Turkish Real Estate Tax

Navigating the Turkish Real Estate Tax Landscape: A Comprehensive Guide

Turkey, with its rich history, vibrant culture, and strategic location bridging Europe and Asia, has become an attractive destination for real estate investment. However, like any thriving real estate market, Turkey has a set of taxes and regulations that investors need to navigate. In this article, we will explore the various aspects of Turkish real estate taxes, providing a comprehensive guide for both local and international investors.

⦁ Property tax:

This is an annual tax paid to the local government. The amount of tax owed is based on the value of the property, which is determined by the local municipality. The tax rate varies depending on the location of the property, but it is typically between 0.1% and 0.6%.

⦁ Title Deed Fees:

Property purchase tax (Tapu Devir Vergisi) in Turkey is 4% of the value indicated in the title deed (TAPU) and is paid upon receiving this document. By default, the tax is divided equally between the buyer and the seller, unless otherwise agreed by the parties. In practice, this tax is more often paid by the buyer.

⦁ Value-added tax (VAT):

VAT is a consumption tax that is applied to most goods and services in Turkey. For new residential properties sold by construction companies, the VAT rate is 18%. However, there are some exemptions to this rule. For example, buyers of apartments smaller than 150 square meters are exempt from paying VAT.

⦁ Capital gains tax:

This tax is applied to the profit made from the sale of a property. The tax rate varies depending on the holding period of the property. For properties sold within five years of acquisition, the capital gains tax rate is 15%. For properties sold after five years of acquisition, the capital gains tax rate is 20%.

⦁ Property rental income tax

Property rental income tax (Emlak Kira Geliri Vergisi) in Turkey is paid by owners at a progressive rate. In the 2022 tax year, profits of no more than 9,500 Turkish liras (646 US dollars) per year for residential and no more than 49,000 Turkish liras (3,330 US dollars) per year for commercial properties are not taxed.

Long-term rental

Foreigners along with Turkish citizens have the right to rent out real estate on a long-term basis. The notarised rental agreement must be submitted to the General Directorate of Population and Citizenship Affairs of the Ministry of the Interior (Nüfus Müdürlüğü) to register the tenants at the residence address.

Short-term rental

A law has been passed in 2017, stating that only legal persons with a special license can rent out properties on a short-term basis. Therefore, only licensed companies can legally provide short-term rentals in Turkey.

In addition to these main taxes, there are a few other minor taxes that may apply to Turkish real estate transactions. For example, there is a stamp duty of 0.09%, and a notary fee of around 0.5%.

Conclusion:

Understanding the intricacies of Turkish real estate taxes is crucial for investors looking to capitalize on the country's dynamic property market. Navigating the various taxes involved in property transactions and ownership ensures compliance with local regulations and helps investors make informed financial decisions. As the Turkish real estate sector continues to evolve, staying updated on tax policies will be instrumental in achieving long-term success in this promising market.