Can I rent out the property I purchased for my citizenship application in Turkey? What types of taxes do I need to pay for the rental income?
You can freely rent out your property, even if you purchased it for citizenship purposes. Rental income tax depends on whether the taxpayer is a company or a real person. For companies, corporate income tax is fixed at 22%. For real persons, the income tax range is between 15-40%, depending on the size of their income.
There is a tax exemption for foreign people who want to buy real estate in Turkey the first time. They are exemption from value-added tax (VAT) if they do not sell the real estate in one year and if they pay the purchasing cost as foreign currency. If they do not buy a property for the first time in Turkey, they will have to pay VAT. For properties are not more than 150 square meters (net area), the VAT is %1; for those that are more than 150 square meters, the VAT is 18%. Additionally, buyers and sellers will only pay 2% property tax each at the purchasing moment. Renting the property is not obstacle for gaining the citizenship. But you can not sell it for three years. You can rent the real estate after purchasing. VAT will be paid by the tenant if you rent your property. You as a house landlord will have to pay the income tax for a rental year which is calculated according to your net yearly rental income between 15% to 35%. For office leasing, the landlord will not pay income tax since the tenants are taxpayers too.
If you purchase a property in Turkey, sale and purchase tax is 4% percent from the assessed value of the property, and it is generally split in half by the buyer and seller. Once you buy the property you can directly rent out your property without waiting for the completion of the Turkish citizenship application. Once you rent the property, you need to submit a tax declaration if the rental income is more than 6.600 TL which is a tax exemption amount in 2020. If the rental income is more than 6.600 TL then tax declaration for the rental income has to be submitted. The rental income tax rate is between 15% and % 40 depending on the rental income amount. Owners of the properties are obliged to pay property taxes that are paid annually on the tax values of land and buildings at rates ranging from 0.1% to 0.3% and also environmental cleaning Tax.
In general, real estate cannot be transferred within three years due to rules on the acquisition of citizenship. A reservation shall be put at the land registry during the sale and purchase. However, if it is transferred within the fourth and fifth years, then you have to pay income tax for the difference between purchase and sale amounts. There is an exemption up to TRL 18,000. If income exceeds TRL 18.000, then the ratio of 15-40% would be applicable depending on the earning. After the fifth year, you are not required to pay the above income tax. You can lease your real estate. If the owner leases the real estate as an apartment, then, any amount exceeding TRL 6.600 shall be subject to income tax on which the above rates between 15-40% shall be applicable. If the owner leases the real estate as a workplace, then any amount exceeding TRL 40,000 shall be subject to income tax on which the above rates between 15-40% shall be applicable. However, the lessee shall pay 20% of the income tax to the tax office on behalf of the owner. The rate for real estate tax is 0.2 % of the real estate's value and is paid each year. The environmental and cleaning tax also applies, which varies between TRL 850 and TRL 5,500, depending on the degrees/levels where the real estate is located. There is a chart for this tax published by the official authority. You also need to pay land registry's fees, which are rated at 1.5 % of the real estate's value shall be paid to the land registry during the sale and purchase.
Yes, you can. And the tax over the rent income is approximately 1/12 of the yearly rental income.
In order to complete the real estate purchase process for citizenship, you need to pay 4% of the title deed fees. In the ongoing process, you’ll have to pay property tax and environment tax annually. By the way, a reservation is made to the land registry with the sale process. After that real estate cannot be transferred within three years due to the acquisition of citizenship rules. However, there is no prohibition to rent your property. Everyone is free to determine the future of their property, as there is no record, unlike the deed. If you rent your property as a natural person, you'll be liable to pay varying income tax every year when you earn rental income that exceeds the amount determined according to tax legislation.
Real estate acquisitions in Turkey are subject to real estate transfer tax (“RETT”). A charge of 4% (2% for the transferee and 2% for the transferor) would be applied either over the purchase price of the real estate or over the official value of the real estate for real estate tax purposes whichever is higher in the determination of the RETT base. Despite 2% RETT liability of the transferor imposed by law, in practice, 2% tax liability of the transferor would be borne by the transferee in addition to his/her RETT liability of 2%. Thus, 4% RETT related to the acquisition of the real estate would be paid by the transferee. Real estate sale transactions are exempt from stamp duty. However, if the parties want to annotate a preliminary sale contract at the Public Register, then a stamp duty at the rate of 0.825% is payable. Additionally, a Public Register fee is payable of 0.59% of the contract price (provided that the contract price is not lower than the real estate tax value of the relevant real estate). The sales of real estate owned by individuals acting with no commercial purposes are not subject to VAT. Real estate transactions take place within the context of commercial activities (i.e. sales of real estate owned by companies) in Turkey are subject to VAT at the rate of 18%. Yet, for certain residential real estate with a net surface of less than 150 square meters, the VAT rate is 1%. The buyer shall pay the VAT to the seller who in return shall pay it to the tax authorities. If a company is not active in real estate business, it would be exempt from VAT depending on certain conditions (i.e. if the real estate is held for one year). If the real estate is sold before being held for five years as of its acquisition, capital gains tax will apply to the sale transaction. Capital gains tax is calculated based on the producer price index (ÜFE) rates. The calculation is made based on the ÜFE rates of the date of acquisition and date of sale of the real estate. The tax rate varies as 15%, 20%, 27% and 35% depending on the value of the sold real estate. If the real estate is kept for five years as of its acquisition, capital gains tax will be exempted while selling that real estate. Sales of real estate gratuitously acquired are always exempted from the capital gains tax. Owners of real estate are liable for certain taxes as well.
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