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Following some news that tax inspectors are after real estate investors, we have received a number of questions regarding income tax related to rental income.
One of the questions I have received is as follows: “We have an apartment in Didim that we rent out to a Turkish family for very low rent. Do you know what we need to do to act within the law on this matter?”
What is rental income?
All kinds of income gained by renting out goods and rights (such as land, buildings, rights, motor vehicles, etc) cited in the Income Tax Law, Article 70, is defined as “rental income,” and such income shall be subject to income tax.
How do I declare my income?
Foreigners residing in Turkey are also obliged to pay taxes on the income gained by renting out property.
If the foreigner only gains income through renting out his property and has no other cash-generating business activities, the foreigner should declare the rental income to a tax office.
Is there any exemption?
Yes, there is an exemption based on the amount of the rent income. Please check this income limit, which is updated occasionally, with a tax office. To give you an idea, the income limit for 2006 was 2,000 YTL. There is income tax applied for rental income lower than this amount.
When and where I should pay the income tax?
The income tax shall be paid two times; 50 percent percent of the tax shall be paid in March and the remaining amount shall be paid in July.
The payment can be made to the tax offices and to account numbers of the tax offices.
What would happen if I do not declare the income?
In case you fail to declare the rental income, it will not be possible to benefit from the exemption limit of 2,000 YTL.
You will be subject to a fine to be issued by tax authorities and the income tax shall be collected with interest applied for each day passed during the pending period.
In case of non declaration, the above-mentioned fine and interest-added tax should be duly paid in one month. Otherwise, the sum will be collected by official collection offices.
I should note that public collection procedure is harsh and all assets of the debtor are open for collection without exemption.
I have renovated my property -- will this cost be deducted?
Yes, the expenses made for the property’s maintenance shall be deducted from the income gained. The declaration should be made after considering these deductions.
Finally, I would like to point out that the amount of the tax will never be as much as the fine. It is never worth ignoring tax issues.
Source: Zaman Newspaper
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