Turkish Income Tax On Rented Property

Turkish Income Tax On Rented Property

 

Turkish Income Tax On Rented Property

Foreign owners who rent their privately owned Turkish property have to pay tax on their rental income in Turkey. With the increase in the numbers of rental property, the tax authorities are now starting to communicate the system for declaration and payment. Where a double taxation agreement exists between the owner's country of residence and Turkey any tax paid in Turkey can be used to offset the tax burden in the owner's country.

The Turkish tax year runs from the 15th March to the 15th March with tax owed due for payment at the end March of the closing tax year.

Tax on rental property is calculated from the gross income in TL, less a personal tax allowance, less a % for property overheads. The net figure is then subject to tax at increasing % bands.  Currently foreign owners can not fully offset all their property overheads, including interest on loans, against their income tax liability in Turkey, however they can offset these in their country of tax residency, if a double taxation agreement exists.

Tax Calculation

A

Gross income received from rental

value in TL

B

Personal tax allowance

per the tax year

C

Balance before expenses

= A-B

D

Allowance for property expenses

= 25% of C

E

Income liable for tax

= C-D

Tax bands for E start at 15% and most the most common tax band for rental income will be 20%.

Example:

If Villa X generated a total income revenue of 10.000YTL during the period 15th March 2009 to the 15th March 2010 the following calculation applies:

Gross income received from rental

A

10.000 TL

Personal tax allowance*allowance for year ending 15.03.2010

B

2.900 TL

Balance before expenses

C

7.100 TL

Allowance for property expenses

D

1.775 TL

İncome liable for tax

E

5.325 TL

Tax band applied for E

20%

Tax Payable

1.065 TL

For property owned by Turkish company formation company taxation laws apply and you will need to speak to your company account for further details.

Tax avoidance is likely to incur a penalty calculated by the tax authorities assumed likely rental income, not allowing for a personal tax allowance (B)or a % for property overheads (D). This would result in a sizable penalty that would also be subject to interest.

To file a Turkish tax return you can either contact a local account or if you have a property management company taking care of your property they can file it on your behalf. They will require the following information.

1) Owner and Property Details

  • The registered property owners name(s) and passport photocopies
  • The reigistered property owners Turkish Tax numbers
  • Photocopy of the Title Deed of the rented property to confirm parcel number and land details.
  • Property name e.g. Villa X

2) Income details

  • Details of Income for the tax year in question. State this in GBP and the month of payments for conversion to the YTL

Information Specifically for UK Foreign Owners

We have checked with the Inland Revenue to confirm how income from your Turkish property should be handled in the UK to prevent double taxation. These are the key points for guidance.

  • Tax receipts from the Turkish authorities for a tax year end will be issued before the UK Self Assessment September deadline.
  • You should submit details of the income received and tax paid to the Turkish authorities through the form FOREIGN PAGES.
  • You should deal with any other tax deductible expenses through the UK tax system through the Land and Property pages of the Self Assessment form.

In light of each individuals different tax position this is the most detail that we can give and we recommend you contact your local Inland Revenue Office for more specific advice on your personal situation.

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