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With regards to real estate in Turkey, following taxes or compulsory insurances are in question:
A real estate property may enable an individual to obtain two types of gains. Firstly, you can rent it out and earn rental income. In that case, you are to pay a personal income tax. Please see the section regarding tax for more information. Secondly, the market value of your asset may rise and hence you can attain a gain. If you sell out your real property in the four-year-period following the acquisition date, you shall be subject to personal income tax based on the difference between the selling price and the inflation-adjusted acquisition price. For sales by individuals after the 4-year-period following the purchase, no personal income tax is charged on the gains to be attained. On the other hand, firms 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.
Foreign nationals and Turkish citizens are no different in terms of taxes or levies to be charged. Tax rates may be updated on a periodic basis. The rates as of January 1, 2005 are presented below. Please have a look at www.gib.gov.tr for updates and other relevant information.
Annual Real Estate Tax (a tax similar to the Council tax in the UK) rates for cultivated land, uncultivated (for building) land, non-residence-purpose buildings, and residential buildings are 0.1%, 0.3%, 0.2%, and 0.1%, respectively.
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 in the period March-to-May
and November each year and those 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 consecutive years’
taxes are paid by the buyer (new owner). On the other hand, the Real Estate Tax rates for properties in the following provinces (metropolitans) are two-fold the normal rates stated above.
Each of buyer and seller is to pay 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 in prior to the transfer of ownership at TAPU office. On the other hand, for the registry of a new building constructed on a land, a levy of 1.5% based on the reference value of the asset is to be paid.
The transfer of property within Turkey, from one to another without any payment or by inheritance are subject to Inheritance and succession tax. Taxpayer is the person who acquires property by inheritance or gratis. Inheritance and succession tax is assessed on the declaration submitted by taxpayer. In the 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. In the case of occurrence of death and being of taxpayers outside of Turkey, the declaration period will be again four months. However, when the death occurs in a foreign country and the taxpayer is in another foreign country, the declaration period is extended eight months. In the case of transfers by gratis, the declaration should be submitted in one month following the date of acquisition of the property. The tax base is updated annually. There are some discounts for inheritance to daughters, sons and spouses. In case a spouse and children including legally adopted ones are to take over an inherited property, then an amount of YTL 83,139 is deducted from the tax base of each person. In case only a spouse is the heir, the amount of deduction from the tax base is YTL 166,375. In case of successions without reciprocity (gifts) the amount of deduction is YTL 1,919. As of 1st January 2006 the applicable tax base brackets and rates are as follows:
Please note that a levy of 0.9% of the value of the property is also charged while the inherited property (or the gift) is being transferred into the name(s) of the new owner(s) at TAPU Offices.
For residential properties, local water suppliers charge an EST of YTL 0.13 per one m3 of water used. For non-residential buildings, the EST is a flat rate and ranges between TL YTL 13 and YTL 1,537 per year. The rates for metropolitan cities, on the other hand, are YTL 0.16 / m3 of water used by residential properties and a flat rate of YTL 16-to-YTL 1,921 for non-residential properties.
Depending on the cylindrical volume or horse power of engine and date of production of the vehicle, vehicle owners have to pay an annual tax ranging between YTL 12 and YTL 24,419 for 2006. Motor Vehicle Tax (similar to road tax in the UK) is paid in two equal instalments in January and July.
Corporate entities have to pay a tax of 30% of their previous year profits. The Turkish Government has recently announced that, the Corporate Tax Rate will be decreased to 20% for all enterprises. Furthermore, only a corporate tax rate of 2% for a couple of years will be applied to the companies which are to make fixed investments above a certain threshold of several hundred-million Euros.
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 up to 150 m2 is subject to a VAT of 1% whereas commercial delivery of those with more than 150 m2 is subject to a VAT of 18%.
Some goods which have effects on the environment, security and health, and luxuries such as.
•
Fuels, industrial oils, petroleum products and petro-chemicals,
are subject to an SCT.
There is a wide range of transactions on which a stamp duty is charged. The Stamp Duty rates applied to contracts in which a monetary clause exists and tenancy contracts are 0.75% (of the amount stated in the contract) and 0.15% (of the rent), respectively.
