Now whether or not a person is liable to pay taxes in Turkey is solely dependent on his/her residency status. If you are a permanent resident of the country, then you are (obviously) required to pay all the taxes that are applicable to every Turkish citizen. However, it is important to note that certain taxes apply to non-residents as well. These comprise government charges on any earnings derived from investments and rental yields in the country – including those chargeable in real estate taxes.
Is Income Tax Applicable on Foreign Nationals in Turkey?
The answer to this question lies in the foreign national’s residency status. In this regard, the following factors come into consideration:
- Foreign nationals with legal Turkish citizenship are expected to pay tax; since they are regarded as ‘official residents’ of the country.
They are also required to pay tax if they have been living in Turkey for more than six months – within any one tax year. This is referred to as the ‘six months’ rule, and it is used by the state to establish whether a foreign national living in the country owes any taxes.
The individuals who satisfy both of the above-mentioned conditions are also required to pay taxes on all the revenue they may have generated within a tax year; even on income earned from sources outside of Turkey.
- A foreign national without legal Turkish citizenship, or one who does not satisfy the conditions of the ‘six-month’ rule, is only required to pay tax on the income generated through real estate ownership or business activities carried out within the country.
This is called the ‘Limited Taxpayer Status’.
It is also applicable to individuals who may have stayed within the country for more than six months but were there in order to fulfill an official appointment or duty (e.g. diplomats).
Foreign national property owners with holiday homes in Turkey also fall under this category, as they are only liable to pay tax on their incomes generated through rental yields or the sale of their properties (or similar investments).
The Real Estate Tax Categories that You Should Know
Real estate taxes in Turkey are relatively lower than in most other European countries. If it is your wish to invest in the country’s property market, then you will require a comprehensive understanding of the country’s tax laws and how the property tax system works here.
Real estate taxes in Turkey can be separated into three distinct categories:
1. Stamp Duty (Title Deed )
This tax is applicable when property ownership changes from one person to another and is to be paid when registering the title deeds for a land plot or building. It is currently set at 3% of the ‘declared amount’ (not to be confused with ‘purchase value’) of the property; with both parties engaged in the transaction required to share the costs equally (even though sellers usually manage to negotiate with the buyers to pay the full amount).
2. Annual Property Tax
This is a yearly tax that is 0.1% of a property’s assessed value. As the value of the property is vastly different from its purchase value, a typical property that costs €100,000 to buy will have an assessed value closer to €60,000; resulting in a maximum annual tax of €60.
3. Real Estate Tax
This tax is applicable to all the income earned through real estate gains from either renting or selling property (or other such investments). The tax rates in this regard can vary from 15% to 30%. Such taxes, for both residents and non-residents, can be divided into two types:
- Capital gains tax on profits accrued through selling property
- Tax on income earned through property – including rent revenues
It is important to note that once you have owned a property for more than five years in Turkey, you are no longer required to pay a capital gains tax on it. Additionally, individuals who have rented out real estate can subtract the costs for its maintenance and repairs from their yearly declared income.
If you were to start looking at countries from across the globe in order to find a location with lower property taxes than Turkey, it is quite possible that you will find several such places that satisfy this requirement. However, you may also notice that none of them offer the same kind of benefits that the country chooses to provision instead.
In Turkey, you will not come across any disconcerting instances of political unrest, economic crises, or civil dissidence. On the contrary, you will find an environment that is conducive to both commercial success and domestic prosperity.
Turkey is a nation that is constantly on the rise, causing investors and businesspersons from every background to travel to the country to make their fortunes; or to lay down their roots in its developing ecosystem.
While you should definitely do your research before making the decision to settle or buy a property in another country, you will not find many that match the ‘holistic’ levels of convenience offered by Turkey – meted out through its low income and property taxes, high property-value growth rates, and minimal barriers to foreign property ownership.
It truly doesn’t get any better than this!