Rental Transactions
1.4.1. According to Article 1/1 of the VAT Law, deliveries and services made within the framework of commercial, industrial, agricultural activities and freelance activities in Turkey; Article 1/3-f, rental transactions of goods and rights specified in Article 70 of the Income Tax Law are subject to VAT.
According to Article 17/4-d of the same Law, rental transactions of real estates not included in economic enterprises are exempt from VAT.
Accordingly, all rental transactions of economic enterprises are subject to VAT according to Article 1/1 of the VAT Law.
Rental transactions of goods and rights listed in Article 70 of the Income Tax Law are subject to VAT according to Article 1/3-f of the VAT Law, but rental transactions of real estates not included in economic enterprises are exempt from VAT.
Within this framework, even if it is defined as real estate capital income in terms of income tax, the transactions of leasing the operating right in the form of leaving a business or institution for the use of someone else for a certain price and period will be subject to VAT according to Article 1/3-f of the Law.
Accordingly;
– Leasing a land belonging to a municipality or a state university is exempt from VAT according to Article 17/4-d of the VAT Law. However, if the land is included in the economic operation of these institutions or an economic enterprise is formed due to this rental transaction, the said rental transaction will be subject to VAT according to Article 1/1 of the Law.
– Since the right of operation will be leased in case a place is leased by a municipality or a state university to be operated as a tea garden, this rental transaction will be subject to VAT according to Article 1/3-f of the Law, regardless of whether the tea garden is included in an economic operation of the institution that is leasing.
– The rental of real estate that is not included in the economic operation of a municipality or state university to be used as an ATM or bank branch is exempt from VAT according to Article 17/4-d of the Law. However, if the real estate in question is included in the economic operation of a municipality or university, this rental transaction will be subject to VAT according to Article 1 of the Law.
– Since the rental of an intra-city private public transportation line is in the nature of a rental of the operating right, it is subject to VAT within the scope of Article 1/3-f of the Law.
– The rental of a car owned by a person to a provincial special administration will be subject to VAT according to Article 1/3-f of the Law.
– The rental of real estate that is not included in the economic operation of a foundation is exempt from VAT according to Article 17/4-d of the Law.
– The renting out of a parking lot belonging to a business center management that is not subject to VAT is subject to VAT in accordance with Article 1/3-f of the Law.
1.4.2. Article 17/4-p of the VAT Law states that the delivery and rental of real estate, establishment of easement rights, usage permits and preliminary permits made by the Treasury are exempt from VAT.
The concept of the Treasury includes “Public Administrations within the Scope of the General Budget” listed in Table 1 annexed to the Public Financial Management and Control Law No. 5018.
Accordingly, the renting out of real estates by public administrations within the scope of the general budget is exempt from VAT.
Source: VALUE ADDED TAX CIRCULAR/60
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