March is here again, and for property investors in Turkey, this means it’s time to declare annual income. Although it’s not the most enjoyable task, it’s a necessary one. Many of Pera’s investors, both new and experienced, often have questions about how rental income tax in Turkey works. One frequent query is: “I don’t live in Turkey, so why do I pay tax?” The answer is straightforward: income earned in Turkey must be taxed in Turkey. If this applies to you, read on!
Allowable Expenses
Two methods are permitted in Turkey for declaring rental income: the lump sum method and the actual expenses method.
Lump Sum Method
- Investors can write off 15% of their rental income as expenses, with no documentation required.
- Once this method is chosen, it must be used consistently for two consecutive years.
Actual Expenses Method
- This option is ideal if your actual expenses exceed 15% of your rental income.
- Investors must retain invoices and receipts for all relevant expenses throughout the tax year.
Here are the allowable expenses under the actual expenses method:
- Loan interest: Interest on loans taken for acquiring the property.
- Depreciation: Owners can declare 5% of the property value as depreciation for up to five years from the date of purchase. For example, a property purchased for ₺1,000,000 can have ₺50,000 declared as an expense annually for five years.
- Maintenance and repairs: Costs related to upkeep, such as painting, door repairs, or garden maintenance.
- Annual property taxes: These can also be claimed as expenses.
Note: Expenses incurred during the acquisition of the property, such as purchase tax and surveyor reports, are not deductible.
Tax Calculation
Rental income is taxed in Turkey according to income tax brackets. Investors should consider appointing an accountant to ensure accurate calculations and compliance. The tax rates for 2024 are as follows:
| Income Scales (TRY) | Rate (%) |
|---|---|
| Up to 32,000 | 15 |
| 32,001 to 70,000 | 20 |
| 70,001 to 250,000 | 27 |
| 250,001 to 880,000 | 35 |
| 880,001 and over | 40 |
These brackets apply to both employment and non-employment income, including rental income. Calculation of tax is based on the total annual rental income minus allowable expenses.
Key Points to Remember
- Declaration Deadline: Ensure your income is declared by 31st March.
- First Installment: The first installment of your tax must also be paid by this date. The second installment is due on 31st July.
- Seek Professional Advice: Navigating Turkey’s tax system can be complex. Hiring a qualified accountant can help ensure compliance and optimize your tax liability. Get in touch with us for a recommendation.
For tailored advice, feel free to contact Pera Property. We would be happy to refer you to our tax advisors, based in Sisli, Istanbul.
This article was first written in March 2016, and updated on Jan 1st 2025 to reflect the latest tax brackets. For the latest tax brackets, please get in touch or refer to the Turkish government’s tax website
