Tax is the money that governments collect from the citizens. They do it either directly or indirectly by adding to the prices of certain items and services, by the relevant law. The taxes are spent on public services.
The financing of the citizens is provided by taxes in Turkey, and also in the world. If there is a government, taxes are mandatory.
The real estate tax is the annual tax collected from the owners of real estates such as residences, workplaces, and land in Turkey. All the real estate taxes in Turkey are listed below:
- VAT (Value Added Tax)
- Stamp Duty
- Annual Property Turkey
- Inheritance or Gift Tax
- Income Tax
- Purchasing Tax
1. VAT (Value Added Tax)
A value-added tax, also known as a goods and services tax in some countries, is a form of tax that is assessed in stages. It is applied to the price of a product or service at every stage of manufacture, distribution, and sale to the final customer. 1% VAT rate is applied for residences with a net area of less than 150 square meters in Turkey. Luxury or first-class quality residences within the borders of the metropolitan municipality might be subject to 8% or 18% VAT.
Land square meter tax values have been re-appraised, effective from the beginning of 2022. So, significant tax increases have occurred in most of the lands in metropolitan areas.
Thus, most of the residences within the boundaries of the metropolitan municipality, whose construction permit will be obtained in 2022 and the following years, will forfeit their right to the 1% VAT rate and will be subject to 8% or 18% VAT.
2. Stamp Duty
Stamp duty is an official type of tax levied by the government, resulting from all contracts. It means the completion of agreements or transactions between individuals and institutions on official papers.
According to the General Communiqué submitted to the Official Gazette, the documents subject to stamp duty consist of many official documents. For instance; guarantees, pledges, termination letters, undertakings, documents for pre-owned vehicle sales, real estate sales contracts. Moreover, stamp duty rates in Turkey range from 0.189% to 0.948% in 2021.
3. Annual Property Tax
It is the annual tax collected from the owners of immovable properties. Annual property tax in Turkey is paid in two equal installments; in May and November each year. For real estate owners who want to pay in advance, it is also possible to pay two installments together. The annual property tax varies according to the type, value, and status of the relevant property.
Annual property tax ratios;
- 0.2% for residences in a metropolitan such as Istanbul, Ankara.
- 0.1% for residences in nonmetropolitan.
- 0.1% for nonbuilding grounds in nonmetropolitan.
- 0.2% for nonbuilding grounds in big cities.
For instance, the annual property tax to be paid for a residence with a current value of 100.000 TL / 10,030 USD in a metropolitan will be calculated as 100.000×2/1000 = 200 TL / 20.06 USD.
4. Inheritance or Gift Tax
An inheritance or gift tax is a type of tax that arises as a result of the transfer of goods belonging to persons with Turkish Citizenship either by inheritance or gift.
Gift tax rates range from 10% to 30% of the appraised value. Moreover, inheritance tax rates range from 1% to 10% percent of the inherited amount. Besides, both taxes are paid in 2 installments a year within 3 years.
5. Income Tax
When foreign investors constantly buy and sell real estate in Turkey, they are considered merchants and pay income tax as commercial earners. On the other hand, investors who do not constantly buy and sell real estate do not pay income tax.
Foreigners are subject to title deed fees, VAT, and stamp tax during the real estate purchase and sale process (title deed transfer). Real estate buyers pay income tax on the sales income or rental income they get by selling the real estate they own. The income tax of people who purchase real estate and deal with sales transactions ranges from 15% to 40% over the total net income in a year.
6. Purchasing Tax
There are title deed transactions and title deed expenses processes in the real estate trade. Procedures can take longer than finding and buying a home. The details and the completion of the documentation are significant. Real estate purchase and sale tax are determined by laws and taxes and fees are paid according to the categories of properties.
Is it Mandatory to Pay Property Tax in Turkey?
Yes, it is. Although all real estate owners have to pay property tax, there is a big group that is exempt. Those who have no income, retirees, veterans, widows, and orphans of martyrs and disabled citizens do not pay property tax if they have only one house. They can also get it back.
Furthermore, 2021 November installment payments of the property tax continue.
Is it Mandatory for Foreigners to Pay Property Tax in Turkey?
Yes, it is. Foreign nationals are also subject to pay property tax for their immovable properties in Turkey. As of 2021, these taxes are;
- Annual Property Tax
- Real Estate Income Tax
- Capital Gain Tax
- Company Tax
- Inheritance or Gift Tax
Is not Paying Property Tax in Turkey a Crime?
Yes, it is. Foreign nationals pay taxes for their immovable properties in Turkey. Those who do not pay are tax evaders.
How to Buy Real Estate in Turkey?
We have listed above the taxes you have to pay after buying real estate in Turkey.
Required documents to buy real estate in Turkey;
- Identity document or passport (Translation of the passport if necessary)
- Property expertise report
- Real estate market value certificate from the municipality
- Compulsory earthquake insurance (DASK)
- If the transaction will be carried out with a power of attorney issued abroad, the original and notarized copy of the sworn translation of the power of attorney
If you want to have more information, Realty Group will be your best solution partner. So, Realty Group will enable you to make your home purchases in no time! You can buy a house or find an affordable one in every province of Turkey. When you buy real estate worth $400,000 at least, you can acquire citizenship for yourself and your family.