In the taxation of rental income, the net amount of the income obtained is determined in two different ways as follows:

• Actual expenses method,
• Lump-sum expenses method (for other than those who lease out rights).

The selection of the actual expenses or the lump-sum method must cover all immovable property, which means that it is not possible to choose the actual expenses method for some part and the lump-sum expenses method for the remaining part.

Taxpayers opting for the lump-sum expenses method cannot return to the actual expenses method unless two years have passed.

Deduction of Expenses in Actual Expenses Method

In case the actual expense method is chosen, the following expenses stated in Article 74 of the Income Tax Law can be deducted from the gross income in order to find the net income.

• Lighting, heating, water and elevator expenses paid by lessor for rented property,
• Management costs which are measured according to the importance of property and related with the administration of the rented property,
• Insurance expenses relating to the rented property and rights,
• Interest of debts relating to the rented property and rights,
• 5% of acquisition value of one rented house for 5 years beginning from the date of acquisition (This deduction applies only to rental income of the rented house; non- deductible part is not evaluated as expenditure surplus. This deduction is not valid for houses acquired before 2018),
• Taxes, duties and fees paid for the rented property and rights and rates paid to municipalities for expenses by lessor,
• Depreciation setting aside for rented property and rights, and heat insulation and energy saving expenditures which are made by the lessor and that increase the economic value of the real estate. (These expenditures can be considered as cost if it exceeds 2.000 TL for the year 2022.)
• Repair and maintenance expenses incurred by lessor for the rented property,
• Rents and other actual expenses paid by sub-lessors,
• Rent of the house accommodated by the lessors who rent their own property, (non-deductible part is not evaluated as expenditure surplus),

It is not allowed for taxpayers not residing in Türkiye, (including Turkish nationals who reside abroad for a continuous period of more than six months with a residence or work permit) to deduct the amount of rents they pay in a foreign country from their rental income obtained in Türkiye.

• Cost of loss, detriments and compensations paid for rented property and rights based on a contract, law or court decree. Non-residents who have opted for the actual expenditure method should keep the documents showing the expenses incurred for a period of 5 years and submit to the tax office when required.

Calculation of Deductible Expenses in Case of Exception in Actual Expenses Method

In case, a taxpayer chooses the actual expenses method and benefits from the exception applied to rental income from house, the part of actual expenses corresponding to the exception shall not be deducted from gross revenues.

The part of deductible expenses corresponding to the taxable revenue will be calculated using the following formula:

(*) Taxable Revenue = Total Revenue – Amount of Exception for Rental Income from House

Example: Taxpayer (D) rented his/her house in 2022 and obtained 120.000 TL of rental income. Taxpayer, who has no any other income, incurred 30.000 TL of expenditure for his/her property and chooses the actual expenses method.

The amount that taxpayer can deduct as actual expenses will be the amount that corresponds to the taxable revenue of the total expense for 30.000 TL.

Taxable revenue = 20.000 – 9.500 = 110.500 TL
Deductible expense = (30.000 X 110.500) / 120.000 = 27.625 TL

In case, the amount of actual expense to be deducted from the rental income is 27.625 TL.

Deduction of Expenses in Lump-sum Expenses Method

Taxpayers opting for the lump-sum expenses method can deduct the lump-sum expense at the rate of 15% from their revenue against actual expenses. The lump sum expense, for taxpayers who obtain a rental income and who will be able to benefit from the residence exemption, will be calculated over the remaining amount after deducting the exception amount.

It is not possible to opt for lump-sum expenses method in the case of renting rights. Taxpayers who earn income from the rental of rights along with the rental income of the workplace must choose the actual expense method in their income tax returns.

Source: Revenue Administration
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

Obtaining of rental income is bound to collection principle. In order to tax the rental income in accordance with the collection principle, it should be collected in cash or in kind.

Collection of Rental Income in Cash

Collection of rental income in cash states that the payment of rent in Turkish Liras or in foreign currency. Received cheques are also taken into account as collection in cash.

• Rental income collected by the taxpayers relating to that year or previous years is taken into account as the income of the year which it is collected in.

Example, if 2020, 2021 and 2022 rental incomes are collected in 2022, these incomes will be taken into account as the income of the year 2022.

• Rental income relating to prospective years which is collected in advance is not taken into account as the income of the year which it is collected in but as the income of the years which the income is related to.

Example, if 2022, 2023 and 2024 rental incomes are collected in 2022, each year’s rental incomes will be taken into account as the income of the related year.

In terms of renting transactions in foreign currency, gross revenues in rental incomes are determined according to the exchange rate announced by the Central Bank of Republic of Türkiye on the collection date.

Collection of Rental Income in-kind

If the rental payment is collected in-kind (property, ware etc.), payments are valued according to the Tax Procedure Law No. 213

Collection and Payment of Leasing by Means of Banks or Postal Administration

According to the Income Tax General Communiqué Serial No. 268 and 298 which are published for the authentication with documents issued by banks or postal administrations of the collections and payments that are made in connection with the transactions regarding workplace and residential rentals;

• For residence, 500 TL or over per month for each house; in case of weekly, daily or similar short-term housing rental regardless of the amount for those who obtain a rental income,
• For workplace, without a limitation of amount for those who lease out their workplaces and their tenants need to make the payments and collection of the leasing by means of banks, financial institutions or postal administrations and are obliged to authenticate their payments and collections through documents issued by these institutions.

