Calculating Capital Gains Tax on the Sale of Turkish Real Estate

capital gains tax on the sale of property

The process of selling a property in Turkey is simple and straightforward. After you purchase a house or an apartment and hold it for several years, you might consider selling it off at some point in time to yield capital gains. In comparison to other countries, property taxes are lower in Turkey. It is one of the prime reasons why the diverse Mediterranean country is the ideal real estate investment destination for Turkish and foreign investors. 

In this article, we will shed light on capital gains tax incurred while selling real estate in Turkey and what costs you might have to pay after your property has been sold. 

Capital gains tax in Turkey

If you intend to sell your house within the first five years of the initial purchase, you will be liable to pay a capital gains tax in Turkey. However, it is not applicable to property owners who held the property for more than five years. 

The total amount of capital gains tax is calculated based on the percentage of the profits incurred between the declared value of the property when you first purchased it and the selling price you quote at the Land Registry or TAPU office when you sell it. 

To get a clear understanding of how much capital gains tax you might have to pay when selling your property, use this simple guide as follows:

  • For profits up to 6,000 Lira- No CGT to be paid
  • For profits between 6,000-7,000 Lira- 15% CGT will be paid
  • For profits between 7,000-18,000 Lira- 25% CGT will be paid
  • For profits between 18,000-40,000 Lira- 27% CGT will be paid
  • For profits above 40,000 Lira- 35% CGT will be paid

Example: 

Let’s say you buy an apartment in Turkey that is priced at 200,000 Lira, and you decide to sell the property after two years. The estimated value of the apartment will be at an elevated level than it was two years ago, so the resale value would be calculated at nearly 217,000 Lira. Now, if you sell the house in less than five years, you will be subjected to capital gains tax on the profit of the home. Because you secured 17,000 Lira in total profit, you will be liable to pay a 25% tax rate. Regardless of your nationality, these taxes are mandatory and must be paid in accordance with the pre-decided tax rate. Whether you are a foreigner owning a property in Turkey or a permanent resident of Turkey, the law applies to all. 

Do you have to pay double taxes in your home country?

Turkey has the most transparent and unbiased tax system that is applied equally to both Turkish and foreign nationals. It has a considerate and plausible taxation policy record with major countries in the world, meaning that you will not be chargeable for the double taxation rule in most of the scenarios. 

In case you pay 25% capital gains tax in Turkey on the profits secured when selling a property, you will not be subjected to tax payable when you take the capital back in your home country.

Nevertheless, depending on your nationality, you will probably also have to declare the profits that you have earned to the tax authorities in your country and pay whatever amount they assess is due on the total gain. However, you will need to check the double tax treaty between your country and Turkey, and typically, you won’t have to pay any additional amount.

Note:

When you decide to sell your house or apartment in Turkey, essentially, you will be required to bring your tax affairs up-to-date. 

For instance, you must show the tax authorities in the country that you have diligently paid the property taxes for the current year, your personal tax filings are duly updated, and that all other relevant taxes pertaining to Turkish real estate have been already paid. 

Final thoughts

All in all, the capital gains tax in Turkey works nearly similar to other countries in the world. It is not a tedious process and shouldn’t come as much of a surprise to sellers who already own real estate in another country. 

Remember, if you hold on to your property for more than five years, you won’t be held accountable to pay taxes on the profit. This will further enable you to secure maximum return on your original investment in Turkish real estate. 

If you have any queries relating to understanding the tax implications on your property or calculating the capital gains tax when selling your house, do not hesitate to get in touch with our team. With years of experience in the Turkish real estate market, our team will guide you right from the purchase planning to the resale of your property. For more details, drop us a line here.

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