12. What are the tax laws for land or property owners in Turkey?

12) What are the tax laws for land or property owners in Turkey?

When land or property is purchased in Turkey the following taxes and insurances may apply:

• Real estate or property tax (similar to council tax) paid annually
• Real estate or property purchase tax (stamp duty) paid at time of sale and acquisition
• Income tax based on rental income and capital gains
• Stamp duty (applies to contracts made with a monetary clause i.e. tenancy contracts)
• Environmental service tax (collection of waste and sewage)
• Earthquake insurance
• VAT (if there is a commercial aspect to the property)
• Inheritance tax

More information regarding tax in Turkey is available from the Turkish Revenue Administrations website www.gib.gov.tr

Land and property purchased in Turkey can provide a substantial CAPITAL GAIN on the investment and also a generous RENTAL INCOME from the purchased house, villa or apartment. If the property is sold within five years after purchase the owner is liable for personal income tax calculated on the difference between the sale price and the acquisition price (adjusted in line with inflation).

Foreign land, house, villa and apartment owners are subject to the same tax payments and levies which are updated regularly. For the latest tax information see www.gib.gov.tr

Real estate or property tax (similar to council tax) is paid annually. The amounts are as follows:

• Land without building permission – 1% of the official value
• Land with building permission – 3% of the official value
• Residential Properties – 1% of the official value
• Commercial Properties – 2% of the official value

The tax is calculated on the declared (amount written on the TAPU) value of the land or property under a rate of threshold determined by the government. Annual tax payments are divided into two equal amounts due in the months of May and November. Payments should be made to the local council offices; late payments incur a small fine. The tax rate is revised annually by the Ministry of Finance factoring in the inflation rate.
A seller is responsible for paying the real estate tax up until the year the property is sold from then on being the responsibility of the new owner.

Any new acquisition must be declared to the council before the end of the year of purchase. The rate is then calculated based on the purchase amount stated on the property deed (TAPU).

On an interesting note, the property tax rate in Turkish cities is double the amount paid by owners for properties outside the city boundaries.

Real Estate or property purchase tax is paid by both the seller and purchaser. They pay an equal amount of 2% of the declared sale price of the property an amount which cannot be below the threshold determined by the government. This amount must be paid just before transferral of ownership takes place. The levy for a new construction is also 2% of the property value declared to the government.

Personal income tax is charged to property owners who receive a rental income from a property they own. Turkish law excludes a certain amount of annual rental income from taxation for individuals renting out their residential properties and a fixed rate of 25% for maintenance is also deducted from the taxable amount.

If more than the exempt amount of rental income is earned annually and not declared to the local authorities, the property owner will be held liable. Registration to the local authority and declaration of rental income is obligatory. Most tax offices in Turkey are now automated and have a comprehensive internet-based system; this means that the local tax office will be able to assist you with all your tax questions.

Stamp duty is charged for a broad range of contractual transactions. For a contract with a monetary clause the tax charge is 0.75%. For a tenancy agreement the tax charge is 0.15% of the stated monthly rental.

Environmental service tax is charged for the removal of waste and sewage. The rate paid differs for residential and commercial properties. This tax is paid to the government via the local water supplier.

Earthquake insurance (DASK) is a compulsory government run insurance scheme to ensure that all properties have a basic cover in the event of an earthquake. A valid DASK certificate must accompany any property deed (TAPU) when selling a property or applying for private buildings insurance.

VAT value added tax is generally charged at 18% although some goods and services are taxed at 1% or 8%.

Inheritance and succession tax is liable to and land or property transferred to another party by means of inheritance or as a gift (when no payment is received). The new owner of the property must pay the calculated tax amount on declaration within the following time periods:

• 6 months if the death happened in Turkey while the recipient was out of the country
• 4 months if the deceased and the recipient were out of the country at time of death
• 8 months if the death occurs out of the country but the recipient was in another foreign country
• 1 months if the transfer of property ownership is a gift

The tax rates are updated every year with certain discounts for inheritance to immediate family available. For example, if a spouse or children (including legally adopted children) are taking possession of an inherited property, 109,971 Turkish Lira will be reduced from the tax base of each individual. If the sole heir is a spouse the deduction is greater at 220,073 Turkish Lira.

Tax Base Brackets Inheritance Tax Rate Succession Tax Rate

1st 160,000 tl 1% 10%
Next 350,000 tl 3% 15%
Next 770,000 tl 5% 20%
Next 1,500,000 tl 7% 25%
Above 2,780,000 tl 10% 30%

Tax evasion is a serious crime in Turkey. If the correct amount of income is not declared, substantial fines can be charged to the property owner. The property owner must declare:

• The actual property value to the TAPU land registry office
• The actual price paid for the property

The degree of fine for tax evasion is dependant on the following:

• If you have mistakenly evaded a tax payment due to misleading or incorrect information given
• Whether the tax evasion is discovered by the tax inspectors
• If someone else informs the tax office of the evasion
• If the seller of the property informs the tax office of the tax evasion

FOREIGN PENSIONS are not taxable in Turkey providing the receiver has a residency permit from the Turkish authorities. An application must also be made to the tax authority in the UK who will issue a form to be approved by the Turkish tax authorities who then stop any taxation on that particular pension payment.

The statements written in the questions & answers section guide relate to any land or property purchased by a non-Turkish national such as apartments, flats, villas, beach front homes, stone-built village property, holiday complex property, investment rental property with or without swimming pools, gardens or access to beaches.