Changes to tax on rental income and taxes on purchase of property
On 29th August 2018, a Council of Ministers decision was published in the Official Gazette introducing a number of temporary measures to try to counter the current economic issues arising from the recent depreciation in the value of the Turkish Lira. These measures include some changes to the tax payable by Landlords on rental income and to the taxes payable by purchasers on the purchase of immovable property.
In relation to the tax on rental income, for a period of 6 months between 1st September 2018 and 28th February 2019 only, where the property being rented is a dwelling which is being used for residential purposes, the tax payable on the rental income is to be reduced from the usual rate of 13% to 1%. In addition, for the same period, where, under the terms of the Tenancy Agreement, the rent is payable by the Tenant in foreign currency, the exchange rate for payment of the rent in Turkish Lira is to be fixed as follows:
For any new Tenancy Agreements made from 1st September 2018 onwards, the tax rate payable on rent being received in TL will be 2% and the tax rate payable on rent being received in foreign currency will be 15%. The fixed exchange rate for rent payable in foreign currency will not be applicable to new Tenancy Agreements made from 1st September 2018 onwards.
In relation to the purchase of immovable property, in order to encourage foreign investment in the property sector, the Council of Ministers decision grants foreign purchasers to right to purchase up to 2 additional apartments in addition to the current existing right to purchase one property of up to 1 donum in area for vacant land or up to 5 donums in area for a single dwelling. This right has been granted for a period of 6 months until 28th February 2019 only. The application for permission to purchase the additional apartments must be made within this 6 month period and the permission must be obtained and the title deeds transferred by the end of 2019. The Land Registry transfer fees payable on the transfer of title to the additional apartments will be payable at the rate of 9% for the first additional apartment and 10% for the second additional apartment. The 3% Land Registry fees on the first purchase of an immovable property by a foreign purchaser remain unchanged. In addition, in order to provide an incentive to local TRNC first time buyers, for a period of 6 months until 28th February 2019 only, the Land Registry transfer fees payable by TRNC citizens on a first purchase of a residential property with a maximum area of 140m2 will be reduced to 1%.