Legal costs regarding property acquisition

Property investors in Turkey are also responsible for taxes and fees indicated below:

Value Added Tax (VAT)

If the seller or buyer is a company, VAT at a rate of 18 % is paid by the company. VAT exemptions are applicable to the property in case of:

• the sale of the property by individuals who are not estate agents;
• the sale of the property by a corporate entity if (1) the property is owned by a company for a minimum of 2 years and (2) the consideration for the sale of the property is added to the share capital.

The sale of houses with a total surface area of 150 sq. m. or less and the delivery of houses to housing cooperatives are subject to VAT at the rate of 1 %.

Capital gains

Capital gains realized by individual. A capital gain generated from the sale of the property that is held by the vendor for at least 4 years before the date of sale is exempt from tax. The standard rate of this tax is identical to the rate of personal income tax which is from 15 % to 35 %.

Capital gains realized by company. If the property is held for more than 2 years before the date of sale, the capital gain generated from such sale is exempt from tax. The standard rate of tax for companies is 20 %. Capital gains tax is calculated only on the actual profit.

Leases

Stamp Duty applies to lease agreements and is levied at 1.5 % (or 0.75 % in cases where the agreement provides a guarantor) of the amount of the rent to be paid in accordance with the duration of the contract. Stamp duty is payable by the parties who sign the agreement. Each original copy of the agreement is separately subject to stamp duty.

Rental payments to individuals by tenants, who are legal entities, are subject to 20 % withholding tax. Rental income of individuals is subject to personal income tax - from 15 % to 35 %. The rental income tax of legal entities is subject to the regular 20 % corporate income tax. Rental payments to landlords, who are legal entities, are subject to VAT at a rate of 18 %.

Property tax

The property tax returns are filed every four years. Annual taxes are paid in two equal installments, with the first in March, April or May and the second one in November. The property in Turkey is taxed according to the purchase / sale value. The taxable basis for properties is subject to annual revaluation based on levels determined by the Government.

Buildings and land owned in Turkey are subject to real estate tax at the following rates:

• residential buildings - 0.1 %;
• other buildings - 0.2 %;
• fields - 0.1 %;
• vacant land (allocated for construction purposes) - 0.3 %;
• farming lands - 0 %.

The rates are doubled for the property located in the metropolitan municipalities.

Environmental tax

Environmental tax is collected through water utility bills.

Earthquake insurance

In Turkey, there are two types of insurance policies for properties: the compulsory earthquake insurance and other non-compulsory property insurance.

Compulsory Earthquake Insurance - DASK (The Turkish Catastrophic Insurance Pool-TCIP) - is mandatory for all houses except for the buildings which belong to public establishments and the buildings constructed on village settlement areas. The insurance companies are authorized to sign insurance agreement with the name and account of TCIP.

Non-compulsory property insurance can be freely bought from the market and they cover some risks including theft and fire. Foreigners are permitted to conclude property insurance contract in Turkey.

Inheritance and Gift Tax

Property acquired as a gift or through inheritance is subject to taxes of between 1% and 30% of the valuation. Tax paid in another country on inherited property is deducted from the taxable value of the asset. Inheritance tax is payable over the period of three years and in two installments per year.

Double taxation Prevention Treaties

Turkey is a signatory to a Treaty for the Prevention of Double Taxation with many countries all over the world. A Double Taxation Prevention Treaty, in principle, enables offsetting tax paid in one of 2 countries against the tax payable in the other, in this way preventing double taxation.