Real Estate Taxation in Turkey
Owning real estate in Turkey is a profitable investment tool that provides gain with value increase and rental income, but the owners have to pay a few real estate taxes as in every country. Fortunately, the property taxes in Turkey are more affordable than in many other countries.
Property Tax Types Applied in Turkey
You can find the details about different property tax types and when they will be applied in Turkey below. These are;
• Title Deed Conveyance Tax (Tapu Devir Vergisi)
• Property Rental Income Tax (Emlak Kira Geliri Vergisi)
• Capital Gain Tax (Gayrimenkul Değer Artışı Vergisi)
• Annual Property Tax (Yıllık Gayrimenkul Vergisi)
• Inheritance Tax (Miras Vergisi)
• Gift Property Tax (Hediye Gayrimenkul Vergisi)
• Value Added Tax (Katma Değer Vergisi)
Title Deed Conveyance Tax
This is one-time taxation upon title deed transaction, paid to General Directorate Land Registry and Cadastre office. The law for title deed conveyance tax indicates that both the buyer and seller pay 2% of the price belonging to the bought property.
Corporate companies follow the law as it is. However, the customs in Turkey favor the buyer to fully pay the conveyance tax. It is advised to talk about the conveyance tax cost while negotiating the sales price. If not agreed, it is accepted that the buyer pays the full conveyance tax.
Property Rental Income Tax
When you rent out your property in Turkey, you are supposed to pay tax and the tax rate depends on the rental price of the property. Until the end of every March, the property owners should declare their incomes to the tax office. There are scales of specific annual rental price ranges. Your rental income tax rate depends on which price range your income is in. The rates are as follows:
Up to 18.000 TL: 15%
18.000 TL - 40.000 TL: 20%
40.000 TL - 98.000 TL: 27%
98.000 TL – 500.000 TL: 35%
More than 500.000 TL: 40%
* Every January, the annual taxation price range scale is announced by the government. Last update: 02.01.2020
Example property rental income tax calculation; Suppose you rent out a shop for 15.000 TL monthly rental income. You have a yearly income of 180.000 TL:
- 15% of the first 18.000 TL: 2.700 TL
- 20% of 22.000 TL: 4.400 TL
- 27% of 58.000 TL: 15.660 TL
- 35% of 82.000 TL: 28.700 TL
You pay totally 2.700 + 4.400 + 15.660 + 28.700 = 51.460 TL property rental income tax for 180.000 TL yearly income. If you rent out this commercial property to a tenant who fully declares the rental agreement, the tenant already pays 45.000 TL on behalf of you as a stoppage (withholding tax) to the tax office. In this case, you pay 51.460 TL - 45.000 TL = 6.460 TL. Tenant wants to avoid paying high stoppage tax, they would like to declare a lower rental amount which might be disadvantageous taxation for the owner.
If the property is residential, the tenant does not pay any stoppage tax, therefore the owner pays full tax. If you want to invest in rental income properties, Antalya Homes advises commercial properties rather than residential ones.
Capital Gain Tax
If you sell your property within the first 5 years of your purchase, you need to pay real estate profit tax to the tax office. This is a kind of profit tax for the difference between buying and selling amounts. It is a 15% tax on the gained amount after the increase in yearly inflation. Inflation is decreasing the value of money, therefore the tax is net of inflation. You need to declare the profit after you sell the property until the next year's March. If a real person sells after 5 years, it is not applied.
Companies do not have a time exemption, companies pay all the time. You may exclude the bank interest costs (if you get a mortgage), title deed conveyance tax, annual property tax, and whatever renovation costs you have spent on the property.
Example profit tax calculation; Suppose that a buyer purchased a property in May 2016 for 100.000 TL. He sells it in August 2020 for 200.000 TL. There is a 100.000 TL difference between buying and selling amounts. The amount of inflation since 2017 and 2020 was a total of 58%. This means he does not pay 58.000 TL because of the net of inflation. The brutto profit is 42.000 TL. He has a cost of 22.000 TL costs as conveyance tax when he bought, the mortgage interest he paid to the bank, and property taxes of 4 years. When he excludes these costs from brutto profit; 42.000 TL - 22.000 TL = 20.000 TL. The net profit is 20.000 TL and he needs to pay 15% of this amount: 3.000 TL as real estate profit tax.
Annual Property Tax
If you own a property in Turkey, you are supposed to pay annual real estate tax to the municipalities. Property tax fees vary across metropolises and cities. Property taxes are paid annually. You may give automatic payment orders at the banks.
Property tax rates are as follows:
When individuals inherit a property in Turkey, they are obliged to pay taxes. Tax rates depend on the value of the inheritance. The rates are as follows:
Up to 160.000 TL: 1%
160.000 TL – 510.000 TL: 3%
510.000 TL – 1.280.000 TL: 5%
1.280.000 TL – 2.780.000 TL: 7%
More than 2.780.000 TL: 10%
Gift Property Tax
When someone receives property as a gift, they are also obliged to pay gift taxes in Turkey. If the gift comes from one of the family members (spouse, parents, or children), the gift tax can be reduced by 50%. Tax rates depend on the value of the property and are as follows:
Up to 160.000 TL: 10%
160.000 TL – 510.000 TL: 15%
510.000 TL – 1.280.000 TL: 20%
1.280.000 TL – 2.780.000 TL: 25%
More than 2.780.000 TL: 30%
Value Added Tax
If the property is owned by a company, there must be an invoice raised upon its sale. If the property owner is a person, that means there is no VAT subject to this purchase. Because the first person who has bought this property already paid its VAT.
There are several parameters used to determine VAT for a property in Turkey. To get an idea of VAT rules in Turkey, we need to know what land fair value (arsa rayiç bedeli) is;
Land fair value: It is the lands' market value per sqm decided by the city committee (valuation commission). Every 4 years the city committee gets together and decides the land market values street by street. Land fair value, depending on the related lands' location; distance to the banks, public transportation, shopping malls, etc.
VAT Rules for Apartments, Commercial Properties, and Lands;
|Apartment||Land fair value < 1.000 TL and net sqm < 150|
The project is under urban transformation and net sqm < 150
|1.000 TL < Land fair value < 2.000 TL and net sqm < 150||Land fair value > 2.000 TL|
net sqm > 150
|Commercial||NA||NA||Company-owned lands always have 18% VAT|
|Land||NA||NA||Company-owned lands always have 18% VAT|
Avoiding Double Taxation on Buying a Property
Double taxation is to income taxes paid twice on the same source of income. Double taxation happens in international trade or investment when the same income is taxed in two different countries.
If a person who is connected to one country with a citizenship bond resides (sometimes dual citizenship) in another country and receives income or does investment from that country, which country will be taxed is a problem that needs to be solved. In order to solve this problem, it will be necessary to determine which country is taxation authority with international legal principles.
Methods of Avoiding Double Taxation
1. National Methods: A country can prevent the effects of double taxation by making regulations in its own law.
2. International Methods: One of the ways to be used in the prevention of double taxation is to make international agreements between countries based on the sharing of powers so that their taxation powers do not conflict.
One of the current regulations is preventing double taxation agreements signed by Turkey and third countries. These agreements are aimed at the entry of foreign capital into Turkey.
List of Double Taxation Agreement Countries
|Bosnia & Herzegovina||Greece||Luxembourg||Qatar||Tunisia|
Learn more about expenses when buying a property in Turkey.