There is a lot of curiosity about the extent of property tax for foreigners in Turkey. The main reason for this curiosity is the increasing interest of foreigners in buying property in Turkey. With the removal of the strict measures of the pandemic, in the first half of 2021, the number of properties purchased by foreigners in Turkey increased by 44% compared to the same period of the previous year, while this figure reached to 185% levels only in June 2021. The increase in exchange rates in Turkey and the newly built luxury projects seem to have fed this increasing interest. In fact, due to the increasing interest, it is seen that the official website of the Ministry of Foreign Affairs of the Republic of Turkey includes the issues that foreigners should pay attention to during the sale of real estate. Turkey has a city where 4 seasons are experienced throughout the year and will always preserve its historical and cultural importance like Istanbul. In addition to offering an enjoyable life experience for foreigners, it is also one of the key countries in the world in the field of logistics. Among the airlines flying to the most countries, Turkish Airlines has taken its place in the top 10. If you want to buy real estate in Turkey, continue reading our article for the tax payments you will encounter.
Property Taxes Paid by Foreigners in Turkey
When you buy a real estate in Turkey, both residential or commercial, you have to pay some taxes as well as in other countries. Property taxes paid by foreigners in Turkey are grouped under different classifications.
1- Title Deed Fee: It is the first payment that every buyer encounters when buying real estate in Turkey. It is paid during the “sale” of the real estate you will buy. The title deed fee is 2% of the sales price. Both the seller and the buyer have to pay the title deed fee at equal rates (2%). Title deed fee is paid for all residences, commercial properties and lands.
2- Property Tax: Every property within the borders of Turkey is subject to property tax. Both locals and foreigners who buy a property in Turkey must also pay property tax. The property tax to be paid may vary depending on the region where the property is located. Especially the property tax paid by the real estates within the borders of the Metropolitan Municipality is doubled compared to other regions. You must pay the property tax a year after the purchase.
3- Real Estate Income Tax: Both Turkish and foreigners who buy real estate in Turkey have to pay "real estate income tax" in case they rent their property. Real estate income tax, which is paid in equal installments in March and June every year, start from 15% of net income and goes up to 40%. While determining the payment amount of real estate income tax, it is important whether the real estate you buy is a residential or a commercial property. The amount of real estate rental income paid for residences and commercial properties are different.
On the other hand, property owners who sell the real estate within the 5 years after they purchased, are also liable to pay real estate income tax. The net profit from the sale is expressed as “revaluation gain”. Capital gains are included in annual property tax payments. The gain in value increase is calculated as “Sales price-purchase cost-sale-related expenses”. It is reported on the property tax return in March of the year the sale took place. Payment is made in 2 equal installments in March and June.
4- Capital Gains Tax: It is the tax that a both locals and foreigners pay, if they constantly buy and sell real estate in Turkey. If a person has bought and sold more than one real estate within 1 year or has made real estate sales for each successive year, his earnings are considered business income and must pay capital gains tax. However, if one holds the purchased real estate for at least 5 years and does not sell it, he does not have to pay capital gains tax. Because in non-commercial purchase and sale transactions, invoice issuance and VAT calculation is made. Invoice arrangement and VAT calculation must be done in the purchase and sale transactions made by traders for commercial purposes. Capital gains tax ranges from 15% to 40%.
5- Value Added Tax (VAT): It is the tax that foreigners who buy real estate in Turkey pay when receiving the property. However, this tax was changed with a new regulation in 2017. Foreigners who do not live in Turkey and make purchases in foreign currency do not have to pay VAT. In addition, if the purchased real estate is sold within 1 year, VAT must be paid with interest.
During tax payments, if there is a “double taxation agreement” between the country of citizenship of the foreigner and Turkey, the provisions of the agreement are valid. For more detailed information on property tax for foreigners, you can contact us now.
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