What Buyers Need to Know About Property Tax in Turkey

Real estate buyers are obligated to pay certain property taxes in Turkey. Buyers need to know and consider certain aspects of the taxation of property funds. Here are the information about the taxation system and the types of property taxes in Turkey.

What is Property Tax?

Property tax is a fee that is required by the local government for the possession of a property. It is calculated as a percentage based on the property’s value.

Property taxation is created to fund the necessities of the city and the property. They are mostly used for improving the facilities and services that the property benefits from. The taxes help to improve the underground systems such as water and sewer canals, providing educational facilities, law enforcement, and health services. The tax percentage may change each year.

While selling a property in Turkey taxes must be fully paid to finalize the sale. The property must be delivered to the new owner debt-free.

There are various property taxes in Turkey. Types of taxes can be sorted as;

• Title Deed Conveyance Tax (Tapu Devir Vergisi)
• Annual Property Tax (Yıllık Gayrimenkul Vergisi)
• Capital Gain Tax (Gayrimenkul Değer Artışı Vergisi)
• Property Rental Income Tax (Emlak Kira Geliri Vergisi)
• Inheritance and Gift Tax (Veraset ve İntikal Vergisi)
• Value Added Tax (Katma Değer Vergisi)

Title Deed Conveyance Tax

This real estate taxation is a one-time fee for real estate purchases. It is also known as property purchase tax in Turkey. It is required for the title deed transfer. The tax must be paid to General Directorate Land Registry and Cadastre Office.

The tax amount is determined as 2% of the sales amount for each party. The regulation suggests that the amount may be paid equally by the buyer and the seller. However, the market rule requires that the buyer should make the whole payment of 4% tax.

Real estate specialists advise discussing the topic during the negotiation. If the topic is not discussed previously, the tax payment remains as the buyer’s responsibility.

Annual Property Tax

The annual property tax is directly linked to the property value. The property values increase each year. This increase is taxed by municipalities. The tax amount is mostly determined by a commission.

The annual property tax in Turkey is usually paid in 2 phases. The first payment is made in Spring, between March and May. The second payment is made in November. It is also possible to pay the tax online through banks.

The tax rates change according to the type of property and its location. The rates are:

Capital Gain Tax

According to Article 80 of the Income Tax Law, if a property owner gains earnings from a property sales within 5 years of owning it, the owner is liable to pay the capital gain tax. However, if the earning is below the exception limit, the Capital Gain Tax is not obliged. The exception limit is announced by the Turkish Revenue Administration. The limit is determined as 25.000 TL for 2022.

There are some exceptions such as the Capital Gain Tax is not mandatory in case of an inheritance or being gifted with real estate by the parents. This will count as a long-term capital gain. That excludes the seller from the Capital Gain Tax.

The property seller must submit a written statement until the following March after the sales transactions. For example, if the house is sold in August 2022, the written statement must be submitted by March 2023. The payment can be made in 2 installments in March and July.

The Capital Gain Tax is calculated by the TUFE rate. TUFE represents the changes in the annual inflation rate. The TUFE rates of the previous and next months of the purchase must be divided into each other.

Then, the quotient amount must be multiplied by the first purchase amount of the house. The obtained number must be subtracted from the last sales amount. The final result represents the profit.

The taxable gain is obtained by the subtraction of the exception rate from the profit. The taxable gain must be calculated with the Capital Gain Tax rate of the year. That will give you the final tax amount to pay.

Property Rental Income Tax (Emlak Kira Geliri Vergisi)

Investment property taxation is obligatory when the investment becomes the source of profit. The property becomes a source of income if the owner earns a regular income by renting it.

The property owners must submit their incomes to the tax office each year. The rental property tax rate is based on the rental income and increases in parallel with it.

How Much is the Rental Income Tax in Turkey?

Up to 32.000 TL annual income, 15%;
4.800 TL fee for 32.000 TL of 70.000 TL annual income, 20% for the rest;
12.400 TL fee for 70.000 TL of 170.000 TL annual income, 27% for the rest;
39.400 TL fee for 170.000 TL of 880.000 TL annual income, 35% for the rest;
287.900 TL fee for 880.000 TL of more than 880.000 TL annual income, 40% for the rest.

