Advantages & Tax Liabilities
What are the Advantages of Buying a Property in Turkey?
- Residency: 1 year renewable residence permit will be given when you buy a property in Turkey
- Citizenship: Citizenship application can be made when you buy a property worth at least 250.000 USD.
- Low Taxes: Taxes to be paid are much lower in Turkey compared to many other countries. Incentives are given for foreign investors such as being exempted from VAT.
- Full Ownership: All properties are freehold in Turkey. When you buy a property in Turkey, will you have full ownership rights on it and your family has the right of inheritance after your death.
- High ROI: Yearly 6% to 8% rental yield and 10% to 20% capital appreciation on the property price can be expected.
- Strategic Location: Turkey is located between Europe and Asia. Istanbul is a hub for the whole region. Istanbul has the biggest airport in the world and Turkish Airlines flies to more than 120 countries in the world which makes it the leading company in this category.
- Cost of Living: Prices in general in Turkey are very affordable. Cost of living in Istanbul is way cheaper compared to many other metropolitan cities like London and Dubai.
- Climate: You can enjoy the four seasons in Turkey during the year. Summers are not very hot and it is possible to see snowy weather in winter whereas it is not very cold neither.
- Nature and Sea: Turkey is one of the greenest countries in the world with a great nature. The country is covered with the beautiful sea in north, west and south.
- Food: Simply you will enjoy the rich diversity and beauty of Turkish cuisine. Everyone loves Turkish food.
- Health Sector: Healthcare is highly accessible all around the country with very affordable prices.
Useful Information to Check Before Buying a Property in Turkey
Closing Costs
While purchasing a property in Turkey, there are taxes and some expenses to be made for the government before receiving the title deed.
Purchasing tax: 2% – 4%
When a sale occurs between two parties, 4% of the sales price should be paid to the government. Usually, this is divided as 2% for the buyer and 2% for the seller.
VAT (Value Added Tax): 1% – 18%
For commercial units and properties over 150 m2 net area, VAT to be paid is %18. For properties under 150 m2 net area, %1 VAT will be paid.
Utilities: ≈ 500 USD
Registration fees for electricity, water, gas connections to your apartment will cost approximately 500USD.
In most cases, VAT will be included in the sales price when you buy a property from a developer. Utility expenses and notary expenses are not high relatively. When you are buying a resale property from an individual, purchasing tax can be requested from you which is 4%. Considering the commission to be paid for the service fee, the total cost will be 6% for resale properties. For brand new properties, your closing cost will be only 2%.
Capital-Gains Tax
In order to avoid fast buying and selling moves in the market, the Turkish government do not charge any capital-gains tax when you do not sell your property for the first 5 years after buying your property. In other words, the appreciation of the price will be your net profit after 5 years.
When you sell your property within five years, the capital-gains tax to be paid will be calculated depending on your accumulated profit taking into account the inflation for each year. The tax to be paid changes with progressive increases from 15% to 35% from the profit.
Rental Income Tax
Rental income tax is a bit complicated subject in Turkey and might need professional guidance in order to reduce the taxes to be paid in legal ways. The regulations are changing while renting a residential unit or a commercial unit. Most of the tax is paid by the tenant when a commercial property is rented. In addition, there are two ways to calculate the tax as you will be choosing the one which is more beneficial for you. The tax rate to be paid is changing with progressive increases between 15% and 40% as shown below. However, there will be deductions in many cases and with the chosen calculation system, the percentages will be less in reality.
Taxes to be paid:
Up to 22.000 TL : 15%
For 22.000 TL the tax is 3.300 TL, from 22.000 TL to 49.000 TL : 20%
For 49.000 TL the tax is 8.700 TL, from 49.000 TL to 120.000 TL : 27%
For 120.000 TL the tax is 27.870 TL, from 120.000 TL to 600.000 TL : 35%
For 600.000 TL the tax is 195.870 TL, over 600.000 TL : 40%
Example: In one calculation system, 6.600 TL income + 15% of the remaining income will be exempted from tax calculation. For example, if your yearly rental income is 100.000 TL; you will not pay tax for 6.600 TL + 14.010 TL part. From the remaining 79.390 TL, rental income tax will be calculated.
Up to 49.000, it is 8700 TL
49.000 to 79.390, it is (79.390-49.000) x 0.27 = 8205 TL
Total rental income tax for 100.000 TL income is 16.900 TL.
Yearly Property Tax
In Turkey cities are categorized in two parts. 30 cities over 750.000 population are considered to be big cities / first category. Other cities are considered in the second category. Property tax to be paid will change depending on the city and property type. (Higher rates given below are for the first category cities)
For residential properties: 0.2% – 0,1%
For commercial properties: 0,4% – 0,2%
For farms: 0,2% – 0,1%
For lands: 0,6% – 0,3%
Example: For a house in Istanbul with 1.000.000 TL value, property tax will be 0.2% of its value which is 2000 TL / yearly.
Residency Permit Applications
Once you receive your title deed, you have the option to apply for a residence permit in Turkey. All foreigners are allowed to get one-year residence permit automatically when they buy a property in borders of Turkey. Foreigners should apply to Foreigners Section of the Provinces’ Police Headquarters of the city they want to live in with their title deed copy and DASK (earthquake insurance) document.
DASK (Compulsory Earthquake Insurance)
Having earthquake insurance for your apartment is obligatory in Turkey and it should be renewed yearly. The cost of the insurance will mainly depend on the total m2 of the property, its location and the age of the building. The amount to be paid will be approximately 50-100 USD yearly in Istanbul.
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