Want to Maximize Your Profits from Rental Properties? Here’s What You Need to Know About Taxation
When will Rental Income be Considered Obtained?
Cash or non-cash rental amounts received by taxpayers within a calendar year, for that year or previous years, will be considered as income obtained in that year. For example, if the rental incomes of 2021 and 2022 are collected collectively in 2023, they will be considered as income of 2023.
However, rental amounts collected in advance for future years will be considered as income of the relevant year and declared in the relevant year. For example, if rental incomes for the years 2022, 2023 and 2024 are collected collectively in 2022, the rental amount for each year will be declared in the relevant year.
Rental Income Obtained in Foreign Currency
In rental transactions made in foreign currency, gross income is determined based on the exchange rate of the Central Bank of the Republic of Turkey at the time of collection. If there is no market value on the stock exchange, the rental income is converted to Turkish Lira based on the exchange rate determined by the Ministry of Finance and declared according to the conditions explained below.
Collection of Rent in Kind
If the rent is collected in kind, the collected rent is declared according to the provisions of the Tax Procedure Law by being converted into cash value with the market value.
Tax Deduction (Withholding) for Immovable Properties Rented as Business Premises
Certain individuals and institutions that rent out real estate as a workplace will deduct income tax from the rental payments they make to individuals and certain institutions. That means that the tenants of the workplace will deduct tax at a rate of 20% on the gross rent they will pay and pay it to the tax office on behalf of the person who earns the income.
Who is obliged to make tax deductions for which payments is listed in Article 94 of the Income Tax Law.
This tax deduction will also be made on rental payments received in advance for future months or years.
For example, when a 3-month or 2-year workplace rental is collected in advance, in this case, the entire rental collected in advance will be subject to tax withholding.
However, if the tenant of the real estate is a taxpayer subject to income tax in the simple procedure, no tax deduction will be made on the rental payment.
Exemption for Residential Rentals
The exemption amounts for residential rentals are as follows for 2022 and 2023:
2023 Residential Rental Exemption Amount: 21,000 TL 2022 Residential Rental Exemption Amount: 9,500 TL (This is the exemption amount to be applied in this declaration period.) Therefore, if the total annual residential rental income obtained in 2022 does not exceed 9,500 TL, it will not be declared, and no tax will be paid.
If the annual residential rental income exceeds the exemption amount, 9,500 TL will be deducted from the total residential rental amount, and after deducting expenses, income tax will be calculated on the remaining amount and paid.
All residential rental incomes exceeding the exemption amount will be declared. (Rental incomes obtained in 2023 will be declared in March 2024.)
In addition, Article 21 of the Income Tax Law states that;
If income is obtained above the exemption limit, the taxpayer will be liable to declare all of his/her earnings for that year and pay taxes on them.