Corporation tax
Corporation tax is charged at the standard rate of 20% (previously 30%) and is payable by Turkish companies and non-resident companies operating through a Turkish branch. Branch profits are also subject to withholding tax at 15% when remitted abroad, or to entities which are not subject to Turkish tax.
Rental payments made by companies which are subject to Turkish corporation tax to non-resident entities with respect to direct use, letting or other use of Turkish real estate are subject to withholding tax at 20%.
Capital gains
Capital gains on the disposal of real estate are subject to corporation tax at 20% regardless of the residency of the vendor.
Property tax
Annual real estate tax is charged at rates varying between 0.1% and 0.3% (depending on the nature of the property) on the officially assessed value of Turkish real estate held on 1 January each year. This tax is payable in two equal installments on 31 May and 30 November each year.
The property tax rate is doubled if the relevant property is located within the boundaries of a large city. A surcharge of 10% of the property tax payable is charged by municipalities in order to pay for the protection of historical and cultural structures.
Furthermore, Municipality Tax is levied for Environmental Cleaning if buildings are used for housing or as a place of business (among other purposes). This tax is charged at certain fixed amounts which change annually and depend on the location and nature of the property.
Property transfer tax
Stamp duty of 0.75% is charged on the disposal of Turkish real estate provided that a sale and purchase agreement has been executed. Both parties to a transaction are jointly liable for the relevant stamp duty. However, in cases where one party is Turkish-resident and the other party is not, the Turkish resident usually declares and pays the stamp duty.
In addition, a ‘title deed charge’ of 1.5% of the value of the real estate will be payable by both the vendor and the purchaser on registration of the transaction at the Land Registry (the total charge to vendor and purchaser is therefore 3% of the real estate value).
VAT
VAT registration is compulsory for companies resident in Turkey and non-resident operating through a Turkish permanent establishment. VAT registration occurs automatically on the incorporation of a Turkish company. In the case of construction projects in Turkey, a branch or a company must be set up in order to deal with VAT issues.
The sale of Turkish real estate (including land) is subject to VAT at 18%. The sale of buildings (not land) of less than 150m2 is subject to VAT at 1%.
Property rental payments are generally subject to VAT at 18%. Such VAT should be recoverable, even if the rental payments are made to non-residents, via the “reverse charge” mechanism.
The above is for general information purposes only. It is not intended to be comprehensive or to provide any specific tax advice.