Residential properties located within Turkey and with a value above the threshold prescribed in Article 42 of the Property Tax Law[1] will be subject to a valuable house tax. According to the Property Tax Law, the applicable tax rates were determined as follows:

• for any house with a value between TL 5 million and TL 7.5 million, nil up to TL 5 million and 0.3% for the portion exceeding TL 5 million;


• for any house with a value between TL 7.5 million and TL 10 million, TL 7.500 for the portion corresponding to TL 7.5 million and 0.6% for the portion exceeding TL 7.5 million; and


• for any house with a value greater than TL 10 million, TL 22.500 for the portion corresponding to TL 10 million and 1% for the portion exceeding TL 10 million.

The foregoing tax base figures will be increased each year by half of the re-evaluation rate determined pursuant to the Tax Procedural Law[2] in that year. Since such re-evaluation rate was determined as 9.11% for the year 2020, the relevant tax figures will now be applied at an increased rate of 4.555% for the year 2021. Accordingly, in 2021, valuable house tax will apply to houses with a value above TL 5,227,000 and the applicable tax base rates for 2021 are as follows:

• for any house with a value between TL 5,227,000 and TL 7,841,000, nil up to TL 5,227,000 and 0.3% for the portion exceeding TL 5,227,000;


• for any house with a value between TL 7,841,000 and TL 10,455,000, TL 7,842 for the portion corresponding to TL 7,841,000 million and 0.6% for the portion exceeding TL 7,841,000; and


• for any house with a value greater than TL 10,455,000, TL 23.526 for the portion corresponding to TL 10,455,000 and 1% for the portion exceeding TL 10,455,000.

Tax Exemption

According to the Implementation Communiqué, the following properties will be exempt:

• any residential properties owned by the State, municipalities, universities and the Directorate of Public Housing Administration;


• any residential property if its owner only owns one residential property within Turkey;


• if a person owns more than one residential property within Turkey, the residential property owned by that person with the lowest value;


• provided that there is reciprocity, any residential properties owned by a foreign State and used as an embassy or consulate or any property and its annexes allocated to an ambassador for residential purposes as well as any residential properties owned by an international organisation headquartered in Turkey or the Turkish branch of an international organisation; and


• any newly built residential properties owned by a real person or legal entity whose main scope of activity is building construction provided that such property has not been subject to any sale, assignment or transfer .

Tax Declaration, Payment Place and Payment Period

Taxpayers are required to submit their declarations to the tax office where the residential property subject to the tax is located until the 20th February of each year, along with a document to be obtained from the relevant municipality showing the tax value of the relevant property (for the previous and current year as of the date the declaration is to be submitted). Taxpayers qualifying for an exemption are required to notify the tax office within the same period regarding such exemption.

Taxpayers also have the option to submit an e-declaration through electronic means. If the declaration is made through electronic means, the document showing the tax value of the relevant property will need to be delivered to the relevant tax office either in person or through mail within 15 days following the electronic submission.

Any tax levied and finalised by the tax office will need to be paid in two equal instalments in February and August of that year.

Conclusion

There was an expectation by taxpayers that this tax would be postponed by another year due to the adverse impacts of the pandemic. Unfortunately, the valuable house tax was introduced. Taxpayers are now advised to evaluate whether they own any property (or hold proprietary rights) within the scope of this new tax, whether any exemptions would apply to their property (or proprietary rights) and to make their tax declarations or exemption notifications within the time limits prescribed by the Implementation Communiqué.