This article provides a detailed overview of the various taxes associated with property ownership and transactions in Turkey, aiming to equip you with the knowledge necessary to navigate the financial aspects of Turkish real estate.
Initial Taxes
Title Deed Transfer Tax
When acquiring property in Turkey, the Title Deed Transfer Tax is a primary consideration. This tax amounts to 4% of the property’s declared sale price and is typically split between the buyer and seller. However, it’s common for buyers to cover the full amount. Payment is mandatory at the General Directorate of Land Registry and Cadastre before the property deed is transferred. It’s important to note that the declared amount may differ from the actual purchase price, often based on a minimum declaration amount obtained by the seller from the local municipality.
Value-Added Tax (VAT)
Certain properties in Turkey are subject to Value-Added Tax (VAT), which can range from 1% to 20% of the property’s purchase price. The VAT rate depends on several factors, including the property’s size, its intended use (residential or commercial), and the seller’s legal status. Foreign buyers may be exempt from VAT on their first property purchase if specific conditions are met, such as paying in foreign currency and proving non-residency in Turkey.
Recurring Taxes
Annual Property Tax (Emlak Vergisi)
Once you own property in Turkey, you will be responsible for paying an annual property tax. This tax is calculated as a percentage of the assessed value of the property, with rates varying from 0.1% to 0.3% for residential properties. Properties located in metropolitan areas typically have higher tax rates. Payments are usually made in two installments, due in May and November, although a single payment is also possible.
Income Tax on Rental Income
If you decide to rent out your property, any rental income earned is subject to income tax in Turkey. The tax rate is progressive, ranging from 15% to 40%, depending on the amount of income earned. There is an annual exemption amount, which is adjusted yearly. Expenses related to property maintenance, insurance, and repairs can be deducted from rental income,1 reducing the taxable amount. Rental income must be reported annually by submitting a tax declaration in March for income earned the previous year.
Taxes on Property Sales and Transfers
Capital Gains Tax on Property Sales
If you sell a property within five years of purchase, you will be liable for Capital Gains Tax. The taxable gain is calculated by deducting the acquisition costs (adjusted for inflation) from the selling price. If the property is sold after five years, the capital gains are generally exempt from tax. For a deeper understanding, explore resources on Income Tax on Turkish Property.
Inheritance and Gift Tax
Transferring property to another person via inheritance or as a gift incurs Inheritance and Gift Tax. This tax rate varies between 1% and 30%, depending on the property’s assessed value and the relationship between the giver and recipient. The tax can be paid in annual installments over three years.
Other Taxes and Fees
Stamp Duty for Purchase Agreements
In some cases, if you sign a formal purchase agreement, a stamp duty of 0.948% of the agreement’s value may apply. This fee is generally associated with mortgage agreements, contracts, and specific legal documents related to the sale.
Valuable Housing Tax
A Valuable Housing Tax applies to properties exceeding a certain value. The rates are progressive, and this tax is relatively new, having been introduced in 2019 and implemented in 2020.
Tax Identification Number (Vergi Kimlik Numarası)
Foreigners must obtain a Tax Identification Number in Turkey before paying any taxes. This number is necessary for all financial transactions, including property taxes, and can be obtained at the local tax office with a valid passport.
By understanding these various taxes, you can better prepare for the financial obligations associated with property ownership in Turkey.
