INDIVIDUAL TAXATION

Residents are taxed on their worldwide income. Married couples are taxed separately on all sources of income.

INCOME TAX

The income tax system divides the taxable income of individuals into seven categories: (1) business income; (2) agricultural income; (3) employment income; (4) professional income; (5) income from immovable property; (6) income from movable property; and (7) other income (capital gains and occasional income).

Iincome from all sources are computed separately, aggregated and then taxed at progressive rates.

The following can be deducted from the aggregated income from all categories:

• Donations, maximum of 5% of total declared income
• Premiums for personal insurance, maximum of 5% of the total declared income

A disability allowance is granted to taxpayers earning employment, professional or business income.

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, a certain threshold amountis 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.

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.

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.

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 is 0.1% for land in general, 0.2% for buildings, and 0.3% for building sites or vacant land allocated for construction purposes.

Valuable Housing Tax

Valuable housing tax is levied on residential properties at progressive rates.