Property Tax Turkey 2015

Amendment proposal property Tax 2015
Increment value tax– upcoming amendment 2015

In most Western European tax systems do levy tax over real assets property, but in Turkey the situation differs. There are no tax charges in Turkey for real asset property on individuals.  Perhaps that is the main reason why Turkey has a pleasant investment climate for indivuduals and of course foreigners.

However, Turkey does apply value tax, based on price increment by real estate sales. The main rule is: The seller is obliged to pay increment value tax, if the real estate property is sold within five years of purchase with price increment above the deductible amount.

The deductible amount for 2014 is 9.700, -TL.
The increment value tax charges are between 15% to 35%.
In addition to is also levied 10% fund (fonpayı).
For more details on the tax rates, I refer you to my website or blog address.

Increment value tax is just applicable on real estates sales, in the same fiscal year.
This is called in Turkish “değer artis kazancı” and depends on your personal declaration to the tax office. The tax office will not send you any tax declaration form ("beyanname") automatically. You must fill up the form yourself at the Tax office. If multiple sales occur in the same fiscal year, you have to  declare all of them in the same declaration.

It is true that the base for increment value tax is not determined by the actual purchase price, but on the base of the reference value determined by the Municipality.

For instance:
You buy a house for 80,000 Euro, but on the Tapu you only see a reference value of 80,000 TL.
Within five years you are selling it for 85,000 Euro but on the Tapu you are declaring the increased value given by the municipality of 100,000 TL. The difference between the purchase amount and sale amount with the exemption amount reduced to this brings your base of increment value taxation to be declared.

The tax levies on property in Turkey are constantly subject to changes. My regular readers will know that the Turkish government has increased the Tapu costs and charges for the last 10 years.

The most recent publication scheduled for 2015 is related to the expected increase of reference value in contrast to fair market value of real estate property. This could mean that with a possible sale of your home, you will pay significantly more Tapu transfer costs and pay on an increment value tax as described above.

The amendment proposal by November 2014 is a fact and we will see the implementation soon.

The importance of a Turkish will

The general rule in Turkish inheritance is that the children together with the surviving spouse automatically are the heirs of the testator. Therefrom it is unnecessarily to draft a will that concerns a property in Turkey, as long the heirs are the children and the surviving spouse.
This is what we call the normal family set up according the inheritance.

When there is no case of a normal family set up it is wise to draft a will.
Situations where it is wise to draft a will could be when:

• the testator has no children
• the testator is unmarried, but lives together with a partner, or when the testator has a registered partnership.
• the testator wants to disinherit the heirs.

This time I don’t want to talk about how to draft a will or how the probate division would look like, I would like to talk about the importance of having a Turkish will in contrast to a will made in your own home country.

My experience shows me that the Turkish court earlier grants execution to a Turkish will then to a will drafted in a foreigner country.
To be clear: a will drafted in a foreigner country has the same value as a Turkish will. The difference lies in the manner in which effect is given to the content of the will. You already understand that this has consequences for the expenses, and the involved time of the inheritance settlement.

Procedure Turkish will
During a hearing all involved parties will be invited and the contents of the Turkish will, is read by the judge. Parties who are not present during the hearing will get a sworn translated  will by mail in person. The objection period against the contents of the will is 1 month.
In case there are no objections during this period is the will between the involved parties in law, regardless of whether the legitimate portions are respected or not.

Procedure foreign will
A foreign will must be provided with an apostil stamp and a sworn translation of the will before an application van be filed to the court. Because the will is already opened and read abroad there is no need that the Turkish court has to do this again. The court must ascertain whether the will is complied with in accordance the wishes of the deceased. Here it is relevant to prove and to convince the judge that the will has been carried out according to the law in their own country.

In case you don’t have a normal family set up(husband-wife-children) I would strongly recommend you to get advice about your options with an unexpected death incident, or to be sure to draw up a will in Turkey.

Sales with Installment Payments

Everyone is familiar with buying luxury goods on credit. You can buy a car or a washing machine where you get the opportunity to pay it in installments. Even goods such as jewelry and carpets you can buy on credit. You speak a term plans and gets the carpet or jewel right away. This is called in Turkish “Taksitli Satis sozlesmesi” and is described in detail in the consumer protection law.

But recently, the legislature has created a different kind of sales model. The most important difference with this sale on credit is that you only get the goods delivered if all the installments have been paid off. This model is called the "ön ödemeli Satis' mentioned agreement and finds its basis in the contract law.

The reason I write this is that I'm investigating the statutory basis of sales under installment, based on multiple complaints mails of mostly elderly tourists. The typical complaint of tourists about a too expensive purchase, which has been done on a whim or under pushy sales practices, has been around a while. Though a much too expensive purchase in itself is no reason to cancel the purchase, but the Consumer Protection Law provides a number of legal options to terminate the purchase contract.

Consumer Protection Law offers the possibility to terminate the contract, if the (economic) qualities of the purchased do not meet the promises from the seller. For example, the carpet that is sold is not a Turkish carpet but a Chinese or gemstone in the ring does not meet the provided certificate. The precondition is that within 30 days of purchase, the buyer must request his will to undo the purchase in writing to the seller.
In such case, it is then to recover the deposit that has been done.

However, this is not the case with the new sales model. With the new sales model, the seller is not obliged to deliver the purchased to the buyer, until the full purchase price has been paid. The purchasing tourist can only undo the sale if the purchased good is delivered to him. But this means that he first has to pay the full purchase amount before he can undertake his undo actions towards the seller. And as you would agree with me; as long as you do not possess the purchased goods you are not able to check (or rather not prove) whether there is a lack of the purchased goods.

In short: Make sure you get the goods delivered immediately when you make a purchase in installments.