Having a property in Turkey can be exciting, but learning the tax system might feel overwhelming. Do not be afraid! In this article, we delve into the different types of real estate taxes in Turkey, providing clarity on their implications and how they are calculated. From annual property taxes to capital gains and inheritance taxes, each tax serves a distinct purpose within the Turkish tax system. Whether you're already a property owner or an investor looking for new opportunities, understanding the fundamentals of Turkish real estate taxation is essential for informed decision-making and financial planning. Our detailed guide is designed to assist foreign buyers and investors in navigating Turkey's complex tax system. By providing essential knowledge and insights, we aim to empower individuals to make well-informed decisions that are in line with their specific goals and objectives.
Types of Real Estate Tax in Turkey
There are numerous types of real estate taxes in Turkey if you are about to buy a property. We have compiled them shortly and concisely for you:
• Annual Property Tax (Yıllık Gayrimenkul Vergisi)
• Capital Gain Tax (Gayrimenkul Değer Artışı Vergisi)
• Inheritance Tax (Miras Vergisi)
• Gift Property Tax (Hediye Gayrimenkul Vergisi)
• Property Rental Income Tax (Emlak Kira Geliri Vergisi)
• Title Deed Conveyance Tax (Tapu Devir Vergisi)
• Value Added Tax (Katma Değer Vergisi)
Annual Property Tax
As an owner of a property in Turkey, you are required to pay an annual property tax to the municipalities. The amount of the property tax varies from metropolis to metropolis and city to city. Property taxes are paid annually to the municipalities.
In terms of property taxes, the following rates apply:
Capital Gain Tax
The property profit tax is a kind of tax that you have to pay to the tax office if you sell your property within the first five years of purchasing it. It is a kind of profit tax for the difference between trading amounts that is decoupled from the profit tax. Inflation reduces the value of money, so the tax is inflation-free, and it is a 15% tax on the amount received after the annual increase in inflation. As soon as you sell the property, you need to declare the profit you made after selling it by March of the following year. If a real person sells it after 5 years, the profit is not valid under the given condition.
In general, companies are not exempt from paying property taxes for a specific period as they always do; they pay all the time. That means you can exclude bank interest charges (if you wish to get a mortgage), title deed conveyance tax, and annual property tax as well as any renovation costs you have committed financially to the property.
To make it clearer for you to understand, imagine a buyer purchasing a property in November 2018 for 600.000 Turkish Lira (TL) and selling it to another buyer in February 2022 for 1.575.000 TL. As a result of net inflation, there is a difference of 975.000 TL between the purchase and sale amounts in the period of January October 2018 to January 2022, which means you did not pay 626.000 TL due to inflation of 154% in total. 48.528 TL is the brutto profit. You will have to pay the 25.000 TL of conveyance tax, the mortgage interest you paid to the bank, and property taxes of 4 years. Subtract these costs from the brutto profit, and you get 23.528 TL. Then, the total net profit is 23 528 TL. You should pay 15% of this amount for real estate income tax which is equal to 3.529 TL.
The Turkish government requires individuals who inherit property in the country to pay taxes on the property. The current tax rates are determined by the value of the property and are as follows:
For the first property 1%: 1.100.000 TL
For the next 2.600.000 TL: 3%
For the next 5.500.000 TL: 5%
For the next 10.900.000 TL: 7%
For the amount of more than 20.100.000 TL: 10%
Gift Property Tax
A person receiving property as a present is required to pay gift taxes in Turkey If the gift is from a family member (spouse, parents, or children), the gift tax can be reduced by 50%. Tax rates vary based on the property's valuation and are as follows:
For the first 1.100.000 TL: 10%
For the next 2.600.000 TL: 15%
For the next 5.500.000 TL: 20%
For the next 10.900.000 TL: 25%
For the amount of more than 20.100.000 TL: 30%
Property Rental Income Tax
In Turkey, you must pay tax when renting out your home. Property owners are required to disclose their revenue to the tax authorities by the end of March each year. Rental income is taxed at different rates depending on the range of prices you earn on a rental basis. The rates are as follows:
Up to 70,000 TL: 15%
For the amount exceeding 70,000 TL up to 150,000 TL: 20%, with a base charge of 10,500 TL
For the amount exceeding 150,000 TL up to 370,000 TL: 27%, with a base charge of 26,500 TL
For the amount exceeding 370,000 TL up to 1,900,000 TL: 35%, with a base charge of 85,900 TL
For the amount exceeding 1,900,000 TL: 40%, with a base charge of 621,400 TL
Note: Every year in January, the annual taxation price range scale is declared by the government.
Title Deed Conveyance Fee
This is a fee you pay when you buy or sell a property, and it's a one-time tax upon the title deed transaction. You must pay it to the Land Registry and Cadastre office. The laws about title deed conveyance determine that both the person selling the property and the one buying it need to pay 4% of the property's price.
Large companies follow this rule, but in Turkey, it's more common for the buyer to pay the whole fee. It's a good idea to talk about this fee when you're discussing the price of the property. If you don't agree on it, usually the buyer ends up paying the full fee.
