While purchasing a property in Turkey, you also need to consider the real estate taxation in Turkey. There are different types of tax on the sale of properties that can be applied to your property. These taxes are;
• Title Deed Conveyance Tax
• Annual Property Tax
• Value-Added Tax
• Capital Gain Tax
• Property Rental Income Tax
• Inheritance Tax
• Gift Property Tax
Title Deed Conveyance Tax
This tax is imposed on the transfer of the real estate to the new owner. This tax, calculated as 4% of the sales price is paid to the General Directorate Land Registry and Cadastre office on a one-time basis.
The law indicates that the price may be shared as 2% between buyer and seller. But in Turkey as a general custom and unspoken market rule, the buyer pays the full price of the title deed transfer tax. We advise talking about it during the price negotiating stage because if not, it is customary and expected from the buyer to pay the full price of transfer tax.
Annual Property Tax
When you own a house, the value of the property increases annually. This increase is taxed annually ranging from 0.1 to 0.3 percent considering the square meter area and its facilities (social and daily amenities nearby) regardless of land or building.
Annual real estate tax rates are doubled in metropolitan Municipalities such as İstanbul, Antalya, Bursa, İzmir, Trabzon, etc. This tax can be paid in 2 installments in May and November and accepts online payment instructions via accepted banks.
These rates are:
If you are buying your property from a company instead of a third person, there has to be an invoice regarding the sale process, which includes VAT.
VAT have different rules for lands, apartments, and commercial properties as explained below;
|Apartment||Land fair value < 1.000 TL and Net sqm < 150|
Project 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|
Value-Added Tax (VAT for short, KDV in Turkish) is based on land fair value; which is the city committee's designated value for the land in question. Every four years, the city committee evaluates every parcel of the town and it depends on many factors like its position and daily or social amenities.
Capital Gain Tax
Selling a property within 5 years after purchase means earning taxable income equal to the price difference from the time you bought the real estate to its current value. Such gains are added to your income. In 2020 Capital Gain Tax on property was 15% of the gained revenue from the sale. Generally, if you hold the property for less than 5 years in Turkey it will give you short term capital gain. Therefore you have to pay short term capital gain tax. 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.
If you sell your property after 5 years, or if you own the property you want to sell without paying a price like inheritance your income will count as long-term capital gain. You will be excluded from Capital Gains Tax on real estate.
For example, let's say that you bought your property in June 2016 at 200.000 TL and sold it in March 2020 for 400.000 TL.
After calculating the property's current value (the price indices of May 2016 and February 2020, which are the months before the purchase and sale take place, should be divided and multiplied by the purchase price of the house (200.000 TL x (482,02/257,27) = 374.719 TL). ).
After we exclude the sales price from the real price, we get the profit (400.000 TL – 374.719 TL = 25.280 TL).
25.280 TL is the amount we gained from the sale of the property. When we exclude this from the exception rate, (25.280 - 18.000 TL = 7.280 TL) 7.280 TL is the taxable gain. In 2020, the capital gain tax was 11,29% therefore you have a 1.693 TL capital gain tax.
Property Rental Income Tax
The most important thing to know about rental income tax is, that it's progressive. This means that the higher your rental capital gains on real estate go, the higher your tax rate will. The rates are;
• Up to 18.000: 15%
• 18.000 TL – 40.000 TL: 20%
• 40.000 TL – 98.000 TL: 27%
• 98.000 TL – 500.000 TL: 35%
If you have a tenant in your residential property, the law states that the owner must pay the full tax. Therefore, if you want to make an investment in rental income properties in Turkey, we advise commercial properties for such purposes. Our rental income properties can be reached from here.
(At the beginning of the new year, annual price ranges announced by the government. Latest update: 22.12.2020).
The inheritance law in Turkey includes foreign investors and residents as well. This taxes rate is based on the value of the inheritance;
• 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
Gift tax rates range from 10% to 30% percent of the item's appraised value, a progressive tax just like the inheritance tax, is applied to items that have been acquired as a gift:
• 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%.
If these gifts are coming from a family member, spouse, or children this tax can be cut by approximately 50%.
Double Taxation in Turkey
Double taxation is a tax principle referring to income taxes paid twice on the same source of income. It can occur in international trade or investment when the same income is taxed in two different countries.
In order to avoid this and draw investors to the country, either a government should make the necessary changes in its regulations, or as more commonly used, make international agreements between countries based on power and information sharing in order to avoid taxation conflicts.
List of Double Taxation Agreement Countries:
|Bosnia & Herzegovina||Greece||Luxembourg||Qatar||Tunisia|
Further read about expenses in Turkey.