Taxes and Compulsory Insurance
Basic property-related taxes
What gains can be attained through property? Are those gains taxed?
Taxes and Compulsory Insurance
Preparation of wills and transfer of property to the heirs
Divorce settlements
Your UK pensions
Agreements for the Avoidance of Double Taxation
Avoidance of Double Taxation on Income Derived from Property
More-information-on-taxes
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, 2008 are presented below. Please have a look at www.gib.gov.tr for updates and other relevant information.
Real Estate Tax
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 in November each year and those are collected by
the local municipality (Council). 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.
| •
Adana • Ankara • Antalya • Bursa • Diyarbakir • Erzurum • Eskisehir • G.Antep |
•
Icel • Istanbul • Izmir • Kayseri • Kocaeli • Konya • Samsun |
Real Estate Sale-and-Acquisition Levy
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 (Land Registry) 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.
Inheritance and Succession Tax
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 96,075 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 192,265. In case of successions without reciprocity (gifts) the amount of deduction is YTL 2,216 from 1st January 2008.
As of 1st January 2008 the applicable tax base brackets and rates are as follows:
|
Tax Base Brackets (Based on the value
of the inherited asset) |
Inheritance
Tax Rate |
Succession Tax Rate (When no reciprocity
exists) |
|
First YTL 150,000
|
1% |
10% |
|
Next YTL 320,000
|
3% |
15% |
|
Next YTL 680,000
|
5% |
20% |
|
Next YTL 1,380,000
|
7% |
25% |
|
Amount above YTL 2,530,000
|
10% |
30% |
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 (Land Registry) Offices.
Environmental Services Tax (EST)
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.
Motor Vehicle Tax
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 28,218 for 2008. Motor Vehicle Tax (similar to road tax in the UK) is paid in two equal instalments in January and July.
|
Category |
Amount of Tax (YTL) |
|
|
Lower Limit |
Upper Limit |
|
|
Car,
motorbike, others
|
12 |
12,697
|
|
Minibus, bus, truck, pick-up truck |
139
|
1,902
|
|
Yacht, boat, vessel, ship |
2,79
|
63.48
|
|
Aircraft, helicopter |
3,384
|
28,218
|
Corporate Tax
Corporate entities had to pay a tax of 30% of their previous year profits. Corporate Income Tax rate was lowered to 20% by the new Corporate Income Tax Law published in the Official Gazette on June 21, 2006. The new rate will apply to all corporate incomes earned after 1st January 2006.
VAT
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%.
Special Consumption Tax (SCT)
Some goods which have effects on the environment, security and health, and luxuries such as. • Fuels, industrial oils, petroleum products and petro-chemicals, • Motor vehicles and sea vehicles, • Beverages and products with tobacco • A number of goods including caviar, perfumes, some make-up/cosmetic products, printed materials, some electrical and electronic devices are subject to an SCT.
Stamp Duty
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.
Personal Income Tax
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 2008 are shown in the table below. (Click here for the tax rates for rental income earned in 2007)
However, Turkish Income Tax Law exempts some amount of rental income from residential buildings for individuals annually. For the year 2008, the residential rental income up to YTL 2,400 (approximately GBP 1,000 @ 2.32 on 27 Dec 2007) is exempted from income tax. This exemption amount is YTL 2,300 for rental income earned in 2007. On the other hand, a flat rate of 25% for maintenance expenses is deducted from taxable rental income.
Please keep in 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. Therefore you must register with local tax office and declare your rental income. It must be declared between 1st and 25th of March and the income tax must be paid in March and July in two equal instalments. Rental income earned in 2007 (If exceeds exempted amount) must be declared from 1st to 25th of March 2008.
Cumulative
Income (YTL) |
Income
Tax |
||
Lower Limit |
Upper Limit |
||
0 |
7,800 |
15%
of the income |
|
7,800 |
19,800 |
YTL
1,170 for the previous slice plus |
20%
of the rest |
19,800 |
44,700 |
YTL
3,570 for the previous slices plus |
27%
of the rest |
44,700 |
-- |
YTL
10,293 for the previous slices plus |
35%
of the rest |
As can be seen above, your rental income and the capital gain you will attain when you sell out your property within a five year period following its purchase in Turkey are subject to personal income tax.
In this regard, you are supposed to declare your annual rental income 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 go to a local tax office and fill out a form (tax return) there, or fill out the relevant form to be downloaded from the web page of the Revenue Administration or to be obtained from the Office of Financial Counsellor at Turkish Embassy in London (see bottom of page for contact details) and then submit it to the tax office.
Moreover, individuals (including foreigners) who earn only rental income in Turkey are able to send their tax returns through internet to the tax offices offering online services. For further information please refer to the Guideline prepaired by the Revenue Administration. The Guidline is also available in Turkish and German.
You’re also 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.
Minimum wage
From 1st January 2008, minimum gross wage for 30 calendar days is YTL 608 for employees at the age of 16 or more (The cost to employer is YTL YTL 738.72/employee). The gross wage will be YTL 638 from 1st July 2008.
In other words, if you establish a firm and recruit employees in Turkey, the monthly minimum labour cost will amount to approximately £318/employee @2,32 on 27 Dec 2007.
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.
For further information please visit our investment pages.
Social insurance
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 have a look at www.csgb.gov.tr, www.ssk.gov.tr, www.bagkur.gov.tr, and www.emekli.gov.tr for further information.
Earthquake Insurance
Property is to be insured by the owner against the earthquake risks. It is compulsory and a national uniform tariff is applied.
Other property insurance types can be freely bought from the market and they cover some risks including theft and fire. For further information please visit our insurance page.
Motorists Insurance
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.