One of the most commonly asked questions we receive here at Pera, relates to property taxes. Be it one off taxes, for example when buying, or ongoing annual taxes, people want to know what to expect. We have produced several guides before, but to keep everyone updated, here’s a comprehensive tax guide for buying property in Turkey, updated for 2024.
A Comprehensive Tax Guide for Buying Property in Turkey
1. Title Deed Transfer Tax (Tapu Harcı)
When you buy property in Turkey, the Title Deed Transfer Tax is one of the first significant taxes to consider. This tax is 4% of the property’s sale price and is typically split between the buyer and the seller, though in practice, buyers sometimes cover the full amount.
- How to Pay: This tax is due at the General Directorate of Land Registry and Cadastre and must be paid before the deed transfer.
- Payment Timing: Payment is expected prior to attending your appointment. The land registry (tapu dairesi) will send you an sms with payment amounts and a reference number.
- Additional payment: Expect to also pay the “doner sermaye”, which can be considered as an administration fee. As of writing, this fee is 935 lira.
- Informal practices: The 4% paid is not strictly based on the purchase price but on the declaration amount. In most cases the seller will obtain what is called the rayac bedeli (minimum declaration amount) from the local municipality, and declare this amount. This is usually 50-60% of the actual price. Note this practice is not legal and is being clamped down upon by the government.
2. Value-Added Tax (VAT) – KDV
In certain cases, properties in Turkey are subject to Value-Added Tax (VAT), which ranges between 1% and 20% of the property’s purchase price. The VAT rate depends on factors like the property’s size, purpose, and the legal entity selling it. It is mandatory only on property sold for the first time i.e. it is not due on resale property.
- Exemptions for Foreign Buyers: Foreign nationals are often exempt from VAT on their first property purchase if the purchase is for residential or commercial use and they meet specific conditions (e.g. paying in foreign currency and proving their residency is not within Turkey.).
3. Annual Property Tax (Emlak Vergisi)
Once you own property in Turkey, you will be responsible for paying an annual property tax. This tax is 0.1% to 0.3% of the assessed value for residential properties, depending on location (e.g., properties in metropolitan areas have higher rates).
- Rates:
- Residential: 0.1% to 0.2%
- Commercial: 0.2% to 0.4%
- Land: 0.1% to 0.3%
- Due Date: Payments are made in two installments in May and November, although can be made in one go.
4. Income Tax on Rental Income
If you decide to rent out your property, any rental income earned is subject to income tax in Turkey. The tax rate is progressive, ranging from 15% to 40% depending on the amount of income earned.
- Exemptions and Allowances: There is an annual exemption amount, which is adjusted yearly. Expenses related to property maintenance, insurance, and repairs can be deducted from rental income.
- Reporting: Rental income must be reported annually by submitting a tax declaration in March for income earned the previous year.
5. Capital Gains Tax on Property Sales
If you sell a property within five years of purchase, you will be liable for Capital Gains Tax. The rate for this tax varies and is calculated based on the profit made from the sale.
- Exemption Period: If you hold the property for more than five years, you may be exempt from capital gains tax.
- Tax Rate: The capital gains tax rate in Turkey is 15% to 35% based on the profit amount.
- Inflation Adjustment: The purchase price is adjusted for inflation when calculating the taxable gain, which can reduce the tax liability.
- Due: the tax is only due once you make a declaration to the tax authorities, or whenever they catch up with you!
6. Inheritance and Gift Tax
If you transfer your property to another person via inheritance or as a gift, there is an Inheritance and Gift Tax. This tax rate varies between 1% and 30%, depending on the property’s assessed value and the relationship between the giver and recipient.
- Annual Installments: The tax can be paid in annual installments over three years.
- Rates: Spouses and close family members usually pay at a lower rate, while unrelated parties may pay at the higher end of the scale.
7. Stamp Duty for Purchase Agreements (via a notary)
In some cases, if you sign a formal purchase agreement (not always required for property purchases in Turkey), a stamp duty of 0.948% of the agreement’s value may apply.
- Applicability: This fee is generally associated with mortgage agreements, contracts, and specific legal documents related to the sale.
- When buying from an instution, such as Emlak Konut, Toki, or the municipality, a notarised contract is mandatory.
- We also recommend a notarised contract where the property is not due for delivery within six months.
8. Additional Fees and Costs
Aside from taxes, there are additional fees associated with buying property in Turkey:
- Agent’s Commission: Real estate agents usually charge a commission fee of 2% to 3% of the sale price.
- Notary Fees: For notarizing certain documents or translations, especially if you don’t speak Turkish. Fees vary as translators can charge whatever they like. Notary fees are fixed by the government.
- DASK (Compulsory Earthquake Insurance): Every property purchase in Turkey requires DASK insurance, which is an annual earthquake insurance that covers potential damages. In most cases, expect to pay 2,000-3,000 lira. Note DASK is not a comprehensive insurance and does not cover the actual value of the apartment. In most cases, it will cover approximately 15% of the value.
9. Tax Identification Number (Vergi Kimlik Numarası)
Before paying any taxes, foreigners must obtain a Tax Identification Number in Turkey. This number is necessary for any financial transactions, including property taxes. It can be obtained at the local tax office in Turkey with a valid passport or online. The cost is free.
10. Residency and Citizenship Programs
Foreigners who purchase property worth a minimum of $400,000 may qualify for Turkish citizenship. Those investing in real estate worth $150,000 in metropolitan areas can also apply for 12 month residency.
- Citizenship by Investment: This is an attractive option for investors, granting the right to reside, work, and access health and education services in Turkey. See our citizenship guide.
Tax Considerations for Investors
For foreign investors, understanding these taxes is essential to evaluating the profitability of a property investment in Turkey. Working with a reputable tax advisor or real estate consultant experienced with foreign transactions can help ensure compliance and optimize tax obligations. Turkey’s government actively encourages foreign investment, making the real estate market relatively accessible, with incentives like VAT exemptions and citizenship opportunities.
