Types of taxes in Turkey – real estate capital gains tax, information about the real estate market in Istanbul, Turkey, your comprehensive guide will be found here, as real estate taxes in Turkey can be complex and confusing, especially for those who are not familiar with the Turkish tax system as a foreigner, and it may be particularly difficult to understand the taxes that apply to your property in Turkey. In this article, we will provide a comprehensive guide to real estate taxes in Turkey, including an overview of the types of applicable taxes, how they are calculated, and what you need to know to remain compliant with Turkish tax laws.

Property Tax

Turkey is one of the leading investment destinations in the world, offering distinctive opportunities in the real estate sector. But as with any real estate investment, taxes play a vital role in the purchasing and ownership process. Among the different types of taxes imposed by the Turkish government, property tax occupies a special place because of its direct impact on local and foreign investors.

Turkey is characterized by a transparent and clear tax system that aims to support economic growth and encourage foreign investments. Real estate taxes vary according to the type, location, and value of the property, and include purchase tax, property tax, and rental income tax. Understanding these taxes allows investors to plan financially well and make informed decisions that suit their needs and investment goals.

In this article, we will highlight the types of taxes in Turkey with a focus on property tax. We will review the details of each type of tax, how to calculate it, and the procedures required to pay it. We will also address some tips and guidelines that help investors adapt to the tax system and achieve the maximum benefit from their real estate investments in Turkey. Join us to discover everything you need to know about real estate taxes in this promising and thriving market.

Real Estate Capital Gains Tax in Turkey – Property Tax in Turkey

Real estate taxes in Turkey, or what are called capital gains taxes, are an important aspect of real estate ownership and investment. These taxes are imposed by the Turkish government and local municipalities, and they can vary according to the type and location of the property. This tax is imposed on properties that have not been owned for 5 years from the date of purchase, since this tax considers that the property sold within a period of less than 5 years was purchased for investment purposes, and therefore a tax called real estate capital gains tax is imposed on it.

As for properties purchased under construction, the beginning of the five-year period starts from the date of receiving the title deed.

How to Calculate Real Estate Capital Gains Tax – Turkish Tax Law

This is the paragraph that everyone is looking for, and it is the most important in the real estate tax system in Turkey, as the value of real estate profits is calculated according to the Domestic Producer Price Index. Since this index is issued monthly, the calculation of the value of real estate profits is not based on the index of the month in which the property was sold, but rather real estate profits are calculated according to the index of the previous month. To clarify more: let us say that a residential unit was purchased on 01/01/2015 at a price of 1000.000 lira (( one million lira )), and it was sold on 01/02/2019 for an amount of 2.000.000 lira (( 2 million lira )), and the increase rate of the Domestic Producer Price Index was as follows:

The calculation will be as follows:

1000.000 × (( 240.25 / 150.23 )) = 1599214 lira, which is the real price of the property value.

After that, we subtract the real price of the property value from the selling price of the property, so we get the real profit of the property, which is known as profits before exemption: 2.000.000 – 1.599.214 = 400.786 Turkish lira, which is the real profit of the property.

To calculate the basic value for determining the amount of tax, you subtract from the real profit of the property the expenses paid by the seller at the real estate department (( title deed )), let it be, for example, 5000 Turkish lira.

400.786 – 5000 = 395.786, which is the basic value for determining the amount of tax.

Then we subtract from the basic value for determining the amount of tax the amount of tax exemptions, which is issued every year by the Turkish government. Since the sale took place in 2016, the tax exemption amount for that year was 11.000 Turkish lira = 395.786 – 11.000 = 384.786, which is the taxable value.

Finally, the tax imposed on the property is deducted from the taxable value, according to the following tax brackets:

Since the taxable value is ( 384.786 ), and according to the brackets this amount exceeded 69000 Turkish lira, it will be subject to the 35% bracket = 134.675, which is the amount of real estate capital gains tax in Turkey. This amount is declared during the period from 01 to 25 of March for the year 2016, and it is paid in two equal installments in March and July of the same year.

Types of Taxes in Turkey – Property Tax in Turkey

They are many, but what concerns us are the types of real estate taxes in Turkey, and among the most important of these taxes are:

Annual Real Estate Tax

Among the basic real estate taxes in Turkey is the annual real estate tax, which is imposed on the value of the property. This tax is paid by property owners, and the amount of tax due is based on the assessed value of the property. The assessed value of the property is determined by the local tax office based on factors such as location, size, and building age.

Property Purchase Tax

There is another important real estate tax in Turkey, which is the purchase tax, imposed on the purchase price of the property. This tax is paid by the property buyer, and the amount of tax due is determined by the purchase price and other factors such as location, size, and type of property.

