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The great allure of owning a second home in Turkey is obvious. Investors are attracted to the combination of a warm climate, ancient historical heritage and a property market that remains among the fastest growing in Europe.
Property in Turkey is particularly popular with British buyers, drawn in by low prices and high yields on holiday rental properties. The process of buying property in Turkey has become a lot more transparent in recent years. This has helped make life a lot easier for foreign investors than in the past.
As a result, there is no shortage of agents dedicated to selling investment opportunities in popular areas of Turkey’s coast and cities like Istanbul, which is experiencing its own spectacular construction boom.
What’s often missing from glossy investment brochures however are the finer details, such as tax liabilities and the costs of managing a property that is often several thousand miles away from the home country.
As with any country, Turkey has its own rules on taxation and how much income investors are allowed to hang onto from their investment. “This is where reality often sets in for overseas investors.” says Ilker Kara, Head of EV Apartments & TAM – a Turkey based vacation rental & property management company with more than a decade of experience handling the administration elements that go with any investment in Turkey property including taxation which can catch out unwary buyers.
“There are plenty of outstanding investment opportunities in Turkey. We see a lot of investors from the UK buying second homes in coastal resorts or apartments in Istanbul for pure investment purposes.
These properties are often bought through property agents based in Turkey or in the UK. Agents and developers are largely focused on selling property and little attention is paid to the often complex administration processes involved in the management of property investments. One of these is tax and property owners can often leave it until the last minute to complete their returns with all the additional worry and stress that brings.”
A range of different taxes can be payable on property in Turkey, including income tax which is due between 1 – 25 March and must be filed with the local tax office within this period.
Income tax is payable on second homes that are let to holiday makers or long term tenants even if the investor is a non-resident in Turkey. The tax on rental income is paid in one payment after the filing in march.
Ilker added “It is important for investors to meet the March deadline so they avoid unnecessary tax fines. In most cases Investors can benefit from the double taxation treaties like the one which exists between the UK and Turkey. We work with individual and institutional investors as well as agents to make sure that the process of owning property in Turkey is as worry free as possible and this includes help with filing tax returns.”
Income tax on property in Turkey is payable at progressive rates depending on how much an individual earns from letting. There may be some tax exemptions if the property is used as a residence and certain deductions for expenses. These include things like lighting heating, water, administration and interest expenses.
The property owner can choose between two different methods of taxation, one being a lump sum method which deducts 25% of the gross income to give the taxable income and the other the deduction of expenses. The taxpayer will be unable to switch back to the deduction of expenses if they have opted to for the lump sum method within a two-year period.
These and other issues with taxation can be dealt with by TAM, which provides the missing link between investors, agents and developers. With many lacking the resources to handle the preparation of tax returns, snagging, lettings and insurance, TAM is able to step in and provide all of these services in one place and help to streamline what are often complicated and time consuming processes.
By Brett Tudor