The Law No. 7194 on Digital Service Tax and Amendment of Certain Laws and Law Decree No. 375 (“Law”), published on the Official Gazette dated December 7, 2019 and No. 30971, (https://www.resmigazete.gov.tr/eskiler/2019/12/20191207-1.htm ) introduced new valuable house tax by amending Real Estate Tax Law No. 1319.
- Scope
- Pursuant to new article, Article 43 of the Real Estate Tax Law, households in Turkey whose tax value or value determined by the General Directorate of the Land Registry is more than TRY 5,000,000 are subject to the valuable house tax.The tax base is the greater of the tax value or the value determined by the General Directorate of the Land Registry (Art. 44/1). Pursuant to article 43/2 and 43/3 if there is no value determined by the General Directorate of Land Registry, taxation will be based on the tax value determined pursuant to Art. 29 of the Law No.1319 (“bina vergi değeri”)
- Basis and Rates :
The valuable house tax will be applied at the following rates (Art. 44/1):
| Value | Rate |
| 5,000,000- 7,500,000 (TRY) | 0.3 % |
| 7,5000,001- 10,000,000 (TRY) | 0.6 % |
| >10,000,000 (TRY) | %1 |
- Taxpayer of the Valuable House Tax :
Pursuant to Art. 45, the taxpayer of the valuable house tax is the owner of the household, the holder of any usufruct right on the household, or if neither exists, those who dispose the household as if they are the owner of the household.
- Payment Period:
Pursuant to Art. 47/3, the valuable house tax declared annually and paid in two installments by the end of February and August in the relevant year.
- Exemptions:
Pursuant to Art. 46 of Law No. 1319 certain households are exempt from valuable house taxes, such as households owned by those who own only one household and can demonstrate that they have no income (excluding individuals under 18 and who are dependents) and those whose only source of income is from social security institutions’ monthly payments. Also (under certain circumstances) the households of the special and general budgeted institutions, municipalities, universities and (under certain circumstances) households of the foreign states using as consulates or embassy buildings or house of ambassador etc. are exempt from valuable house tax.
The valuable house tax will enter in force on April 1, 2020.
- Conclusions
As it can be clearly understood from the text of the Law and argued by the commentators:
- This law applies only the small amount of households, this seems problematic and conflict with the basic principles of taxation. It does not apply to commercial unit/property even if their value is above 5,000, 000 TRY.
- How General Directorate of the Land Registry will determine the value of the household? The law does not say anything on this issue.
- Pursuant to article 43/2 and 43/3 if there is no value determined by the General Directorate of Land Registry, taxation will be made based on the tax value determined pursuant to Art. 29 of the Law No.1319 (“bina vergi değeri”). This distinction is another criticism brought against this regulation.
- The calculation method is problematic and contradict with basic principles of taxation.
- The general approach of Law seems problematic and contradict with the basic principles of taxation. For instance, this tax will apply to those who have one household if the value of house is above 5,000,000 TRY, for example 6,000,000 TRY. But this tax does not apply to those who have 4 houses if each of their value is lower than 3,000, 000 TRY. As it can been clearly understood those whose household valued 6,000,000 will pay but those whose household valued 12.000.000 TRY will not pay this tax. This is another strong criticism brought against this tax.
Taxpayer has a right to appeal the value determined by the General Directorate of the Land Registry and take other relevant legal action subsequently.
For further information please contact with:
Att. Med. Fatih M. Tercan
and
Trainee Atty.
Ezgi Hazal Özhan
This legal newsletter has been prepared for informational purposes only; it has not been prepared for advertising purposes or with the intention of creating an attorney-client relationship. None of the information contained in this legal newsletter shall constitute legal advice or anything akin thereto.