Profit Tax

In addition to these taxes, there is also a profit tax imposed on the gains realized from selling real estate. This tax is paid by the property seller and is calculated based on the difference between the purchase price and the selling price of the property. We have discussed it above in detail.

Property Tax

Property tax, known in Turkish as ” emlak vergisi “, is a tax imposed on the value of real estate such as land, buildings, and apartments. The tax is imposed by the local municipality where the property is located and is calculated as a percentage of the assessed value of the property.

Title Deed Fees

Title deed fees, known as ” tapu harcı ” in Turkish, are a tax imposed when buying or selling a property. They are calculated as a percentage of the sale value of the property and are paid by both the seller and the buyer.

Value Added Tax ( VAT )

Value added tax is a tax imposed on the sale of newly built properties. It is calculated as a percentage of the sale value of the property and is paid by the buyer.

Stamp Duty

Stamp duty, known in Turkish as ” damga vergisi “, is a tax imposed on contracts and agreements related to real estate transactions. It is calculated as a percentage of the contract value, and it is paid by the party that initiates the contract.

Capital Gains Tax

Capital gains tax, known in Turkish as ” gayrimenkul sermaye iradı vergisi “, is a tax imposed on the profits realized from selling real estate. The tax rate varies depending on the holding period of the property and the amount of profit.

Inheritance and Gift Tax

Inheritance and gift tax, known as ” veraset ve intikal vergisi ” in Turkish, is a tax imposed on the transfer of real estate ownership due to inheritance or gift. The tax rate varies according to the relationship between the donor and the recipient and the value of the transferred property.

Taxes in Turkey

Income Tax in Turkey

Income tax in Turkey is a tax on the income of individuals, partnerships, and companies. It is a progressive tax, meaning that the higher an individual’s income, the higher the tax rate they pay. The tax year in Turkey is the calendar year, and individuals and companies are required to submit their tax returns by the end of March after the end of the tax year. Tax rates for individuals range from 15% to 35%, depending on the level of income, while the corporate tax rate is a fixed rate of 25%. There are also additional taxes on certain types of income, such as rental income and capital gains.

Corporate Tax in Turkey

Corporate tax is a tax on the income of companies and other business entities in Turkey. The corporate tax rate in Turkey is fixed at 25%. All companies, regardless of their size and the amount of income they generate, are subject to corporate tax. The tax is based on the taxable income of the company, which is calculated by subtracting allowable deductions and exemptions from gross income. Corporate tax returns must be submitted by the end of March after the end of the tax year. Delays in paying corporate tax can lead to fines and interest charges.

Car Tax in Turkey

In Turkey, car tax is a tax imposed on vehicles based on their engine size, age, and type. The tax is paid annually and is required for all vehicles registered in the country. The amount of tax depends on the engine size and the age of the car, with larger and older engines generally paying higher taxes. In addition, luxury cars and vehicles with high carbon emissions may also be subject to additional taxes or fees. Car tax is collected by the Turkish government and must be paid by the vehicle owner or operator on an annual basis. Failure to pay car tax can result in fines, penalties, and even vehicle seizure.

Banking and Insurance Transactions Tax

It is a tax imposed on certain banking and insurance transactions in Turkey. The tax is applied to the value of transactions related to banking and insurance services, including but not limited to deposits, loans, letters of credit, foreign exchange transactions, and insurance premiums.

The BITT rate varies according to the type of transaction and ranges from 5% to 1%. For example, the BITT rate for foreign currency deposits is 0.1%, while it is 5% for certain types of loans.

BITT is collected by banks and insurance companies on behalf of the Turkish Revenue Administration and then transferred to the government. It is an indirect tax, meaning it is ultimately paid by customers who use banking and insurance services.

BITT plays an important role in the Turkish economy, as it generates significant revenues for the government. Tax revenues are used to finance public services, such as infrastructure projects, education, and healthcare.

Special Consumption Tax ( SCT )

Special Consumption Tax ( SCT ): is a type of indirect tax imposed on the consumption of certain goods and services that are considered ” luxury “, or harmful to health or the environment. SCT is also known as ” sin tax ” and applies to products such as tobacco, alcoholic beverages, petroleum products, cars, and luxury goods. SCT is calculated as a percentage of the retail price of the product and is collected by the Turkish Revenue Administration. The revenues generated from SCT are used to finance public services and projects. The SCT rate varies depending on the type of product, with higher rates generally applied to products considered more harmful or luxurious.