Since receipt or monthly statement is issued for the payment and collection while using mediums like depositing money, money order, cheque or credit cart by means of banks, financial institutions or postal administrations, these documents shall be accepted as certifying documents. Payment and collection carried out via internet banking are also evaluated in the same scope.

The fine which shall be applied to persons who do not comply with the aforesaid obligations is 5% of each transaction’s amount and it should be no lower than the amount of special irregularity fine determined for that year in accordance with the Repeating Article 355 of the Tax Procedure Law.

Source: Revenue Administration
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

Any firm forced out of business due to a Force Majeure, such as the pandemic, can approach the government.

The government will pay 60% of the staff salaries for a period of three months.

With this short-term employment allowance, the government will make direct transfers — within the ranges of 1,752 Turkish liras ($260) to 4,381 liras ($650) — in the employees’ bank accounts directly.

The government will also pay for their health insurance during the period.

With these measures, the government hopes to cut back unemployment figures due to the pandemic, which has claimed over 74,800 lives globally and infected more than 1.35 million others.

In Turkey, the death toll stands at 649, with more than 30,200 cases confirmed.

Bünyamin Esen, a social security inspector, said that due to the short-term employment allowance, firms do not lose their staff for three months.

He added that President Recep Tayyip Erdoğan has the authority to extend the three-month period to six months. “If the risk of epidemic does not end as early as expected, the period of the allowance will be extended.”

Salaries are paid by the government on the fifth day of each month through the country’s postal service, PTT.

Employers will not have to pay the salaries, insurance premiums and income taxes of their staff during this period said Esen, who is also CEO of a consultancy firm, Uzman Global.

He said this allowance was valid since 2008, but it was stretched to incorporate the unprecedented situation rising from COVID-19, the official name of the virus.

Under the amendment, an employee who has worked for at least 60 days and has 450 days of premiums for the last three years qualifies for the allowance. In case an employee loses his job after the three-month period, the state will give them an unemployment allowance for up to seven months and up to 2,354 Turkish liras ($350).

Turkey has also approved tax discounts and delays for companies and citizens.

Especially tourism and aviation firms, which are affected mostly by the virus, are being protected by the government.

Banks have allowed clients to defer their installments for three months and are offering new low-interest-rate credit packages to firms.

The country backs employers with minimum wage and tax supports besides the short-term employment allowance.

Turkey increased the minimum pension to 1,500 Turkish ($223) after the start of the outbreak.

After first appearing in Wuhan, China, in December, the virus, has spread to at least 184 countries and regions, according to data compiled by U.S.-based Johns Hopkins University.

Source: Hürriyet Daily News/Link: https://www.hurriyetdailynews.com/turkey-takes-sweeping-steps-to-cushion-coronavirus-fallout-153646
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

 It is obligatory for the wages paid from these companies in return for all kinds of services, to joint-stock partners and limited-liability partners and limited partners to be subjected to tax withholding and it is possible to state these an expense, since these are the payments within the scope of the 61st Article of the Income Tax Law.

According to the Article 61 of the Income Tax Law, with its meaning in the law of obligations, labor law and social security law, the wages of the board of directors, which are not considered as service fee but are considered as counsel fees, are considered as wages, and thus they are subject to tax withholding on the Income Tax tariff, and pursuant to the Article 40 of the Income Tax Law, these are accepted as the expenses to be deducted from the commercial income by considering them as the wage paid to the employee.

Source: İSMMMO
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

Included in Law No. 7194, enacted by the Turkish parliament on December 5, 2019, the DST applies at a rate of 7.5 percent to revenues from the supply of certain digital services to consumers in Turkey. The tax applies to companies with global revenues of at least EUR750m (USD827m) and domestic source revenues of at least TRY20m (USD3.2m) from taxable services.

According to a draft communique published by the tax authority last month, digital services falling within the scope of the DST are any kind of advertisement services offered in the digital environment. This includes ad control and services such as performance measurement, user data transmission and management as well as technical services related to the presentation of an advertisement.

Furthermore, taxable services include any audio, visual, or digital content (computer programs, applications, music, video, games, in-game apps, etc.), and content to be listened to, watched, or played digitally.

Additionally, revenues from digital platforms where users can interact with each other are included in the tax. This includes business services, such as the selling of goods and services between users, as well as services provided to facilitate the sale.

Source: Tax News / link: https://www.tax-news.com/news/Turkey_Introduces_New_Digital_Services_Tax____97563.html
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

The foreign person has income tax liability. There is no residence permit. Can we register him/her as Bag-Kur (Social security organization for artisans and the self-employed) in terms of 4/B?

According to Law No. 6735, work permit or exemption of work permit stands for residence permit in accordance with article 27 of Law No. 6458. However, work permits issued to foreigners holding the status of Applicant of International Protection, Conditional Refugee and Temporary Protection, do not replace residence permits.

