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RENTAL PHASE

How is my rental income taxed in Turkiye?

Rental income is subject to “Income Tax”. Income Tax is calculated on a yearly basis by taking into consideration for all rental income collected during the calendar year. Rental collections relating to the previous years and current year are subject to tax as the income of the year in which collection is made, whereas collections made for future years in advance are taxed as income of the year to which they relate. Moreover, the income obtained at the time of a lease transaction made on the basis of a foreign currency is converted to Turkish Lira using the exchange buying rate of the Turkish Central Bank effective on the date collection is made and the tax is levied accordingly. Yearly rental income is declared via an annual income tax return between 1st and 25th of March in the following year that the rental income is obtained and taxed at the rates between 15% and 35%. Income Tax is paid in two equal instalments in March and June.

Specific portion of the rental income derived from residential property is held to be exempt from Income Tax. The exempt amount is TRY 3.900 for the year 2017.

Taxpayers who derive rental income that is subject to withholding tax (please refer to the following question for details) will submit a tax return in the event the gross amount for this rental income exceeds TRY 3.900 which is the cap set for submitting a tax return in 2017. At the time of determining this cap, the gross rental income which is subject to withholding tax as well as residential rental income exceeding the exemption amount is taken into account together. In the scope of declaring rental income obtained during a calendar year, individuals are allowed to deduct some expenses.

As regards expenses to be deducted while determining the base for the rental income to be taxed, there are two methods that can be selected by the taxpayers. These are:

 

Real Expense Method :

In case of selection of the real expense method, following expenses that are incurred in relation to the leased properties can be deducted from the gross rent amount:

*Lighting, heating, water and lift expenses

*Administrative expenses,

*Insurance expenses for the properties and rights leased out,

*Interest expense of the borrowing made and spent for the properties and rights leased out,

*5% of the acquisition amount of the property rented out for residential purposes for a period of five years (this deduction equalling the 5% of the acquisition amount will only be applied to the income derived from the relevant property, the portion not deducted will not be treated as excess expense),

*Property tax, duties, charges and goodwill as well as participation amounts for expenditure paid to municipalities,

*Amortizations,

*Repair expenses,

*Rents and other real expenses paid by those who have leased out properties and rights which they have rented.

*Rent amounts of residential or accommodation units occupied by those persons who lease out their residential units (excluding rent amounts paid by non-resident taxpayers in a foreign country), and

*Damages, losses and indemnities.

The portion of these expenses corresponding to the income amount held exempt from tax cannot be deducted.

 

Lump Sum Expense Method :

Taxpayers who prefer the lump sum expense method can deduct the lump sum expense corresponding to 25% of the amount remaining after the offsetting of exemption amount from the rental income. Taxpayers who prefer this method cannot use the real expense method for the next three years.

 

Should I charge VAT to my rental income?

No. Rental incomes obtained by individuals who are not dealing with any commercial activity or from the properties that are not part of the enterprise are not subject to VAT. So, as an individual lessor you will not charge any VAT.

 

What happens if my lessee is a company?

Legal entities have to calculate tax withholding at 20% over rental payments for properties leased by real persons and pay the relevant amounts to the affiliated tax office. Real persons obtaining the relevant rental income offset these taxes that are levied to their earnings from the tax that will be calculated over their yearly declared earnings.

 

Does stamp tax applicable if I sign a rental agreement?

As mentioned above, in principle all originally signed agreements having a monetary value signed in Turkiye are subject to “Stamp Tax” including leasing agreements over the total leasing amount stated in the agreement at 0.189%. On the other hand, since leasing agreements between two individuals are exempt from stamp tax no tax is calculated.

 

Is it obligatory to register rental agreement to the title deed registry? What are the fiscal liabilities if we register?

No. It is not obligatory. But, if parties are agree to register Title Fee at the rate of 0.683 % over the total rental amount is calculated and paid to the Tax Office.

Should I pay property tax for all my properties in Turkiye? How and when?

Yes. Land and buildings in Turkiye are subject to property tax and the taxpayer is the owner of the building.

Property tax rates vary depending on property type and its location (whether the property is located within the boundaries of a metropolitan municipality). Tax rates that are currently effective according to these criteria are as follows:

 

 

Residential Unit

Workplace

Arable Land

Other Land

Ordinary regions

1 %

2 %

3 %

1 %

Metropolitan municipality boundaries and surrounding areas

2 %

4 %

6 %

2 %

 

*Property tax is calculated over values determined by municipalities for the streets and avenues. So, you should check your property’s tax value by the related municipality.

*Property tax liability for persons who purchase property starts as of the beginning of the year following the year in which the sale is made.

*Property tax is paid in two equal instalments, the first one due for payment in March, April and May and the second one due for payment in November.

Also, as an additional liability called “the surcharge for the protection of immovable cultural assets” is collected together with the property tax at 10% of the annually collected property tax.

Sosyal Medyada Bizi Takip Edin !