For commercial properties, stoppage tax must be paid by the owner and the tenant. In the case of residential properties, stoppage tax is not mandatory for the tenant. The owner must make the full tax payment.

Explore the best selection of rental income properties by Bursa Homes ®.

Inheritance and Gift Tax

If someone receives an immovable gift or by inheritance, they are obliged to pay an inheritance and gift tax in Turkey. The rates may differ according to the receiving methods. The methods are divided in two as by inheritance and by gift. The tax amount is determined based on the value of the property.

The owner makes a full payment if the immovable was obtained from a lottery, a competition, or some individual. However, the tax amount may be reduced by 50% if the gift was received by family members such as spouses, children, or parents.

Value Added Tax

The VAT is a tax payment a seller/service provider is obligated to pay to the Tax Office. The VAT payment is made by the buyer of a product/service to the seller/service provider.

The VAT payment is only mandatory for first-time property purchases by construction companies. For second-hand properties, if the seller is an individual the buyer is exempted from the VAT payment.

The amount of land or commercial real estate taxation may differ in comparison to the residences. VAT rates for apartments, commercial properties, and lands are as follows:

The Value Added Tax is calculated based on land fair value. The fair value is determined by a committee. It depends on many factors such as location, environmental conditions, etc.

What is Double Taxation?

It is a regulation referring double payment of the income taxes of the same source of income. It is only valid if the buyer is living in a different country than its nation and gain earnings from the investment. It is also possible for dual citizens. In this situation, two countries may require an income tax at the same time.

Countries may sign an agreement with each other to avoid this compulsion. The agreements between authorities aim to support overseas investments and entrepreneurship.

List of the countries with Double Taxation Agreement

FAQ – Frequently Asked Questions About Property Taxation in Turkey

Q: Are there property taxes in Turkey?
A: Yes. There are 6 different types of property taxes in Turkey. Title Deed Conveyance Tax is only paid while buying a property.

A homeowner must pay the Property Rental Income Tax if the real estate has become a source of income. Capital Gain Tax must be paid if a real estate is being sold within 5 years of the purchase.

Annual Property Tax is an annual payment a homeowner must pay. If a property was inherited by a family member or obtained as a gift, the new owner must pay Inheritance and Gift Property Tax. A Value Added Tax (VAT) is a one-time payment for new property purchases.

Q: Do foreigners pay property taxes in Turkey?
A: Yes. Foreign property buyers must pay necessary taxes in Turkey.

Q: Are property taxes high in Turkey?
A: No, tax rates are determined in parallel with the inflation rate. The tax rates are relatively lower in comparison to similar European countries.

Q: How are the property taxes paid in Turkey?
A: It is possible to pay the taxes through local banks. Some banks allow their customers to make payments via online banking.

Q: How do I pay my Turkish taxes online?
A: Some local banks allow to completion of tax payments through online banking.

Q: How much is Property Tax in Turkey?
A: The price of a property tax may differ according to the tax type. The fees are mostly calculated based on the value of the property.

Q: How does the Property Tax work?
A: The property assessment and taxation are regulations made by the government and state authorities. There are 6 different property taxes based on the purpose of purchase or usage.

Q: What are the real estate taxes?
A: There are 6 types of real estate taxes:

• Title Deed Conveyance Tax (Tapu Devir Vergisi)
• Property Rental Income Tax (Emlak Kira Geliri Vergisi)
• Capital Gain Tax (Gayrimenkul Değer Artışı Vergisi)
• Annual Property Tax (Yıllık Gayrimenkul Vergisi)
• Inheritance Tax (Miras Vergisi)
• Gift Property Tax (Hediye Gayrimenkul Vergisi)
• Value Added Tax (Katma Değer Vergisi)

Q: What are the real estate taxes based on?
A: The taxes are calculated based on the value of the property, the income obtained by the property, or the property size.

Q: How can I make sure that the property is debt-free before buying it?
A: During the property sales, all tax payments must be completed before the title deed transfer. It is not possible to transfer the title deed if the property has a tax debt.