Turkish rental income tax advice
Everyone who earns an income in Turkey is liable to pay tax, and that includes income on your Turkish property.
Taxes in Turkey are divided into three different categories:
- Income tax
- Taxes on expenditures
- Taxes on wealth
Income taxes in Turkey:
Income tax in Turkey is progressive, meaning that the higher your income, the higher the tax rate will generally be. Income tax rates in Turkey vary from 15% up to 35% in total.
Non-residents are only required to pay income tax on all income and earnings earned in Turkey – including employment, rental income of your property in Turkey, and if you are running a business in Turkey. So for example, if you purchase a holiday home in Turkey and you rent out the home during the peak months of the summer, you will have to pay taxes in the income you make from renting your home.
If you are an investor and you earn interest on your investments in Turkey, you are liable to pay tax on these too.
Tax rate explained based on your income in Turkey:
0-10,000 Turkish lira is taxed at 15%;
10,001-25,000 lira is taxed at 20%;
25,001-58,000 lira is taxed at 27%,
58,001 lira and above is taxed at 35%.
Business tax for holiday rentals
In 2018, new rules were rolled out for property owners who rented their holiday homes. In short, all private owners who rent out their Turkish homes must now have a business licence to operate, and pay business taxes. The licence (Vergi Levhasi) shows you are a rental business, rather than a sole trader.
As with income tax, the business tax is progressive, with an annual exemption. You may also deduct expenses such as management fees, repairs and insurance.
It’s an easy and pretty painless process, especially if you hire a local Turkish accountant to file returns for you on a monthly basis.
Deductions on Turkish income tax
You can deduct certain expenses from your rental property income. Maintenance and some wear and tear, insurance and property management fees, can be deducted from your taxable amount.
Taxes on expenditures:
These include Value Added Taxes (VAT) – this is known as KDV in Turkish. These are paid on imports and exports to and from Turkey.
If you are planning on setting up a business in Turkey that brings in foreign items to sell, for example, then you will have to pay VAT on those items. Similar to other countries around the world, there is also a special consumption tax that falls under this category, and there are four key product types that are affected under this:
- Petroleum and gas products
- Automobiles and motor vehicles, including boats.
- Tobacco and alcohol
- Luxury products
For most people who are simply looking to buy a home in Turkey, however, this won’t affect their life in Turkey and they won’t need to worry about this.
Taxes on wealth:
This includes Turkey property taxes. Every year, as an owner of real estate in Turkey, you will have to pay taxes on the land and building values of the property. These normally rate at between 0.1% and 0.6% in total. Turkish property and land itself is taxed at 0.1% in total. Once you have completed your purchase of Turkish property, you can easily work out the tax you will have to pay per year on that.
For example, if you purchase a home in Turkey and the value of the home is 200,000 Euros, then you will have to pay a fee of 200 Euros per year. One thing to note, is that once a property has been purchased or sold in Turkey, both the buyer and seller will have to pay a tax equal to 2.2% of the declared price – this is known as stamp duty and is a one off payment.
For more information on these taxes, including the most up to date and sought out information on buying a home in Turkey, please contact us or give us a call and one of our friendly team members will be happy to assist you in the laws surrounding taxes in Turkey when you buy a home in Turkey.