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c. Rent of houses occupied B. Indexation

Another actual expense item on the other hand is the rent The effect of inflation can be eliminated during the calculation
paid by those who rent the houses they own and pay rent of the gains that are generated from real estate sold before
for another house they live in. The part of these rents expiration of the five-year period and that must be declared.
corresponding to the non-exempt gains can be deducted from This is briefly called as “indexation”. The Turkish Statistical
the revenue in accordance with the actual expense method. Institute (TSI) announces the domestic producer’s price
However, as explained above, if the expense exceeds the rent indexes (D-PPI) used in the calculation of the inflation of
income, the exceeding part may not be deducted from other the previous month, at the beginning of each month. These
incomes or carried forward to following years. D-PPIs must be used in the indexation relating to real estate
sold in 2021.
d. Thermal insulation expenditures
The rate of increase between the index of the month prior
Expenditures intended to ensure thermal insulation and to the month when the real estate is sold and the index of
energy saving which provides a feature of increasing the the month prior to the month it is purchased is calculated.
real estate’s economical value made by the leaser may A new cost price is determined by increasing the purchase
be deducted from rental income. On the other hand, in price at this rate. The amount remaining after deducting the
the circumstance that these expenditures exceed the expenses, if any, from the difference between the new cost
amortization limit (TL 1,500) in a single calendar year, price and the sales price calculated in this way is deemed as
considering them as a cost is also possible. net profit. However, the index difference must be more than
10% in order to benefit from this implementation. Otherwise,
e. Other actual expenses the profit must be calculated by deducting the initial purchase
price and expenses from the sales price.
Some other actual expense items that can be taken into
account in the declaration of rental income, provided that C. Exemption implementation
they are related with the real estate rent, are as follows:
TL 19,000 (for 2021) of the gains generated from the sale
• Lighting, heating, water and elevator expenses, of a real estate in 5 years is exempted from income tax.
• Management expenses, Tax return shall not be submitted and therefore tax shall
• Taxes, duties, fees and goodwill paid along with insurance not be paid, in case the gains calculated after indexation, if
expenses, indexation is possible, or the difference between the sales and
purchase price, if indexation is not possible, is less than TL
• Depreciation (2%), 19,000.
• Repair and maintenance expenses,
If gains exceeding this amount are generated, the exceeding
• Rents and other actual expenses paid by those who lease part should be declared with an income tax return and the
the property and rights they rent.
related tax should be paid.
II. Real estate sales profits III. Tax rate, declaration and payment

Gains derived from the sale of the real estate purchased, A. Income tax rate
outside of the scope of the commercial activity by real
persons, are deemed as “capital gains”. Under normal Income tax on the tax returns to be submitted in March 2022
circumstances, these gains are subject to income tax, but for the non-wage income (security income, rental income,
income tax shall not be paid regardless of the amount of the commercial earnings, self-employment) derived in 2021 will
income, in case of sale of real estate that is acquired through be calculated in line with the below tariff:
inheritance or donation.

A. Time of retention and its effect on taxation Income bracket Tax rate
Up to TRL 24,000 15%
In order not to pay taxes over the income in case of sale of For TRL 53,000; for the first TRL 24,000, TRL 3,300, for 20%
real estate acquired through means other than inheritance or above
donation (acquired, constructed, etc.), the real estate must
have been retained for at least 5 years. In other words, in For TRL 130,000; for the first TRL 53,000, TRL 9,400, 27%
case the real estate is sold after being retained for less than for above
5 years, income tax must be paid over the gains derived in For TRL 650,000; for the first TRL 130,000, TRL 30,190, 35%
principle. The five-year period is calculated in days. for above
For more than TRL 650,000, for TRL 650,000, TRL 40%
212,190, for above

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