Non-residents are taxed in Turkey on income arising from Turkish sources only and are liable to a number of other property related taxes outlined below. The tax year in Turkey is the calendar year and an individual is considered resident in Turkey if she/he spends 183 days or more in any tax year in Turkey.
There is an agreement between The United Kingdom of Great Britain and Northern Ireland and The Republic of Turkey for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains. But at present, Ireland and Turkey have not signed a Dual Taxation agreement but one is expected in near future. This will impact the tax implications on income received from Turkish property.
Taxes payable when purchasing a property in Turkey:
Turkish transfer fees 3% is payable by the buyer side on the sale of a property. These fees are based on the declared value of the property. However, the declared value of the property cannot be lower than the 'tax value' determined by the local town hall, which is also used as the base of the property tax. 1.5% is also payable on the register of new buildings constructed on land.
The VAT rate in Turkey on the sale of property is 18%. But sales of houses which are below 150 meter square in net area, are subject to 1% VAT. If an immovable is owned by a company in Turkey, than selling this immovable after having held for 730 days (2 full years) might not be subject to VAT and corporate tax. This exemption also depends on some other conditions.
Turkish Stamp duty is levied on sale & lease contracts. The rates range from 0.15% - 0.75% and depends on the value of the contract.
Ongoing property taxes payable in Turkey are as follows:
Turkish Rental Income for a non-resident is taxed at scaled rates from 15% - 35%. Expenses directly related to the renting of the property are allowable as a tax deduction eg repairs & management fees.
There is also a lump-sum expense method, which allows the taxpayer to deduct 25% of the gross income as the expense without proving with documents.
Tax is deducted by way of a withholding tax. If a DTA comes into effect reduced rates of withholding tax may apply.
A Turkish tax return must be filed by 25th March with taxes payable in 2 equal payments - March & July.
Local Turkish Property Taxes (rates) are payable in 2 equal installments - May & November. Rates are calculated based on the value of the property and are subject to thresholds set by the Tax Authorities as follows:
* Residences 0.1%
* Other buildings 0.2%
* Land 0.1%
* Farming land 0%
* Vacant land (but allocated for construction purposes) 0.3%
Taxes payable when purchasing a property in Turkey:
