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It seems that the regional tax office responsible for the Kalkan area is targetting foreign investors for spot checks to establish exactly who is staying at their properties in Turkey. This signals a move by the Turkish authorities to clamp down on a previously lax area of revenue collection. Many overseas owners are unaware of their obligations regarding filing personal income tax returns on rental income whilst others have ignored the law as it had not been enforced.

Tax Inspectors are apparently visiting properties and asking for proof of ownership/residency, which of course many renters cannot provide. Unless family ties with the owner can be proved, the possibility of punitive fines being imposed is very real. It must be added that a Double Taxation Agreement between the UK and Turkey is in operation but that the landlord is responsible for ensuring that they comply with the taxation laws of both countries.

This development may be seen as negative, not least by those caught out by inspectors, but it does offer real evidence that the Turkish property/taxation systems are developing. Jones Lang LaSalle ranked Turkey 46th of the 51 countries surveyed in their 2004 Global Real Estate Transparency Index, stating that it is an "opaque" market (more on this in an upcoming post). Some might argue that the Turkish authorities are going after soft targets for rich pickings in the Turkish property market but other developments in the Turkish tax system detract from this point of view. One example is the new automated online income tax filing system, which seems as if it will be at least as good as comparable EU versions and is an attempt to tackle the large 'black economy'.

In any case, the warning shots have been fired. If you are renting your Turkish property, now might be a good time to sort out your Turkish tax affairs (and how they relate to your country). See our previous post on Turkish property taxes for more and visit here and check section 7.3.10 for Turkish income tax rates, which are used to determine your rental tax liability in Turkey. If the lessee is a Turkish tax payer, they are reponsible for withholding this amount but if you let to a non-Turkish tax payer, you must file an Income Tax Return. For more background information, you can go to the Turkish Revenue Administration site. We will publish the 2006 tax rates which are relevant to rentals (and some worked examples) in a syndicated article, shortly.

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Tags: property tax Turkey