Taxes imposed on foreign investors in Türkiye
There are very important matters regarding taxes imposed on foreign investors in Turkey that foreign citizens investing through real estate and company owners must know. As Turkey continues to grow steadily and become one of the advanced economic powers on the global level, it has become a focus of interest for many foreign investors recently. In recent years, it has been noted that the returns on profits from real estate investments in Turkey are very large, and therefore foreign investors must pay attention to the types of taxes imposed on the investments they make in Turkey.
Non-resident foreign investors in Turkey are subject to the real estate rental and sale tax law under the status of a limited tax taxpayer, and the rental or sale of real estate may also be subject to the value-added tax law in some cases as well, and the types of taxes that are imposed on foreign investors in Turkey can be determined as follows:
1- Tapu deed taxes
The title deed fees are paid during the sale of the property, and the persons responsible for paying these fees are the seller and buyer of the property. These fees are imposed in an equal amount on both parties, but they are collected separately and are estimated at 4 percent of the property sale price. The fact that the property buyer is a citizen does not constitute For a foreigner or a legal person, there is no difference regarding the title deed fees. The title deed fees are imposed on all types of real estate without exception (apartment, commercial office, agricultural land, construction land, etc.).
2- property tax
According to immovable property rights in Turkey, all types of immovable property, such as apartments, commercial offices, and lands, follow the property tax law. Therefore, foreigners who own immovable property in Turkey must pay property taxes. The property tax has been set at one per thousand for apartments, two per thousand for commercial offices, and three per thousand. One thousand for construction lands and one per thousand for agricultural lands. If these immovable properties are within the borders of large states or their neighboring regions, property taxes become double the mentioned amounts, and the property tax is imposed on immovable properties one year after purchasing them.
3- Types of taxes imposed on income
Profits on real estate purchased by foreigners are divided into two types: profits from leasing the property and profits from selling the property. Therefore, whether the owner of the property is a real foreign person or a company will make an important difference in terms of the taxes imposed.
4- Profits from renting immovable property
If the person who receives the profits from renting the property is a foreign person, he will be subject to the property income tax law, and in the event that there is no double taxation agreement between Turkey and the country in which the foreign citizen resides, the foreign person will also be subject to the tax law, but in the event that there is a double taxation agreement between Turkey and the country in which the foreign citizen resides, the provisions of the prevailing agreement shall be applied.
5- Profits from the sale of immovable property
If the real foreign citizen is constantly busy buying and selling, his income will be considered commercial profits and thus his income will become subject to the capital gains law.
6- Profits from leasing immovable property for companies
If a company established in Turkey receives profits from renting a property, the company’s income will be considered commercial profits and thus its income will become subject to the corporate tax law at a rate of 20% of profits. The tax rate can be reduced by deducting employee expenses and the company’s financial payments from taxes.
7- Profits from the sale of immovable property for companies
Institutional taxes are also imposed on the profits that companies earn from selling real estate, and the tax rate can be reduced by reducing the expenses mentioned above.
Profits from leasing immovable property for foreign companies
Companies that conduct their activities inside Turkey are classified as a limited tax taxpayer, as frozen taxes are imposed on profits from rental income for workplaces and buildings owned inside Turkey only, and limited tax taxpayers must deduct the frozen taxes from the rent paid, and the percentage of frozen taxes is 20% of the profits. The Tax Department must be notified by the person paying the rent by submitting a tax statement.
8- Profits from the sale of immovable property for foreign companies
In the event that a foreign company established in Turkey, as a limited tax taxpayer, obtains profits from the sale of real estate, the company’s profits are evaluated within the framework of the Enterprise Tax Law, and through the evaluation, the classification of the company’s profits is reached, whether they are commercial or non-commercial, or if the company’s capital receives profits. From the sale of the property or not, and accordingly, an enterprise tax will be imposed on the company’s profits from the sale of the property at a rate of 20% of the profits.
9- Inheritance tax and transfer of ownership
In the event that the property of a deceased foreign person in Turkey is transferred to another foreign person through inheritance or transfer of ownership, the inheritance and transfer tax is imposed on the foreign person, regardless of his nationality or the country in which he resides. The reason why the nationality of the foreign person or the country in which he resides is not important is that Inheritance or ownership transfer procedures take place within the borders of the Turkish state, and the fact that the foreign person is a real or legal person does not affect the application of taxation either. It is worth noting that the inheritance and ownership transfer tax is subject to a variable tax system proportional to the value of movable and immovable property.
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