration (agreements, court decisions, etc.);
4. proof of payment of the state registration fee.

*Individuals must present an identity document, while representatives of legal entities must provide the entity's founding documents, proof of authority, and their own identity document.

The State Registration Service determines the exact list of documents required for registration based on the type of transaction and the application submitted by individuals or legal entities.

2) Which official institutions are authorized to make real estate transactions?

The authority to carry out transactions involving real estate is primarily vested in the Service for State Registration of Real Estate Rights and Transactions under the Ministry of Justice of Turkmenistan, as well as the territorial offices of the Service.

3) What are the tax implications of buying and selling real estate?

According to the Tax Code of Turkmenistan, there are certain tax implications for foreign legal entities (non-residents) of Turkmenistan when purchasing and selling real estate. Specifically, if a foreign legal entity owns real estate in Turkmenistan but does not carry out activities through a permanent establishment, branch, or representative office, it is required to register with the relevant tax authority and independently fulfill its obligations for paying property tax (Article 144).

When selling real estate located in Turkmenistan, the foreign legal entity is subject to taxation on income. The taxable income is determined as the difference between the sale price of the property and the costs incurred for its acquisition and sale. However, income from the sale of real estate within the national tourist zone is not subject to taxation (Article 180).

4) Are there any differences to consider if the purchaser of the real estate is a foreigner?

Article 11 of the Constitution of Turkmenistan stipulates that foreign citizens and stateless persons shall enjoy, on an equal basis with citizens of Turkmenistan, the rights and freedoms guaranteed by Turkmen law and international agreements. Furthermore, Article 17 of the Law of Turkmenistan “on the Legal Status of Foreign Citizens in Turkmenistan” provides that foreign citizens residing in Turkmenistan shall have the right to own real estate and other property in accordance with Turkmen law. In this context, foreign nationals shall have the same rights as citizens of Turkmenistan, as well as the same obligations.

5) What are the responsibilities of the seller in a real estate transaction?

Under Turkmen law, the obligations of the seller in real estate contracts are not specifically regulated. Consequently, the provisions governing the obligations of the seller in general sales contracts are applied by analogy to real estate sales contracts. Therefore, the obligations imposed on the seller in general contracts shall be applicable in this case.

6) What are the implications of property liens and encumbrances?

There are various types of encumbrances and liens (mortgages, arrests, etc.), each of which has its own characteristics and consequences under Turkmen legislation. Consequently, each encumbrance and/or lien must be registered with the relevant government authorities in order to be effective against third parties. And to remove liens and encumbrances, it is necessary to fulfil all obligations secured by the lien or encumbrance. The presence of encumbrances and liens can limit the owner's rights to real estate. For example, if there is a mortgage, the owner cannot freely dispose of the property, since it is the subject of the pledge. Also, the sale of real estate with encumbrances may require additional procedures based on the aspects like type of encrumbance, state authority (e.g. court or executive authority) involved in the process and the nature of legal transactions.

Authors: Ikbal Said Alauddin, Kerim Balkanov, Annamenli Rozymyradova