Turkey: Taxes and Costs

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Rental income tax is high in Turkey

Effective Tax Rate on Rental Income
Monthly Income	€1,500	€6,000	€12,000
Tax Rate	14.6%	21.7%	24.8%
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Rental Income

Net rental income is taxed as ordinary taxable income. However, if the net rental income from property let out as a residence does not exceed YTL2,200 (€1,095), the said income is not subject to declaration. The net rental income is not liable to VAT.

Net rental income can be determined either through the actual deduction method or lump sum method.

• The actual deduction method deducts real expenses (inc. lighting, heating, water expenses; administrative expenses, insurance expenditures; tax and duties; interest expenses; depreciation costs and repair expenditures) from the gross rental income. 5% of the acquisition cost is also deductible within five years for income arising from the lease of buildings.
• The lump sum method allows taxpayers to deduct 25% of their gross income to arrive at the taxable income. Once the taxpayer has chosen to use the lump sum method, he may not revert to the deduction of actual expense until after two years.

Income tax rates for 2006 range from 15% to 35%, thus:

Corporate Route

As of 01 January 2006, net rental income is taxed at 20%. Furthermore, a 10% withholding tax is levied on property rents.

Withholding tax

A 22% withholding tax is levied on rent payments to non-residents who only earn rental income in Turkey. The taxpayer would not have to file tax return on income from his Turkish property.

Property tax

Residential premises and land are taxed at 0.1% of their value. This tax rate is doubled if the property is in a metropolitan area.

Capital Gains Tax

Capital gains from the sale of immovable property (land and buildings) are exempt from income tax provided that the holding period is longer than four years. For properties owned less than four years, normal income tax rates apply. Taxable gains are computed by deducting the acquisition cost from the selling price.

Corporate route

Capital gains from the sale of immovable property are considered as ordinary taxable income and taxed at 20%. However, properties owned for more than two years are exempt.

VAT

No VAT is chargeable on the sale of real estate by individuals who are not estate agents, except in the case of houses with a total surface area above 150 sq. mt., which are subject to 1% VAT.

Turkey - more data and information

• Guide to buying houses and registering property sales in Turkey

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