What property tax will I pay on a second home in Turkey?

Every week, Mansion Global poses a tax question to real estate tax lawyers. Here is this week’s question.

Q: I am a resident of Great Britain and am looking to buy a second home in Izmir, Turkey. What are the property taxes like there?

A: Property taxes in Izmir, Turkey’s third largest city, located on the beautiful Aegean coast, are the same as in the rest of Turkey.

Buyers buying a home in Turkey must pay an initial stamp duty or transfer tax, known as a title deed fee, when the transaction is completed. The total tax due to the Turkish authorities is 4% of the value of the land, as determined by the local directorate of land registration and cadastre. The value of the land is often lower than the sale price of the property. Turkish law states that the seller pays 2% and the buyer 2%, unless both parties agree otherwise. This means that an element of negotiation is often involved as the seller will sometimes ask the buyer to pay both parts of the tax.

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Foreign buyers may also have to pay a 2% commission (plus 18% VAT) to the estate agent, but some listings, especially for new builds, include the commission fee.

Annual property taxes are due in two installments in May and November. Owners of residential properties must pay 0.2% of the value of the property annually if located in a metropolitan area, or 0.1% if located in a rural area. This means that the tax due on a property in the city of Izmir will be twice that due on a rural property in the province of Izmir. For example, an apartment in the city of Izmir valued at 2 million Turkish liras (136,500 US dollars) will be taxed at 4,000 Turkish liras per year.

In order for a property in Turkey to be sold, the seller must pay the full year’s property tax in advance, so the buyer will not be responsible for paying the annual property tax until the first year. calendar after purchase. For example, if the buyer purchases a property in Izmir in April 2022, the seller will need to make advance payments for taxes due in May 2022 and November 2022 before the sale can be completed. The buyer’s first tax payment will be due in May 2023. Taxes can be paid at local council offices or online.

Buyers can be exempted from paying the annual property tax when buying a private residence with a gross floor area of ​​less than 200 square meters, provided they have no income in Turkey – except exclusion of income from a pension – and own no other property within. the country. It’s worth checking with a local financial adviser to make sure a property qualifies for this exemption before making the purchase.

Additional rental income taxes may be due if the buyer chooses to rent the property when not in residence. Part of the sale price plus the cost of any renovations or repairs can be deducted as an expense, meaning taxes on rental income tend to be very low for the first ten years.

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