Individuals’ net rental income is liable to income tax at progressive rates. Nonetheless, a specific threshold amount is free from taxation if the property is rented out as a residence.
Either the lump sum approach or the actual deduction method can be used to work out net rental revenue.
- The actual deduction method subtracts actual costs from the gross rental income, including those for lighting, heating, water, administrative costs, insurance costs, taxes and charges, interest costs, depreciation costs, and repair costs. For income from building leases, 5% of the acquisition cost is also deductible within five years. In order to calculate their taxable income using the lump sum approach, taxpayers can deduct 25% of their gross income. Also, taxpayers cannot switch back to the actual expense deduction until two years have passed after choosing to adopt the lump sum approach.
Capital Gains Tax
If the holding term exceeds five years, capital gains on the sale of immovable property are excluded from income tax (four years if the property was bought before 01 January 2007).
Normal income taxation rates apply to properties owned for less than five years, or four years if purchased before January 1, 2007. The acquisition costs (subject to inflation adjustment) are deducted from the selling price to determine the taxable gains.
Value-Added Tax (VAT)
In Turkey, there is no VAT on renting out real estate.
Except for homes with a total surface area of 150 square metres, which are subject to 1% VAT. There is no VAT charged on the sale of real estate by persons who are not estate agents.
Turkish real estate is subject to a municipal tax known as real estate tax (land and buildings). The classification of the property determines the applicable tax rate.
Land and residential properties are taxed at 0.1% of their value. The tax rate is 0.1% for all types of land, 0.2% for structures, and 0.3% for building sites or undeveloped land set aside for construction.