Source: İSMMMO
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

According to the report published by Organization for Economic Co-Operation and Development (OECD), the Turkish standard VAT rate is 18.0%, which is below the OECD average. The average VAT/GST¹ standard rate in the OECD was 19.3% as of 1 January 2019. The previous standard VAT rate in Turkey was 17% in 2000. It changed to the current level in 2001. Turkey applies reduced VAT rates of 1% and 8% to a number of goods and services. VAT was introduced in Turkey in 1985 at a standard rate of 10.0%. Since then the minimum and maximum standard rates have been at 10.0% and 18.0% respectively.

VAT Revenue Ratio

The VAT Revenue Ratio (VRR) for Turkey was 0.40 in 2016, below the OECD average of 0.56. The VRR is a measure of the revenue raising performance of a VAT system. A ratio of 1 would reflect a VAT system that applies a single VAT rate to a comprehensive base of all expenditure on goods and services consumed in an economy – with perfect enforcement of the tax. Relative to the pre-crisis level of 2007 (0.38), the Turkish VRR position has increased by 0.02 percentage points. The Turkish VRR remained stable at 0.40 between 2014 and 2016. The lowest VRR was recorded in the year 2009 at 0.36 and the highest level in 2000 at 0.46.

Source: Organization for Economic Co-Operation and Development (OECD) / link: http://www.oecd.org/tax/consumption/consumption-tax-trends-turkey.pdf
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

According to the Taxing Wages report published by Organization for Economic Co-Operation and Development (OECD), the tax wedge is a measure of the tax on labour income, which includes the tax paid by both the employee and the employer in Turkey.

Single worker

The tax wedge for the average single worker in Turkey decreased by 0.1 percentage points from 39.0 in 2017 to 38.9 in 2018. The OECD average tax wedge in 2018 was 36.1 (2017, 36.2). In 2018 Turkey had the 17th highest tax wedge among the 36 OECD member countries, compared with the 18th in 2017.

In Turkey, income tax and employer social security contributions combine to account for 67% of the total tax wedge, compared with 77% of the total OECD average tax wedge.

One-earner married couple with two children

The tax wedge for a worker with children may be lower than for a worker on the same income without children, since most OECD countries provide benefits to families with children through cash transfers and preferential tax provisions.

Turkey had the 8th highest tax wedge in the OECD for an average married worker with two children at 37.2% in 2018, which compares with the OECD average of 26.6%. The country occupied the 7th highest position in 2017.

Child related benefits and tax provisions tend to reduce the tax wedge for workers with children compared with the average single worker. In Turkey in 2018, this reduction (1.7 percentage points) was less than the OECD average (9.5 percentage points).

Tax wedge trends between 2000 and 2018

In Turkey, the tax wedge for the average single worker decreased by 1.5 percentage points from 40.4% to 38.9% between 2000 and 2018. During the same period, the average tax wedge across the OECD decreased by 1.3 percentage points from 37.4% to 36.1%.

Since 2009, the tax wedge for the average single worker increased by 2.2 percentage points in Turkey. During this same period, the tax wedge for the average single worker across the OECD increased by 0.6 percentage points.

Employee tax on labour income

The employee net average tax rate is a measure of the net tax on labour income paid directly by the employee.

In Turkey, the average single worker faced a net average tax rate of 28.2% in 2018, compared with the OECD average of 25.5%. In other words, in Turkey the take-home pay of an average single worker, after tax and benefits, was 71.8% of their gross wage, compared with the OECD average of 74.5%.

Taking into account child related benefits and tax provisions, the employee net average tax rate for an average married worker with two children in Turkey was reduced to 26.2% in 2018, which is the highest in the OECD, and compares with 14.2% for the OECD average. This means that an average married worker with two children in Turkey had a take-home pay, after tax and family benefits, of 73.8% of their gross wage compared to 85.8% for the OECD average.

Source: Organization for Economic Co-Operation and Development (OECD) / link: http://www.oecd.org/tax/tax-policy/taxing-wages-turkey.pdf
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

What will be the profit taxation rate, when the revenue obtained from our company located in the UK, and the relevant amount is transferred to the accounts of the company or person in Turkey?

The tax is calculated by combining with incomes in Turkey for the revenues and incomes obtained from companies or entities in Turkey. Taxes paid abroad, if any, are deducted from the calculated taxes. 15% income tax withholding is applied in profit distribution.

Source: İSMMMO
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.

Is it possible to use the stamp tax book which is certified every year and to make interim approval-continuation certification in January? Is there an obligation to issue new books every year?

You can use the stamp tax book next year. You must get an interim approval by the end of January.

Source: İSMMMO
Legal Notice: The information in this article is intended for information purposes only. It is not intended for professional information purposes specific to a person or an institution. Every institution has different requirements because of its own circumstances even though they bear a resemblance to each other. Consequently, it is your interest to consult on an expert before taking a decision based on information stated in this article and putting into practice. Neither MuhasebeNews nor related person or institutions are not responsible for any damages or losses that might occur in consequence of the use of the information in this article by private or formal, real or legal person and institutions.