Tax Information

There is no difference between Foreign Nationals and Turkish Citizens pertaining to levies charged. With regard to real estate in Turkey, the following taxes apply.

A real estate property may enable an individual to obtain two types of gains >>
a. Capital Gains Tax
b. Personal Income Tax
Real estate Acquisition and Purchase Levy (Stamp Duty) >>
Real Estate Tax >>
Environmental Services Tax (EST) >>
Corporate Tax >>
VAT >>
Inheritance and Succession Tax >>
Divorce Settlement >>

1a. Capital Gains Tax

The market value of your asset may rise by the time you sell it and you will obtain a capital gain. If you sell your property in the four-year-period following the acquisition date, you will be subject to capital gains tax based on the difference between the selling price and the purchase price. However, approx. €4,000 of the gain attained from the sale is exempt from income tax.

You will not be liable for capital gains tax provided you sell your property after a 4-year-period following the purchase.

On the other hand, companies which are subject to corporate tax are exempt from any corporate tax relating to the real estate-based gains, real estate sale-and-acquisition levy, and VAT, if they sell a real estate that they have owned for at least two years and add the gaining to their capital.

1b. Personal Income Tax

If you generate rental income, you are required to pay personal income tax.

Main personal items, which are taxed, are commercial income, wages self-employment revenues, rent, interest and other incomes. Personal income tax rates for the year 2007 are shown in the table below. Turkish income tax law exempts some amount of rental income from residential buildings annually. For the year 2007 the residential rental income for up to €1,200 is exempt from income tax.

Keep in mind that if you earn rental income more than the exempt amount and do not declare to local tax office or under declare, exemption does not apply and you could face penalties. It must be declared between the 1st and 15th of March of each year and the income tax must be paid in March and July in two equal instalments e.g. rental income earned in 2007 must be declared between the 1st and the 15th March 2008.

Cumulative Income €	Income Tax
0 - 3,800	15%
3,801 - 9,800	€600 for the pervious slice plus 20% of the rest
9,801 - 22,000	€1,800 for the pervious slice 27% of the rest
22,000 - Plus	€5,000 for the pervious slice 35% of the rest

We advise you to contact a financial advisor or your local tax office in Turkey for more information on all tax matters.

2. Real estate Acquisition and Purchase Levy (Stamp Duty)

Both the buyer and seller are subjected to the real estate sale and acquisition levy of 1.5%, based on the declared value of the asset (This value cannot be less than the threshold determined by authorities). It is collected prior to the transfer of ownership at TAPU office (The Title Deeds Office). On the other hand for the registry of a new building constructed on a land, a levy of 1.5% based in the reference value of the asset is to be paid.

3. Real Estate Tax

Tax is calculated on the basis of the declared value of the asset, which could not be less than a threshold determined by tax authorities. Tax payments are made in two equal instalments each year and those taxes are collected by the local governments (Municipality). The tax base is annually updated by a coefficient determined by the Ministry of Finance taking into account the inflation rate.

Real Estate Tax of the property in the year of acquisition is paid by the seller whereas the consecutives years’ taxes are paid by the buyer (new owner).

4. Environmental Services Tax (EST)

For residential properties, local water suppliers charge an EST of 7c per one m3 of water used. For non-residential building, the EST is a flat rate and ranges between 7c and €800 per year.

The rates for metropolitan cities, on the other hand, are 9c m3 of water used by residential properties and a flat rate of 9c to €1000 for non-residential properties.

5. Corporate Tax

Corporate entities are required to pay a tax of 30% of their pervious years profit.

6. VAT

The general vat rate is 18%. However, some goods and services are taxed at either 1% or 8%. Commercial delivery of a residential property with net area of up to 150m² is subject to a VAT of 1% whereas commercial delivery of those with more than 150m² is subject to a VAT of 18%.

7. Inheritance and Succession Tax

The transfer of property within Turkey from one person to another (without payment or by inheritance) is subject to inheritance and succession tax.

Taxpayer is the person who acquires the property by inheritance or gratis. Inheritance or succession tax is assessed on the declaration submitted by the taxpayer.

In case of inheritance, the declaration should be submitted in four months, starting with the date of death.
If the death occurs in Turkey and the taxpayer is outside of Turkey the declaration period is extended to six months.
If death occurs in the same foreign country as the taxpayer is in, the declarations period is four months.
When the death occurs in a foreign country and the taxpayer is in a different foreign country, the declaration period is eight months.

In the case of transfers of gratis, the declaration should be submitted in one month following the date of the acquisition of the property.

There are some tax-free allowances for inheritance by spouses and children (including legally adopted children) the amount of €50,000 is deducted from the tax base of each person. When the spouse is the sole heir, the amount of the allowance is €100.000. In case of successions without reciprocity (gifts) the amount of deduction is €1,100 from the 1 st of January 2007 .

Tax Brackets (Based on the value of the inherited assets) €	Inheritance Tax Rate %	Succession Tax Rate %
0 - 75,000	1	10
75,001 - 160,000	3	15
160,001 - 350,000	5	20
350,001 - 700,000	7	25
700,001 - Plus	10	30

8. Divorce Settlement

If a married couple gets divorced and one of the parties is to transfer the ownership (or a share) into the name of the other party then the transaction is not subject to any tax. Similarly, maintenance payments received from the ex-husband by the ex-wife (or vice versa) are all tax exempt.

Disclaimer:
Tax law is complex and every effort has been made to offer information that is current, correct and clearly expressed. The information in this summary is intended to be no more than a general overview of the position and certain details have been deliberately omitted. The contents of this page should not be taken as an authoritative statement of Turkish tax law and practice. Neither the author nor the publisher are responsible for the results of actions taken on the basis of information contained in this summary, nor for any errors or omissions. This text is not intended to render legal, accounting or tax advice. Readers should seek professional advice concerning specific matters before making any decision.

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