Turkish Real Estate and Taxation

know more about the the taxation in real estate in Turkey

Turkish Real Estate and Taxation

When considering property investment in Turkey, understanding the tax implications is crucial. Income tax liability in Turkey depends on your residency status. If you are regarded as a Turkish resident, you will be liable to pay income tax in Turkey. For non-residents, the tax is limited to earnings derived within Turkey, such as real estate income.

Are Foreign Nationals Liable to Income Tax in Turkey?

Foreign nationals' income tax liability in Turkey is determined by their residency status. If you are a resident, you must pay income tax on your global income. Non-residents, however, are only liable for taxes on income earned within Turkey, including real estate income.

Turkish Real Estate Taxes: An Overview

Real estate taxes in Turkey are comparatively low, making it an appealing destination for property investors. Here's a breakdown of how property taxes work in Turkey and a comparison with other European countries:

Capital Gains Tax in Turkey

Capital gains tax is levied on the profit made from selling a property. This profit is calculated as the difference between the declared purchase and sale amounts. For instance, if you bought a property in 2010 for EUR 100,000 (declared amount EUR 60,000) and sold it in 2013 for EUR 130,000 (declared amount EUR 80,000), your taxable profit is EUR 20,000. The tax rates range from 23% for gains up to TL 40,000 to 35% for higher amounts. Notably, no capital gains tax is payable if you sell your property after five years of ownership.

Rental Income Tax in Turkey

Tax on rental income is calculated similarly to capital gains tax. After deducting allowable expenses like maintenance, the net income is taxed. Tax brackets start at 15% and can rise to 35% for net incomes exceeding TL 40,000.

Comparison with European Countries

Russia: Foreign investors face a 30% income tax on rental income with no deductions, plus land and property taxes.

Austria: Non-residents encounter higher property taxes and a 25-30% tax on capital gains without expense deductions for properties sold within ten years.

France: The tax code varies for furnished and unfurnished rentals, with additional penalties for "professional" landlords.

Panama: Investors are subject to VAT on immovable property and a property tax increasing with property value.

Italy: Rental income is taxed at 23-43%, and residents pay taxes on global income.

Switzerland: Rental income is taxed at a high rate of 54.5%.

Greece: Although current property and income taxes are lower than in Turkey, Greece's financial instability may lead to future tax hikes.

Why Invest in Turkish Real Estate?

Turkey stands out for property investment due to its low property and income taxes, high property value growth rates, and minimal barriers to foreign ownership. Compared to other European nations, Turkey offers a more favorable tax environment, making it a top choice for real estate investors.