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Vergide Gündem
English Translation

Income tax issues arising from the housing

market

The price instability in the housing market in the recent period has led to many
incidents with economic and judicial dimensions. We have tried to evaluate the
current issues from income tax perspective.

During the sale of houses, if the houses are not acquired gratuitously and if they are
disposed of within 5 years after the acquisition, the increase in value is subject to
income tax. Considering that we are going through an inflationary period, we would
like to remind that it is possible to make inflation adjustment on the cost value of
the house during the calculation of the capital gain.
The following evaluations can be made regarding rental income by considering the
events that are observed in the market recently:

• In the ordinary case, we are accustomed to the collection of rents for a monthly
period, however in the inflationary period, we see that rental agreements can
be made for biannual-annual payments. In terms of income tax practice, the
income generated should be allocated to the corresponding calendar years where
the amount related to the calendar in which income is generated should be
declared through annual income tax return of that calendar year and the earnings
corresponding to the following year will have to be declared when submitting the
annual income tax return for following tax year.
• It is observed that the number of tenants who have difficulty in paying their rents
is increasing. It is not necessary to declare uncollected rents and pay tax on these
amounts to Turkish tax authority. Rental income should be included in the tax
return of the year in which it is collected, however the year which it relates to
should be specified in this declaration. It is also worth reminding that if the rent
amount has been collected through a court decision, mediation agreement, etc.,
and interest has also been collected due to late payment; the interest amount will
also need to be declared as income from movable assets.
• In some cases, payments can be made to tenants for the eviction of residences.
If tenants are paid compensation for evacuating the dwelling through an
agreement, it is possible to consider these amounts as expenses in calculation
of rental income on the other hand, tenants who receive such a payment may be
required to declare this income as "other income and profits" depending on the
amount.
• It is understood that day-to-day renting of dwellings has become widespread.
In the case of day-to-day rentals, the Revenue Administration characterizes
the income obtained from such transactions as commercial income, not rental
income. Therefore, many different duties arise in addition to the annual tax return
filing.

In addition to the above cases, it is also possible to allocate residences to relatives
or acquaintances free of charge. Although there are some exceptions, for such
allocations, an imputed rent amount calculated as 5% of the tax value of the
residence will need to be declared to the tax office and income tax will need to be
paid to authorities.
It is good to note that, nowadays it is important to comply with income tax
regulations in a timely manner, considering that the Revenue Administration has
started to follow the earnings from the properties sensitively.
Kasım 2023 November 2023 9