Turkey: Holiday Properties - Taxes & Inheritance: Turkey

The decision to purchase a holiday home is often made on a wave of emotion, with the exuberance of great memories of a beautiful summer holiday. But however enthusiastic you are about the beauty of your home and its area, it is important to also keep an eye on the costs in order to avoid unpleasant surprises later on leading to “buyer’s remorse”. These start with the ancillary costs of the actual purchase and can continue until the inheritance tax in the case of an inheritance.

In the following article, we review the costs you need to take into account for Turkey as they occur on the purchase of the property, during its ongoing use, on its sale or transfer as a gift, or even in the event of inheritance.

Overview

What costs do you incur when purchasing a holiday home?

Real estate is transferred directly at the land registry. The land registry fees are 2% of the purchase price for the buyer and the seller. If a property is acquired by foreigners, the Land Registry also requires a written valuation from a licensed property valuation company; the cost of this is around € 400. The standard estate agent’s fee is also 2% plus VAT (18%) for both buyer and seller, but this fee is negotiable. There is no property transfer tax in Turkey. If the property is a new building being sold for the first time, foreign buyers are exempt from VAT if they are not resident in Turkey and they pay for the property in foreign currency. Otherwise, VAT of 8% of the price per m2 must be paid for the first 150 m2, and 18% per m2 must be paid for the area above that, if the property is acquired by a company.

What operating costs need to be paid by the owner of a holiday property?

Once the property has been bought, a property tax of 1% of the market value of the property must be paid each year; payment is made in two instalments. If the property is located in a city, the property tax is 2% of the market value. The market value is recalculated every four years by the municipal valuation committees. In addition, there is a sewerage tax, but this is minor and is measured based on water consumption (TRY 1.50 per m3 in large cities, otherwise TRY 1.10 per m3). In addition you need electricity, water and, if relevant, natural gas customer contracts, the costs of which are minor.

What costs are incurred when selling a holiday home?

On sale, land registry fees of 2% of the purchase price and, if relevant, estate agents fees of 2% plus VAT (18%) of the purchase price apply for each of the buyer and seller. If the property is sold less than five full years after the purchase of the property, the seller must pay income tax on the difference between the two purchase prices. The income tax varies between 15 and 40% and depends on the amount of profit the seller has made on the sale. If the seller benefited from the exemption from VAT and sells the property less than three years after purchasing the property, it must pay the VAT retroactively, plus interest.

What costs apply when making a lifetime gift?

The gift is also recorded in the land registry office; the recipient of the gift must pay land registry fees of 6.831% of the value of the property declared to the land registry office. In addition, there is gift tax. Since the exemption amount is only TRY 23,387 (this amount is adjusted every year), gift tax always has to be paid. The gift tax rate is graduated depending on the value of the gift and in 2023 is 10% for the value of up to TRY 1,100,000, 15% for any amount above this up to TRY 2,600,000, 20% for any amount above this up to TRY 5,500,000, 25% for any amount above this up to TRY 10,900,000 and 30% on all amounts exceeding TRY 20,100,00. These thresholds are also adjusted annually. If the gift is made to parents, spouse or children, the tax rates mentioned above are halved.

What costs are incurred in the event of inheritance?

The transfer of a property to the heirs also takes place in the land register, but no land registry fees apply. In the event of inheritance, the tax-exempt amount for spouse and descendants is TRY 1,015,747 each, if there are no descendants, the tax-exempt amount for the surviving spouse will double to TRY 2,032,742. For larger amounts, the inheritance tax rate varies like the gift tax. In 2023, the inheritance tax is 1% for amounts up to TRY 1,100,000, 3% for any amount above that up to TRY 2,600,000, 5% for any amount above that up to TRY 5,500,000, 7% for any amount above that up to TRY 10,900,000 and 10% for any amount over TRY 20,100,000. These thresholds are also adjusted annually.



Autor: Senem Kathrin Güçlüer