Value Added Tax
If a company owns the property, it needs to create an invoice when selling it. But if an individual owns the property, there's no VAT on the sale because the first buyer already paid it.
In Turkey, there are specific factors used to establish the VAT for a property. To understand these rules, you should know about something called "land fair value." (arsa rayiç bedeli in Turkish). This is the market value of the land per square meter, decided by a committee in the city. Every four years, this committee meets to set the land market values for each street. The fair value depends on factors like the land's location, distance to banks, public transportation, shopping malls, and so on.
Here is the up-to-date VAT Rules for Apartments, Commercial Properties, and Lands;
If the land's fair value is less than 1,000 TL and its size is less than 150 m², OR
If the project is part of urban transformation and its size is less than 150 m².
If the fair value of the land is between 1,000 TL and 2,000 TL, and the size of the land is less than 150 m².
If the fair value of the land is more than 2,000 TL, OR
If the size of the land is more than 150 m².
If the company owns the land, there is always a 20% tax added to it.
If the company owns the land, there is always a 20% tax added to it.
How Is Property Tax Calculated in Turkey?
If you are considering opportunities in the property sector, it's essential to understand how to calculate Turkish property taxes. To begin with, property taxes in Turkey are determined based on the assessed value of the property. This assessed value is then subjected to a varying tax rate. To stay compliant with tax regulations, property owners need to make an annual declaration of their property's value. The annual tax amount is calculated by multiplying the assessed value by the applicable tax rate.
When calculating property tax in Turkey, certain property attributes should be kept in mind. Here's what you need to know before the process:
1- The property tax is based on the unit value per square meter of the land and the total square meterage of the property.
2- Costs are determined by the type of building materials (carcass, wood, concrete, or masonry) and the class of construction.
3- Tax rates vary for businesses and residences, depending on whether they are located outside or within a metropolitan municipality.
4- The total measurement of the external area of the building is considered in the calculation.
5- Wear allowance reduction is also considered in the calculation.
6- The calculation includes differences related to features like elevators and heaters in the property.
After learning these pieces of information, you may continue by doing these calculations:
Firstly, you should multiply the building's surface area by the median value representing the usual construction cost per square meter.
Next, you can add the differences resulting from this multiplication to any additional value for features like heating, air conditioning, or elevator installation, typically set at 8% for heating or air conditioning and 6% for elevators.
After obtaining this total, deduct the recorded depreciation, which depends on the type of construction and the property's age.
Once depreciation is accounted for, add the calculated land size or amount based on minimum measurements to the adjusted total.
How to Pay Property Tax in Turkey?
Turkish property registration taxes may be paid in cash or other forms. For instance, foreigners in Turkey usually open Turkish bank accounts before buying real estate so that they can sell their possessions without limits and pay taxes to the government. Furthermore, online paying is common when buying a property. We explained how you can pay the taxes online in the following steps:
1. Go to the Municipality's Website: Find the Municipality's Website: Search the web for the official website of the municipality where your property resides. For example, if your property is in Alanya, search for "Alanya Belediyesi."(Alanya Municipality) Look for the section related to real estate tax, usually under services ("hizmetler"). This section might be named "Emlak Vergisi" or "Taşınmaz Vergisi." Within the real estate tax section, find the option for online payment ("online ödeme"). This might be under "e-belediye" or "elektronik ödeme hizmetleri."
2. Provide Tax Information: To pay online, use your Turkish Tax Number and registration number. Enter your Tax Number, and security code, and click on the "query" (sorgula) button.
3. Review Property Tax Details: The screen will display a revision of your entire Property Tax debt in Turkey. You can see the details and amounts owed.
4. Make Payment: Choose the specific taxes you want to pay. If you click on the pay button, the system will redirect you to the payment page. Enter your credit or debit card details. First, select the type of card you are using. Fill in the required information from your card. After entering the information, click the pay button to complete your payment.
Congratulations! You've successfully paid your Property Tax online. We suggest reaching out to the municipality's information line just to ensure you won't encounter any issues.
Do Foreigners Pay Property Tax in Turkey?
Yes, everyone who owns real estate in Turkey must pay property taxes each year. Municipalities collect these taxes and are responsible for their administrative boundaries.
Who is Exempt from Property Tax?
In Turkey, property buyers are subject to Value Added Tax (VAT) when purchasing new properties, particularly those in new projects directly from developers. However, the Turkish government has established certain conditions under which foreign buyers can be exempt from paying VAT as a means to encourage foreign real estate investment. Here are the key points regarding who is exempt from property tax in this context:
1. No Residency Permit in Turkey: The foreign buyer should not possess a residency permit in Turkey at the time of the property purchase.
2. Applies Only to New Properties: The VAT exemption applies only to new apartments or commercial units directly purchased from developers which means second-hand properties are not eligible for this exemption.
3. Currency of Money Transfers: All financial transactions related to the property purchase, including the transfer of funds from the buyer to the seller, must be conducted through banks using foreign currencies such as USD, EURO, or others, excluding TL.
4. No Quantity Limitation: Buyers qualifying for VAT exemption can purchase multiple units without any limitations on the number of properties eligible for the exemption.