Capital Gains Tax

Capital Gains Tax is going to be a hot topic with sellers during sales negotiations where the buyer is a foreigner wanting to apply for a residence permit in Turkey.  This is due to the recent announcement on the 16th October 2023 regarding changes to property valuations for residence permit applications. Buyers will now only be able to apply for a residence permit if the sales value written on their title deeds is in excess of 200,000 USD or more. This figure was previously 75,000 USD so this is a big increase. 

The background

It has traditionally been common practice in the Fethiye area, along with lots of other areas across Turkey, for the sales value written on the title deeds to be lower than the actual sales price paid. This is due to builders wanting to pay the minimum amount of tax on the sale of their new builds. The problem we now have is there are lots of property owners with a very low sales value on their title deeds. This could have implications for Capital Gains Tax.

What is Capital Gains Tax?

Capital gains tax is the tax on profits made from the sale of a property. In Turkey it only applies to those that sell a property within 5 years of purchasing it. 

How to calculate Capital Gains Tax

When calculating the amount to be paid there is an allowance for inflation rises.  The percentage of tax to be paid is applied on a sliding scale and the rate you pay depends on the size of your gain. In short, the more profit you make the more tax you pay.  Property Wizard Turkey recommends using an online calculator to work out a more precise figure – please click here to use the online calculator we use.

What do sellers need to know?

Sellers need to be aware that if the buyer is a foreigner that needs to apply for a residence permit they will stipulate that the minimum sales value written on to the title deeds will need to be the Turkish Lira equivalent of 200,000 USD.  The seller needs to be mindful that Capital Gains Tax will be due if they have owned the property for less than 5 years. During sales negotiations they need to take the amount of tax due into account when agreeing on a final sales price.  Property Wizard Turkey will be on hand to provide support during these negotiations and be able to give up to date advice on how best to proceed with the sale.

Feel free to contact us If you have any questions or would like more information on Capital Gains Tax.