31st March is the last day in which income derived from leased property must be declared to the dreaded taxman in Turkey. It’s also the date at which the first installment for tax must be paid. First things first – what are allowable expenses?
March is upon us once more, and March in Turkey means its time to declare one’s annual income. Nobody likes to do this, however needs must and here we are again. There is much confusion amongst Pera’s investors (new and old) who want to know how income tax in Turkey works in relation to rental income. The first question is always this – “I don’t live in Turkey, why do I pay tax?!”. Well, income derived in Turkey must be taxed in Turkey – if this is you, read on!
Allowable expenses
Two methods are allowed in Turkey – the lump sum method and the actual expenses. Investors can choose to write off 15% as expenses, no questions asked. If this route is chosen, it must be made for at least two years worth of declarations.
Investors can choose to declare actual expenses, if it is more than 15% of the rental income. In this case, all invoices must be kept throughout the tax year. The advantage of this is that one can offset any interest paid to a bank for a loan which was used in the acquisition of the property. A further important “expense” is the depreciation of the property. Owners can declare 5% of the property value as depreciation for a maximum period of 5 years from the date of ownership. As an example, a property purchased for 1,000,000 Lira can have 5% of its valued declared as an expense each tax year, i.e. 50,000 lira.
Maintenance and repairs are also allowable expenses. These are expenses made in the upkeep of the property – e.g. repair of doors, fresh paint, garden maintenance and so on. Other expenses such as annual property tax bills can also be claimed. One cannot claim expenses made in the acquisition of the property i.e. Purchase tax, surveyor reports etc.
Tax calculation
Pera Property strongly recommends you appoint an accountant for your annual tax bill. Rental income is taxed in line with income tax brackets in Turkey. Hence investors can expect to pay between 15% and 35%. Here are the brackets:
| Income Scales (TRY) (Employment Income) |
Rate (%) | Income Scales (TRY) (Non-Employment Income) |
Rate (%) |
| Up to 18,000 | 15 | Up to 18,000 | 15 |
| 18,001 to 40,000 | 20 | 18,001 to 40,000 | 20 |
| 40,001 to 148,000 | 27 | 40,001 to 98,000 | 27 |
| 148,001 and over | 35 | 98,001 and over | 35 |
Calculation of the tax is made in accordance with these brackets. For professional advice, please contact us.
