Tax Guide for Foreign Property Buyers in Turkey

Taxes for Foreigners Buying Property in Turkey

When purchasing property in Turkey, foreigners are subject to the following taxes: Property Buyers in Turkey

1. Title Deed Transfer Tax:
   • Rate: 4% of the property’s declared value.
   • Paid during the transfer of ownership at the Land Registry Office.
2. Value Added Tax (VAT):
   • Rate: 1% to 18%, depending on the property’s size and type.
   • Exemption: Foreign buyers are often exempt if they pay in foreign currency and commit to holding the property for at least one year.
3. Annual Property Tax:
   • Rate: 0.1% to 0.6%, depending on the property type and location.
   • Paid in two installments annually.
4. Income Tax on Rental Income:
   • Rates: Progressive, ranging from 15% to 40%.
   • Deduction: Certain expenses (e.g., maintenance, insurance) can be deducted.
5. Capital Gains Tax:
   • Exemption: No tax if the property is held for more than five years.
   • Rate: Progressive, based on the profit.

Starting a Business in Turkey: Taxes and Regulations

1. Company Formation Options for Foreigners:
   • Limited Liability Company (LLC): Requires at least one shareholder.
   • Joint Stock Company (JSC): Suitable for larger operations.
2. Taxes for Businesses:
   • Corporate Income Tax: 20% (subject to changes).
   • Value Added Tax (VAT): Rates vary between 1% and 18%.
   • Withholding Tax: 15% on dividends distributed to foreign shareholders.
3. Accounting and Bookkeeping:
   • Businesses must maintain their accounts in accordance with Turkish Financial Reporting Standards.
   • Hiring a certified public accountant (“SMMM”) is mandatory for bookkeeping and tax filings.
4. Annual Reporting:
   • Financial statements and annual reports must be submitted to relevant authorities.

Work Permits and Operational Costs

1. Work Permits:
   • Foreigners owning a company in Turkey can apply for a work permit via the Ministry of Labor and Social Security.
   • Requirements: Employment of at least five Turkish citizens per foreign employee.
2. Annual Cost of a Dormant Company:
   • Accounting fees: $1,500 – $2,000 annually.
   • Tax office registration: Minimal, depending on the business size.
   • Social security contributions: Even if inactive, a company must meet minimum obligations.

Do You Need a Turkish Partner?

• Not Mandatory: Foreigners can own 100% of a company in most sectors.
• Exceptions: Certain industries, such as media and transportation, may require local partnerships.

Closing a Company in Turkey

1. Steps to Liquidate a Company:
   • File a closure application with the Trade Registry Office.
   • Publish an announcement in the Trade Registry Gazette.
   • Settle all outstanding debts and taxes.
2. Duration: The process can take 6-12 months.
3. Costs: Includes accounting and legal fees, which vary depending on the company’s size and complexity.

Disclaimer

These details may become outdated as the Republic of Turkey periodically updates its regulations. For the most accurate and up-to-date information, please contact us directly.

Conclusion

Turkey’s dynamic market and strategic location make it an attractive destination for foreigners looking to invest in property or establish a business. While the processes involve several legal and financial steps, careful planning and professional assistance can make the journey smoother. For tailored advice or assistance, contact Alanya Realty today!