The Turkish tax regime is an important part of the economy and can be divided into 3 main categories:
Income Taxes, such as Individual Income Tax and Corporate Income Tax.
Taxes on Expenditure, such as Value Added Tax or Banking and Insurance Transaction Tax or Stamp Tax.
Taxes on Wealth, such as Property Tax or Inheritance and Gift Tax.
Income taxes in Turkey are levied upon the income, both domestic and foreign, of individuals and corporations resident in Turkey. Non-residents earning income in Turkey through employment, ownership of property, carrying on a business or other activities providing an income are also subject to taxation, but only on their income derived in Turkey.
Individual Income Tax
The limited tax liability covers trade or business income from a permanent establishment, salaries for work done in Turkey (regardless of where paid or whether or not remitted to Turkey), rental income from real property in Turkey, Turkish derived interest, and income from the sale of patents, copyrights and similar intangible assets.
The personal income tax rate varies from 15% to 40%.
Rental income is liable for tax assessment in Turkey and anyone owning real estate in Turkey who rents it out must declare it at a tax office to become a tax payer.
Those who have already declared and paid taxes in their own country according to the double tax agreement will have to prove this with receipts at the tax offices in order to avoid double taxation. However, the Ministry of Finance of Turkey conditions that tax payments will have to be made in Turkey where the real estate is registered and located to avoid legal and financial difficulties in future. Those who already paid the taxes in Turkey would need to get the receipts to be stamped by the nearest Turkish Consulate/Embassy.
Regarding the real estate rental income made in Turkey, each property owner will have to submit a written declaration (beyanname) at the tax office through an accountant if the net income exceeds 2,000 YTL .
An example of how rental income is taxed:
Gross income: 10.000 YTL
Exemption: 2.200 YTL (for 2006 fiscal year- 2.000 YTL for 2005 – 1.800 YTL for 2004).
Maximum expence allowed (maintenance, repairs etc.): 25% out of the total gross income.
20% (for 2006) taxed out of the balance 5.500 YTL
The amount to be taxed 1.100 YTL (equal to GBP 400. 1 GBP = 2.75 YTL)
For exact calculations please consult with your accountant. One of the leading accountants in Kalkan is Mr. Ali Tunc. Email: email@example.com. Tel: 0090 242 8443266.
The average amount charged for each year of accountancy is GBP 100 or 2.750 YTL. One must obtain a tax number and register as a taxpayer at the nearest tax office. Your accountant can do this for you. The declaration must be submitted and the taxes paid every year in March.
List of the UK’s double taxation agreements
9.16 Countries with which the UK has double taxation agreements in force covering taxes on income and/or capital gains (other than limited agreements concerned solely with air transport and shipping) at October 1999 were as follows, (this is where Turkey is listed)
Rent from overseas property. Residents of the UK who are ordinarily resident and domiciled in the UK Residents of the UK who are not domiciled in the UK, or are Commonwealth or Republic of Ireland citizens not ordinarily resident in the UK.
You will be liable to UK tax on rent you receive from letting a property overseas, although you may deduct certain expenses such as interest paid, maintenance and repair costs in calculating your liability. If you make a loss from the letting of your property in any year, this may be deducted in computing rental income you receive from the same property in future years. You will be liable to UK tax on the net rental income you receive from letting a property overseas to the extent that you remit it to the UK*.
* Income of a UK resident from a source in the Republic of Ireland is chargeable on the full amount arising rather than on the amount remitted.
Will I also have to pay foreign tax?
The country in which your overseas income arises may tax you on that income. This will depend on its own laws. You may need to ask the tax authority there for advice. If you find that you are paying tax on your overseas income both in the UK and in the country where the income arises, you will normally be able to obtain relief for any double taxation.
How can I obtain relief from double taxation?
Relief from double taxation may be available under a double taxation agreement, or in other ways. The aim of the relief is for the income to be taxed in one country only or, if both countries tax it, for your combined tax bill to be no more than the amount you would have to pay in the country with the higher tax charge.
What is a double taxation agreement?
A double taxation agreement is an arrangement between the UK and another country, which aims to prevent, or give relief for, double taxation. It provides that income will be taxed in one country only or, if taxed in both, that one country will allow credit for the tax paid in the other (‘tax credit relief’). Tax credit relief cannot exceed the amount of UK tax which can be attributed to the overseas income. For example, if you have £100 of overseas income on which you have paid foreign tax of £20, your liability to UK tax on the £100 would be reduced by £20 or, if less, by the amount of UK tax chargeable on that overseas income. There is a list of the countries with which the UK has double taxation agreements in booklet IR 20 ‘Residents and non-residents – liability to tax in the United Kingdom’. You can get details of any agreement which might affect you from a Tax Enquiry Centre, your UK Tax Office or the overseas tax authority.
What other relief is available?
If the UK does not have a double taxation agreement with the country in which your overseas income arises, you may be entitled to a special relief called ‘unilateral relief’. This works in the same way as credit relief under a double taxation agreement, and ensures that the overseas tax you have paid is set off against UK tax on the same income. Certain conditions have to be met before unilateral relief can be given – a Tax Enquiry Centre or your Tax Office will advise you whether you qualify for relief in respect of a particular foreign tax. Alternatively, where a claim for tax credit relief under a double taxation agreement or for unilateral relief is not to your advantage, you may be entitled to a foreign tax deduction. That is, you may be able to deduct the amount of foreign tax you have paid on your overseas income in computing the amount of income which is chargeable to UK tax. You can find out more from a Tax Enquiry Centre or your Tax Office.
What do I do next?
If you have overseas income, you should complete a UK tax return each year including details of the income and send it to your UK Tax Office.