Main personal income items which are taxed are commercial income, agricultural income, wages, self-employment revenues, rent, interest and other incomes. Personal income tax rates for the year 2006 are shown in the table below. However, Turkish Income Tax Law exempts some amount of rental income from residential buildings for individuals annually. For the year 2006, the rental income up to YTL 2,200 (approximately GBP 940) is exempted from income tax. Please keep in the mind that if you earn rental income more than exempted amount and do not declare to local tax office or under declare, exemption does not apply and you could face severe penalties.
As can be seen above, your rental income and the capital gain you will attain when you sell out your property within a four year period following its purchase in Turkey are subject to personal income tax. In this regard, you are supposed to declare your annual rental revenue to the local tax office on an annual basis whereas you are to immediately declare your capital gain as soon as a sale subject to personal income tax is carried out. Most tax offices do have office automation and internet-based interactive systems. Thus, you can either
You’re advised to contact a financial advisor or the local tax office in order to gather information on when to make the rental income declaration and to pay the associated tax.
In year 2006, minimum gross wage for 30 calendar days is YTL 531 for employees at the age of 16 or more (The cost to employer is YTL 645.17/employee). In other words, if you establish a firm and recruit employees in Turkey, the monthly minimum labour cost will amount to approximately £260/employee. Minimum wage is applied nation-wide and updated periodically. The Minimum Wage Commission composed of the social partners advices the Government on what the minimum wage ought to be, and the Government determines the amount taking into account this advised figure.
According
to Turkish social security laws, self-employed & farmers,
employees (wage earners) and civil servants have to
register to Bag-Kur, SSK, and Emekli Sandigi, respectively.
These are compulsory schemes. Contribution rates for these schemes range between 35% and 40% of the contribution base. The main risks covered by these schemes are old-age, disability/invalidity, health, maternity, mortality, orphanage, widow(ed), unemployment (for the employed). Minimum retirement age for the new entrants is 58/60 (F/M). Please note that the Social Security Reform is on the agenda of the Government and the new law will be enacted this year. Please have a look at www.csgb.gov.tr, www.ssk.gov.tr, www.bagkur.gov.tr, and www.emekli.gov.tr for further information.
Property is to be insured by the owner against the earthquake risks. It is compulsory and a national uniform tariff is applied.
If you possess a car, you are obliged to buy a motorists (traffic) insurance. The cost of policy depends on the cylindrical volume of the engine and the production date of the vehicle.
Wills prepared by foreign nationals in their own countries can be executed in Turkey so as to transfer the ownership of a property to the individual(s) stated within the wills. To carry out the property transfer pursuant to a will, a heir has to gather a court letter confirming the will from the relevant court of his/her own country and to have it ratified at the Turkish Consulate General. Then he/she has to submit that letter to the relevant court of the province in Turkey where the property is located. Then, the Turkish Court issues an official document which allows the transfer. Finally, the heir presents the document granted by the Court to the Tapu Office as well as other documents required for the transfer of ownership. These transfers are exempt from any military clearance and the other restrictions applied to foreign nationals. Please note that transfer of ownership of a property to an heir is subject to inheritance tax. Thus, if the heir sells out his inherited property, he is not subject to any personal income tax based on the capital gains.
When a married couple gets divorced and one of the parties is to transfer the ownership of his/her property (or a share) into the name of the other party, then this transaction is not subject to any tax. Similarly, in Turkey, subsistence payments to be made by a divorced party to the other party are all tax exempt.
Since your UK pensions are already subject to tax in the UK, they will not be taxed again in Turkey. Furthermore, such an income is not gained as a result of a commercial activity carried out in Turkey. In this regard, you can freely transfer your pensions to Turkey. You can either have your pension transferred to your bank account in Turkey or prefer getting cheques sent to you. Please note that an average Turkish household lives on an average monthly income much less than an average UK pension. Thus, your pension itself will allow you to have a financially-comfortable life in Turkey.
Agreements between the Republic of Turkey and 61 countries (including the UK) for the Avoidance of Double Taxation can be reached through the web page of Revenue Administration. (Unfortunately in Turkish) Agreement between the United Kingdom of Great Britain and Northern Ireland and the Republic of Turkey for the Avoidance of Double Taxation was signed on May 9, 1986 and published in the Official Gazette on November 30, 1988. The comprehensive agreement has effect
The Office of the Financial Counselor at the Turkish Embassy in London is in charge of advisory services regarding taxes and customs. Furthermore, the Revenue Administration of Turkey is the regulatory and supervisory tax authority in Turkey. You are advised to contact one of those authorities through:
Revenue Administration
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