Environmental Tax

Environmental tax: is a type of tax imposed by the Turkish government on activities that may have harmful effects on the environment. It aims to motivate individuals and companies to reduce their negative impact on the environment by making it more expensive to engage in activities that cause pollution or damage to natural resources. The environmental tax can be applied to a variety of activities, including the use of certain materials, production processes, and waste disposal. The amount of tax imposed is determined according to the type and amount of activity carried out and the extent of its environmental impact. The government uses the revenues generated from the environmental tax to finance environmental protection and conservation efforts.

Telecommunications Tax

Telecommunications tax: is a tax imposed on telecommunications services such as telephone, internet, and cable TV services in Turkey. The telecommunications tax has currently been set at 7.5% of the total cost of the service. The tax is collected by service providers and then transferred to the government. Telecommunications tax revenues are used to finance various government programs and initiatives.

Electricity Consumption Tax

Electricity consumption tax: is a type of tax imposed on electricity consumption in Turkey. It is applied to electricity bills for homes and businesses and is calculated based on the amount of electricity consumed. The tax rate varies depending on the amount of consumption, with higher consumption levels subject to higher tax rates. The revenues generated from electricity consumption tax are used to support energy efficiency and renewable energy projects in Turkey.

Natural Gas Consumption Tax

Natural gas consumption tax: is a tax imposed on the use of natural gas in Turkey. The tax is calculated based on the amount of natural gas used and the tax rate determined by the government. The tax is paid by natural gas distribution companies, which then pass the cost on to consumers in their bills. The purpose of the tax is to encourage energy efficiency and conservation, as well as to generate revenue for the government. The rate of natural gas consumption tax in Turkey varies depending on the amount of natural gas used, with higher rates applied to higher consumption levels.

Gaming Tax

Gaming tax: includes types of games and betting activities. Activities subject to gaming tax include sports betting, horse racing, casinos, bingo, lottery, and other games of chance. The tax rate varies depending on the type of game or betting activity, but generally ranges from 5% to 10%.

Tax Exemptions in Turkey – Turkish Tax Law

There are many tax exemptions available in Turkey, which can vary depending on the type of tax and the individual or entity receiving the exemption. Some of the most common tax exemptions in Turkey include the following:

1 – Value Added Tax (VAT) exemptions for certain types of goods and services, such as exports, international transportation, and certain types of medical supplies.

2 – Corporate income tax exemptions for companies engaged in certain types of activities, such as research and development, renewable energy, and certain types of investments.

3 – Personal income tax exemptions for certain types of income, such as rental income from the primary residence, income from agricultural activities, and income earned by disabled individuals.

4 – Tax exemptions for certain types of properties, such as cultural heritage sites, public buildings, and religious institutions.

5 – Inheritance and gift tax exemptions for certain types of assets, such as family-owned businesses and agricultural lands.

It is important to note that tax exemptions may have specific criteria or restrictions, and individuals or entities seeking an exemption should consult a tax specialist, or the relevant government agency for guidance.

Conclusion and Tips for Compliance with Turkish Real Estate Taxes

The Importance of Complying with Turkish Tax Laws

Complying with Turkish tax laws is extremely important for individuals and companies operating in Turkey. Failure to comply with tax regulations can lead to legal consequences, fines, and penalties.

Paying taxes on time and accurately is necessary to maintain a good reputation with the Turkish government and avoid any legal problems. It also helps ensure that the government can continue to provide the necessary services and infrastructure for the country.

In addition, following tax laws can lead to financial benefits, such as tax exemptions and exemptions that can help reduce overall tax liabilities. It can also improve the efficiency of financial management by ensuring that the correct amount is allocated for taxes and included in the budget.

In general, understanding and complying with Turkish tax laws is essential for financial stability and the success of individuals and companies operating in Turkey.

Tips for Staying Compliant with Turkish Real Estate Taxes

Below are some tips from Masar Istanbul Company for staying compliant with Turkish real estate taxes:

1 – Be aware of your tax obligations: it is important to understand your tax obligations as a property owner in Turkey. This includes understanding the different taxes that apply to your property and when they are due.

2 – Keep accurate records: keeping accurate records of all property-related transactions can help you stay on top of your tax obligations. This includes records of property purchases, sales, rentals, and any other financial transactions related to your property.

3 – Seek professional advice: consulting a tax specialist who is familiar with Turkish tax laws can help you remain compliant with property taxes. They can advise you on the tax laws and regulations that apply to your specific situation and help you stay on top of your tax obligations.

And we, Masar Istanbul Real Estate Company, provide you with consultation free of charge.

4 – Pay your taxes on time: it is important to pay your property taxes on time to avoid fines and interest charges. You can usually pay your property taxes at the local tax office or through online payment portals.

5 – Stay updated on changes in tax law: Turkish tax laws and regulations can change frequently. Keeping up with these changes can help you remain compliant with property taxes and avoid any potential penalties or legal problems.