Summary: This exceptional article explains how to calculate the Gains tax when you buy a real estate in Turkey and then sell it before passing five years on the date of the Land Registry receipt.
According to the Article No. 80 pertaining to the Turkish Income Tax Law, in the case of sale of a real estate before passing five years on the date of purchasing, the real estate subjects to capital gains tax on property (for the real estates purchased under construction, the beginning of the five-year is from the date of the receipt of the Land Registry), excluded from this gains tax the sold real estates which have been obtained free of charge, namely, by inheritance, donation, or something like that, in that case the real estate is not subject to the forgoing tax.
The value of property gains tax is calculated according to the Local Producer Price Index. However, this indicator is issued monthly and for that the value of capital gains tax on property is not calculated according to the month index on which the real estate is sold; it is calculated according to the previous month index, here is a simple example to clarify things out:
Let’s say that a real estate was bought in 01/02/2010 at a price of 120,000 Turkish Lira, and then sold in 01/03/2014 at a price of 200,000 Turkish Lira, while the Local Producer Price Index proportion of rising was as follows:
01.02.2010 = 166.22,
01.03.2014 = 232.27,
Calculation of the tax shall be as follows:
Multiply the price of purchasing of the real estate in Turkey by the proportion of the rate of rising of the Local Producer Price Index (Rate of Inflation). The rate of rising of the Local Producer Price Index can be gotten by dividing the proportion of rising of the price index in the month before the sale of the real estate to the proportion of rising of the price index in the month before buying the real estate. Then multiply this rate by the price of purchasing of the real estate to get the actual price of buying the real estate (price of purchasing of the currency in the date of sale).
120000 x (232, 57 / 166, 52) = 167597 Turkish Lira the actual price of the real estate (the price of purchasing of the real estate of the currency of the current day). Then subtract the actual price of purchasing from the sale price to get the actual profit of the real estate, which is defined in terms of taxes as "the earnings before tax."
200000 - 167959 = 32 041 Turkish Lira, the actual profit.
According to Article No. 81 pertaining to the tax law, taxes, fees, and selling expenses, like the expenses paid by the seller in the land registry department for example, all ought to be subtracted from the actual profit which is about 2% or something like that.
32041 - 4000 = 28041 Turkish Lira. By this, we can get the tax bracket (the basic value to determine the amount of tax).
Subtract the tax write–off of the gains, which are determined by the Income Tax Department every year, from the tax bracket to get the basic taxable value.
Tax write–off of Capital gains tax on property is as following:
9700 Turkish Lira
Having the sale process made in 2014, subtract the exemption adopted in 2014, which is 9700 Turkish lira, from the tax bracket to get the basic taxable value.
28041 - 9700 = 18341 Turkish lira, the taxable value.
The tax is deducted from the taxable value according to the following assessment role lists:
The annual income tax assessment role lists for 2016:
More than 69.000 Turkish Lira
From 30.000 to 69.000 Turkish Lira
From 12.600 to 30.000 Turkish Lira
Less than 12.600 Turkish Lira
According to the assessment role lists for 2014, the tax levied on (18341) Turkish lira is (3073). This amount is announced in the period from March 1st to 25th 2014 with the annual income tax statement, and it must be paid in two equal installments in March and July of the same year.