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Tax penalty risk for daily rentals in Turkey

15th June 2017

Online banking users always click on this option.

This option appears on the screen in every money transfer-EFT transaction... Payment type is selected as "rental fee" and then the transaction continues. (Or the transaction is carried out by selecting "other" option.)

Ones who visit the bank personally and transfer the rental fee from the counter have the teller to note down "rental fee payment" on the bank receipt.

This requirement had started back in November 2008... All of the workplace rental fees have to be transferred to the property owners through bank or PTT. For the rental fees related to the houses, this requirement applies when the monthly rental fee is over 500 TL. Starting from July 1, there is a requirement for transferring of payments through bank or PTT for "short term house rentals" such as daily, weekly or similar regardless of the amount. (Official Gazette dated 9.6.2017: Communiqué Serial No. 298 on Amending the Income Tax General Communiqué Serial No. 268)

Thus, it is now easier to determine informal transactions if the property owners, who gain a rental income, do not declare this income although the tenants transfer their payments through a bank. As a matter of fact, while the total number of other taxpayers (commercial enterprises, corporate taxpayers etc.) has increased at a very low rate over the years, the number of taxpayers submitting tax returns due to rental income has increased apace since 2008. (After 2008, the number of taxpayers submitting tax returns due to rental income has increased from 750.000 first to 1 million, then to 1,5 million and then to 1,9 million in 2017.)

Either for the workplace rental fees and for the house rental fees, the taxation rules are clear...

The declaration limit for workplace rental fees in 2017 is 30 thousand TL gross (24 thousand TL net). If the workplace is rented to a taxpayer keeping its books by single entry (or rented to the ones who are not obliged with tax withholding), then the declaration limit is 1.600 TL for the incomes in 2017 (Income Tax Law Article 86/1-d).

For the house rental fees, the burden of declaration starts when the annual income obtained / to be obtained in 2017 exceed 3.900 TL. (Income Tax General Communiqué no. 296)

Tax liability is deemed to be fulfilled when the rental fee incomes obtained in 2017 and exceeding the abovementioned amounts are declared in March 2018 (March 1-25). And these rental fee incomes are included to the tax return as real estate property income (GMSI - 'gayrimenkul sermaye iradı' - Real estate capital income )...

But there is one critical issue for the ones who obtain daily-weekly rental fee income... The incomes obtained might not be considered as *GMSI. ( *'gayrimenkul sermaye iradı' - Real estate capital income )
Although it's been considered that these are collected as rental fee income, such incomes can be recognized as "commercial earning". (therefore a company is required)

In such a case where the income obtained is recognized as commercial earning, what is changing for the property owner? While submitting Income Tax (IT) return once a year is sufficient for GMSI (gayrimenkul sermaye iradı - Real estate capital income ), commercial earnings cause troublesome liabilities such as (real) bookkeeping requirement, and regularly submitting VAT return (as well as withholding tax return depending to the transaction). (a COMPANY) Of course there is also a requirement for annual income tax return... Thus, when the rental fee income is considered as a commercial earning, then the liabilities increase for the property owner.

So, why does the Revenue Office consider daily rental fees as "commercial earning"? These are considered as commercial earnings on the basis that "higher income is obtained compared to long term renting, the house is continuously kept ready for being used again when the tenant leaves the house". In addition to this, the Revenue Office states that such rental transactions require an organization, thus they should be taxed as "commercial earning", not as rental fee income. (Ankara Tax Office Directorate, Ruling dated 13/09/2012 and numbered 928)

A fine equal to 5% of rental fee (for each transaction) is applied to the ones who do not comply with the requirement regarding payment of rental fees through bank or PTT (the fine imposed may not be less than the special irregularity fine).

Property owners renting out their properties on a daily basis should also take the judicial risks into account. Identity of the tenant for daily-hourly rentals is generally not known. There is also a risk that such houses can be rented by terrorist organizations and prostitution gang. Within the scope of the Decree Law (DL) no. 678 published in the Official Gazette on November 22, 2016, it's been obligatory to report the identities of the people who rent a house on a daily basis.

Accordingly, while obtaining higher amounts of incomes compared to the monthly-annual rentals, the property owners renting their properties on a daily-weekly basis need to take their increasing incomes as well as the tax penalty risks and judicial risks into account .
Original translation of this article can be found here.

YellAli are following any new developments
of the short-term property rentals. We also provide a service to assist those home owners (in all Muğla regions, Kaş & Kalkan only) with their guest registration and property taxation. Please see here for more information or contact us:

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We are offering two options for property owners who are renting out their property to paying guests and to those who allow family/friends to stay for free. (only available in the Muğla Region - Fethiye, Marmaris, Bodrum, Gokova, Ortaca, Dalaman, Datça, Köyceğiz etc etc)
Kaş & Kalkan (in Antalya)

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