Tax and Turkish Real Estate

| Created : 2023-07-10
| Updated : 2024-03-19
Created : 2023-07-10
Updated : 2024-03-19

Buying a property in Turkey is a significant investment, and it is important to understand the associated taxes. Turkish real estate taxes are relatively low compared to other countries, but they can still add up. Here is a brief overview of the main Turkish real estate taxes:

  • Property tax: This is an annual tax paid to the local government. The amount of tax owed is based on the value of the property, which is determined by the local municipality. The tax rate varies depending on the location of the property, but it is typically between 0.1% and 0.6%.
  • Title deed fee: This is a one-time tax paid when buying or selling a property. The tax rate is 4%, and it is shared equally between the buyer and seller.
  • Value-added tax (VAT): VAT is a consumption tax that is applied to most goods and services in Turkey. For new residential properties sold by construction companies, the VAT rate is 18%. However, there are some exemptions to this rule. For example, buyers of apartments smaller than 150 square meters are exempt from paying VAT.
  • Capital gains tax: This tax is applied to the profit made from the sale of a property. The tax rate varies depending on the holding period of the property. For properties sold within five years of acquisition, the capital gains tax rate is 15%. For properties sold after five years of acquisition, the capital gains tax rate is 20%.

In addition to these main taxes, there are a few other minor taxes that may apply to Turkish real estate transactions. For example, there is a stamp duty of 0.09% and a notary fee of around 0.5%.

It is important to note that these taxes are subject to change, so it is always best to consult with a tax advisor before buying or selling a property in Turkey.

What are the Taxes that Foreigners Pay After Buying Real Estate in Turkey?

If you are on the verge of buying a property in Turkey and wondering whether you are subjected to more taxes than a Turkish citizen, the answer is no. A foreigner and a Turkish citizen have the same rights in all real estate-related taxes. Foreigners and Turkish citizens are subjected to these taxes;

  • Property Tax
  • Title Deed Fee
  • Value Added Tax
  • Capital Gains Tax (in case of selling the property)

As mentioned above, the tax rates are on an equal basis between foreigners and Turkish citizens. By understanding the tax obligations and planning accordingly, you can navigate the process of buying real estate in Turkey as a foreigner more effectively and make informed financial decisions.

How to Calculate Your Taxes in Turkey?

Before you buy a house, you can calculate how much tax you will pay on the appraised price. This way, you can calculate how much you will be financially affected before you buy the house, and you can approach this complex transaction with more solid steps.

Annual Property Tax Let’s say you bought a residential property in a big city in Turkey (metropolitan cities, for example, Istanbul real estate, you are to pay % 0.2 of the total amount of the purchase, every year. In another scenario, if the property is located in a small city, the rate will be reduced to % 0.1. A property sold for $300,000 will have an annual tax bill of $6,000 in metropolitan areas and $3,000 in smaller cities. If the property is commercial, the percentages are multiplied by two and the math is the same. If it’s land, the percentages are multiplied by three this time, making it % 0.6 for big cities, % 0.3 for small cities.

Title Deed Fee As we already mentioned, this is a one-time payment to the General Directorate of Land Registry and Cadastre, to get the official document that states you own the property. The title deed fee is calculated on the total amount of the property, which is %4, and divided between the buyer and the seller.

Value-Added Tax When it comes to property tax in Turkey, there are additional VAT exemptions available to first-time foreign purchasers. For commercial properties, the VAT rate is 18%. For residential properties, the VAT rate ranges from 1% to 18%. Specifically, flats with a net area of less than 150 m2 have a VAT rate of 1%, while units with a net area of more than 150 m2 are subject to an 18% VAT rate.

However, it is wise to mention that;

  • If your house is 500TL m2 or less, you are to pay %1 VAT.
  • If your house is between 500 TL and 1000 TL m2, you are to pay %8 VAT.
  • If your house is higher than 1000TL m2, you are to pay %18 VAT.

How Can I Pay Real Estate Taxes in Turkey?

Now that you know about the taxes you are subject to, the next step is how and where to pay your taxes. The property tax is paid to the municipality. Therefore, either visit your local municipality and pay or access the website of the municipality and pay it online. You will have to provide your tax and registration number to pay it via the website. 

Luckily, various ways ease up the process of paying taxes, which are;

  • Online banking, many banking services allow you to pay your real estate taxes through their platform, either from a mobile phone or website.
  • Automatic payment, which many banks provide the service, is an agreement between you and your bank. If you agree to this, your bank will automatically pay the real estate taxes for you.
  • By visiting the bank, you can make the payment in cash. You have to ensure that you have every necessary document.
  • By visiting the tax office, you can also make the payment in person.

You can pay the title deed only by going to the tax office you are affiliated with. You can also use the Interactive Tax Office (Interaktif Vergi Dairesi) systems to make title deed fee payments over the Internet.

Do I Pay Tax When I Sell My Apartment in Turkey?

If you are wondering whether you are to pay taxes while selling your apartment, even though you paid some when you’re buying it, the answer is yes. Capital Gains Tax is specifically targeting this. If you have purchased the house you intend to sell within the last 5 years, you will have to pay capital gains tax. At this point, the difference between the purchase and sale price is calculated and a tax payment is issued to you. The tax rate can reach up to 35% depending on the difference between the purchase and sale price. For this reason, the real price of the house should be reflected when buying and selling a house, or you might get into trouble.

Are Real Estate Taxes in Turkey Lower Than in Other Countries?

Indeed, Turkish property tax rates are generally lower compared to those in many other countries. In Turkey, the overall property tax rate varies between 0.1% and 0.6%, depending on factors like property type and location. This stands in significant contrast to the property tax rates observed in several European nations, such as the UK (ranging from 0.3% to 0.9%), France (ranging from 0.5% to 1.7%), and Germany (ranging from 0.3% to 1.5%). Moreover, Turkey's property tax rates are also lower than those found in the United States, where they typically fall between 0.7% and 2.4%. In addition to the advantage of lower overall property tax rates, Turkey also offers various exemptions and deductions that can further reduce the property tax for residents and citizens. For instance, primary residences benefit from an exemption, and there are specific deductions applicable to properties used for commercial purposes.