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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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INDIVIDUAL TAXATION

Non-residents are liable to pay tax on their Turkish-sourced income. Married couples are taxed separately on all sources of income.

INCOME TAX

Net income from all sources are aggregated and taxed at progressive rates. Tax bands and tax rates in Turkey change annually.

RENTAL INCOME
Net rental income earned by individuals is subject to income tax at progressive rates. However if the property is let out as a residence, the first YTL2,400 (€1,144) for 2008 is exempt from taxation.

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.

CAPITAL GAINS
Capital gains from the sale of immovable property are exempt from income tax provided that the holding period is longer than five years (four years if the property was acquired before 01 January 2007).

For properties owned less than five years (four years if the property was acquired before 01 January 2007), normal income tax rates apply. Taxable gains are computed by deducting the acquisition costs (subject to inflation adjustment) from the selling price. The first YTL6,800 (€3,242) capital gains for 2008 are exempted from taxation.

VALUE ADDED TAX (VAT)

Leasing real estate properties in Turkey are not subject to 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.

PROPERTY TAX

Real Estate Tax

Real estate tax is a municipal tax levied on the value of Turkish real property (land and buildings). The applicable tax rate varies depending on the classification of the property.

Residential premises and land are taxed at 0.1% of their value. The tax rate for buildings is 0.2% and 0.3% for building sites.

CORPORATE TAXATION

INCOME TAX

Income and capital gains earned by companies are taxed at the standard corporate tax rate of 20%. Income-generating expenses are deductible from the gross income.

CAPITAL GAINS
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.

Turkey - more data and information

• Guide to buying houses and registering property sales in Turkey

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