Time to sell property in Turkey

I recently read that many foreign investors are now selling in the Turkish property market. This should mean that some investors are now realizing their real estate investments and turning a profit in Turkey. In many articles we have tried to shed some light on the aspects of investing in Turkey from the position of buying a property. Now, it seems that it is a good time to write a couple of articles from the foreign seller’s point of view. There are several issues to be discussed when looking from the seller’s side. The first thing on my agenda is the issue of tax.

Capital gains tax on the sale of property,

In the case of reselling the property within four or five years (the exemption period depends on the exact purchase date of the property) of the date of purchase, the seller will be obliged to pay capital gains tax. The difference between the purchase price originally paid by the seller and the purchase price to be paid by the new buyer will be regarded as “capital gains,” and the capital gains tax will be calculated on this amount.

Tax implications when selling your property,

The primary rule about the taxation of the income on real estate transactions is as follows: If you sell a house within a period of five years beginning from the date of purchase, you are obliged to pay capital gains tax on the income gained from the increase in value. This tax rule is not widely known, even to locals, as this legislation is somewhat recent, being published in the Official Gazette on April 4, 2007 — Law No. 5615. This tax on income is not just for houses but covers all kinds of property, including land, office and commercial/trade centers. The five-year period starts on the date of the title transfer in the land registry office. If you sign a sales agreement on May 1, 2005 but the completion date and the title transfer is later, for instance on Oct. 17, 2007, then the five-year period begins on Oct. 17, 2007.

Question: I have some land and I have signed a construction agreement with a contractor. The contractor will construct 10 villas on my land at his expense and we will share the houses 50-50, i.e., five houses for each of us. Will I be obliged to pay capital gains tax if I sell the houses in five years? What would be the start date for this five years period? In your case, the five-year period will start from the date the occupancy permit is issued by the authorities.

Question: I bought my house in 2006. Am I still obliged to pay capital gains tax? Is there any exemption for me that I bought my house before this law was made? The five-year period shall be regarded as four years for properties acquired before Jan. 1, 2007 — see Law on Income Tax, Article 71. For example, if you purchased the property on May 1, 2004, for 50,000 pounds and if you sell it, for instance, on May 2, 2008, for 150,000 pounds then there will be no capital gains tax to pay on the property.

Question: I acquired a house from my late father through his will. Could you please inform me about the tax implications when selling this house? In the case of acquisition of a property through inheritance, the inheritors are exempted from paying income tax on the sale of an inherited property. Imagine that you acquired this property on May 1, 2006 and the declared value of the property was 50,000 pounds for the real estate tax and you sold it for 150,000 pounds on June 1, 2007, then there would be no income tax on the increase in value of the property. One should note that there might be implications for inheritance tax, which is a totally different story. 31/01/09