Basic tax rules for foreigners who own real estate in Turkey
Posted by meb at May 23rd, 2007
Throughout history states have always looked for more effective ways to collect more tax revenue from their subjects. Similarly the taxpayers have tried to devise original methods to avoid paying.
Some dodge their tax liabilities by exploiting illegal means. On the other hand there are some who use loopholes in relevant articles of the tax laws to pay less.These statements are all valid for domestic taxpayers. Foreigners, however, generally tend to abide by the financial rules of the country that they operate in. In that sense foreign investors having establishments in Turkey — in other words foreign-based taxpayers as defined in the Income Tax Law — are very sensitive and careful aboutobeying their duties, since they really worry about coming face-to-face with the tax office in an unwanted manner. This article will largely deal with these non-resident taxpayers, especially with the taxation of their revenues from real estate properties in Turkey.
According to the Income Tax Law, people who reside in Turkey and live within its borders for an uninterrupted period of six months or more within a tax year — between Jan. 1 and Dec. 31 – are considered full-fledged taxpayers. These people are taxed for any income and annuity they get both inside and outside Turkey. On the other hand people who don’t stay in Turkey for at least six months are called non-resident — or foreign — taxpayers. The state requests them to pay their taxes only for the income they gain in Turkey. In addition there are still some people who stay in Turkey more than six months, yet remain accepted as non-resident — or restricted — taxpayers.
1- Businessmen, scientists, experts, civil servants, reporters, etc., who come to Turkey for a specific purpose for temporary durations, as well as those who visit the country for education, medication, resting or just travel.
2- People who are seized or forced to stay in Turkey due to arrest, sentence or ill health.
Turkish citizens who live abroad are taxed as non-residents unless they stay in Turkey more than six months.
After stating the necessary background as such, let’s come back to the main issue of real estate. A foreigner is taxed a non-resident taxpayer as long as the real estate in question is:
1- located inside Turkey;
2- or evaluated in Turkey.
Our tax laws explain “evaluation” as meaning that the transaction of the rental payment must be made within Turkey, or that it must be transferred to a bank account in Turkey.
Real estate rented as a home
In this case being a foreigner doesn’t matter any more. They declare their incomes by annual income tax declaration and pay the corresponding taxes as if they are resident taxpayers. Yet again, there is an exception. If their income is less than YTL 2,300 for 2007, foreign taxpayers need not file a tax return. However if their rental income exceeds this amount, they have to file a tax return with a tax office in Turkey and choose a taxation method as described in the Income Tax Law.
Real estate rented as a workplace
The Income Tax Law suggests in this case that the owner of the workplace is taxed in accordance with the relevant methods of withholding taxes. Lodgers cut 20 percent as tax from the total rent. They pay this withholding tax, cut on behalf of foreigner landlord to tax office by a withholding tax return. Therefore a foreigner doesn’t have to make a tax return for their real estate property if it is evaluated as a work place.
Note: Non-resident taxpayers should also consider “double taxation agreements” executed between their own country and Turkey.
source: Today’s Zaman
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