Non-residents are taxed in Turkey on income arising from Turkish sources only and are liable to a number of other property related taxes outlined below. The tax year in Turkey is the calendar year and an individual is considered resident in Turkey if he/she spends 183 days or more in any tax year in Turkey (the days do not need to be consecutive.)
There is an agreement (DTA) between the UK and Northern Ireland and The Republic of Turkey for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains. There is no DTA as yet between the Republic of Ireland and Turkey but one is expected in near future.
Taxes payable when purchasing a property in Turkey:
Turkish Transfer fees @ 1.65% (1.5% in 2009) are payable by both the buyer and the seller side on the sale of a property. These fees (i.e. 3.30% in total) are based on the declared value of the property. However, the declared value of the property cannot be lower than the 'tax value' determined by the local municipality, which is also used as the base of the property tax. 1.5% is also payable on the register of new buildings constructed on land.
The VAT rate in Turkey on the sale of property is 18%. But sales of houses which are below 150 meter square in net area are subject to 1% VAT.
If an immovable is owned by a company in Turkey, than selling this immovable after having held for 730 days (2 full years) might not be subject to VAT and corporate tax. This exemption also depends on some other conditions.
Turkish Stamp duty is levied on sale & lease contracts. The rates range from 0.165% - 0.825% (015% - 0.7% in 2009) and depends on the value of the contract.
Ongoing property taxes payable in Turkey are as follows:
Turkish Rental Income - A non-resident is taxed at scaled rates from 15% - 35%. Expenses directly related to the renting of the property are allowable as a tax deduction e.g. repairs & management fees.
There is also a lump-sum expense method, which allows the taxpayer to deduct 25% of the gross income as the expense without proving with documents.
Tax is deducted by way of a withholding tax. If a DTA comes into effect reduced rates of withholding tax may apply.
Income tax deadline Date
A Turkish tax return must be filed between March 1st and March 25th after the end of the year, with taxes payable in 2 equal installments –the first been in March, the second been in July.
Local Turkish Property taxes (rates) are payable in 2 equal installments, the first been in May and the second been in November. Rates are calculated based on the value of the property and are subject to thresholds set by the Tax Authorities as follows:
Other buildings 0.2%
Farming land 0%
Vacant land (but allocated for construction purposes) 0.3%
Other buildings 0.4%
Vacant land (but allocated for construction purposes) 0.6%
Other applicable taxes are as follows:
Turkish Capital Gains Tax (CGT) - arising from the sale of property is treated as income in the year of assessment. It is taxed at the marginal rate of 15% - 35%. A capital gain of up to TRY 7,700 in 2010 is exempt from CGT. Details of the disposal must be made within 15 days of sale. Property, if owned after January 1st 2007 and held for more than 5 years is exempt from Turkish CGT.
Turkish Inheritance Tax (IHT) - rates vary from 1% - 30%. Tax on inherited property is deducted from the taxable value of the asset.
Rental income received in Turkey will first have to be declared before the Turkish tax authorities. You may be liable to declare this income within your resident tax return.
If resident in the UK or Ireland you will have to declare any income received in Turkey in your annual resident tax return. There is a double taxation agreement between Turkey and the UK but not with Ireland so double taxation relief applies in the case of UK tax residents. Please contact us for further details regarding double taxation relief and/or filing your Resident Tax Return.
Property Tax International can organise the completion and filing of all necessary Turkish tax returns in addition to advising on your property tax obligations in your home country.
Page added August 2010