ADO PROPERTIES

With regards to real estate in Turkey, following taxes or compulsory insurances are in question:

7.3

Taxes and Compulsory Insurance

Foreign nationals and Turkish citizens are no different in terms of taxes or levies to be charged.

Tax rates may be updated on a periodic basis. The rates as of January 1, 2006 are presented below. Please have a look at www.gib.gov.tr for updates and other relevant information.

7.3.1

Real Estate Tax

Annual Real Estate Tax (a tax similar to the Council tax in the UK) rates for cultivated land, uncultivated (for building) land, non-residence-purpose buildings, and residential buildings are 0.1%, 0.3%, 0.2%, and 0.1%, respectively.

Tax is calculated on the basis of the declared value of the asset which could not be less than a threshold determined by tax authorities. Tax payments are made in two equal instalments in the period March-to-May and November each year and those are collected by the local governments (municipality). The tax base is annually updated by a coefficient determined by the Ministry of Finance taking into account the inflation rate.

The new owner of a property has to declare the actual price, which has been paid to the seller, to the municipality by end-December in the year of acquisition.

Real Estate Tax of the property in the year of acquisition is paid by the seller whereas the consecutive years’ taxes are paid by the buyer (new owner).

On the other hand, the Real Estate Tax rates for properties in the following provinces (metropolitans) are two-fold the normal rates stated above.

• Adana
• Ankara
• Antalya
• Bursa
• Diyarbakir
• Erzurum
• Eskisehir
• G.Antep

• Icel
• Istanbul
• Izmir
• Kayseri
• Kocaeli
• Konya
• Samsun

7.3.2

Real Estate Sale-and-Acquisition Levy

Each of buyer and seller is to pay real estate sale-and-acquisition levy of 1.5%, based on the declared value of the asset (This value cannot be less than the threshold determined by authorities). It is collected in prior to the transfer of ownership at TAPU office.

On the other hand, for the registry of a new building constructed on a land, a levy of 1.5% based on the reference value of the asset is to be paid.

7.3.3

Inheritance and Succession Tax

The transfer of property within Turkey, from one to another without any payment or by inheritance are subject to Inheritance and succession tax.

Taxpayer is the person who acquires property by inheritance or gratis.

Inheritance and succession tax is assessed on the declaration submitted by taxpayer.

In the case of inheritance, the declaration should be submitted in four months starting with the date of death. If the death occurs in Turkey and the taxpayer is outside of Turkey, the declaration period is extended to six months. In the case of occurrence of death and being of taxpayers outside of Turkey, the declaration period will be again four months. However, when the death occurs in a foreign country and the taxpayer is in another foreign country, the declaration period is extended eight months.

In the case of transfers by gratis, the declaration should be submitted in one month following the date of acquisition of the property.

The tax base is updated annually. There are some discounts for inheritance to daughters, sons and spouses. In case a spouse and children including legally adopted ones are to take over an inherited property, then an amount of YTL 83,139 is deducted from the tax base of each person. In case only a spouse is the heir, the amount of deduction from the tax base is YTL 166,375. In case of successions without reciprocity (gifts) the amount of deduction is YTL 1,919.

As of 1st January 2006 the applicable tax base brackets and rates are as follows:

Tax Base Brackets (Based on the value of the inherited asset)	Inheritance Tax Rate	Succession Tax Rate (When no reciprocity exists)
First YTL 130,000	1%	10%
Next YTL 280,000	3%	15%
Next YTL 600,000	5%	20%
Next YTL 1,200,000	7%	25%
Amount above YTL 2,210,000	10%	30%

Please note that a levy of 0.9% of the value of the property is also charged while the inherited property (or the gift) is being transferred into the name(s) of the new owner(s) at TAPU Offices.

7.3.4

Environmental Services Tax (EST)

For residential properties, local water suppliers charge an EST of YTL 0.13 per one m3 of water used.

For non-residential buildings, the EST is a flat rate and ranges between TL YTL 13 and YTL 1,537 per year.

The rates for metropolitan cities, on the other hand, are YTL 0.16 / m3 of water used by residential properties and a flat rate of YTL 16-to-YTL 1,921 for non-residential properties.

7.3.5

Motor Vehicle Tax

Depending on the cylindrical volume or horse power of engine and date of production of the vehicle, vehicle owners have to pay an annual tax ranging between YTL 12 and YTL 24,419 for 2006. Motor Vehicle Tax (similar to road tax in the UK) is paid in two equal instalments in January and July.

Category	Amount of Tax (YTL)
Category	Lower Limit	Upper Limit
Car, motorbike, other	12	10,988
Minibus, bus, truck, pick-up truck	121	1,647
Yacht, boat, vessel, ship	2.43	54.94
Aircraft, helicopter	2,919	24,419

7.3.6

Corporate Tax

Corporate entities had to pay a tax of 30% of their previous year profits. Corporate Income Tax rate was lowered to 20% by the new Corporate Income Tax Law published in the Official Gazette on June 21, 2006. The new rate will apply to all corporate incomes earned after 1st January 2006.

7.3.7

VAT

General VAT rate is 18%. However, some goods and services are taxed at either 1% or 8%.

Commercial delivery of a residential property with net area up to 150 m2 is subject to a VAT of 1% whereas commercial delivery of those with more than 150 m2 is subject to a VAT of 18%.

7.3.8

Special Consumption Tax (SCT)

Some goods which have effects on the environment, security and health, and luxuries such as.

• Fuels, industrial oils, petroleum products and petro-chemicals,
• Motor vehicles and sea vehicles,
• Beverages and products with tobacco
• A number of goods including caviar, perfumes, some make-up/cosmetic products, printed materials, some electrical and electronic devices

are subject to an SCT.

7.3.9

Stamp Duty

There is a wide range of transactions on which a stamp duty is charged. The Stamp Duty rates applied to contracts in which a monetary clause exists and tenancy contracts are 0.75% (of the amount stated in the contract) and 0.15% (of the rent), respectively.

7.3.10

Personal Income Tax

Main personal income items which are taxed are commercial income, agricultural income, wages, self-employment revenues, rent, interest and other incomes. Personal income tax rates for the year 2006 are shown in the table below. However, Turkish Income Tax Law exempts some amount of rental income from residential buildings for individuals annually. For the year 2006, the rental income up to YTL 2,200 (approximately GBP 800) is exempted from income tax. Please keep in mind that if you earn rental income more than exempted amount and do not declare to local tax office or under declare, exemption does not apply and you could face severe penalties. Therefore you must register with local tax office and declare your rental income. It must be declared between 1st and 15th of March and the income tax must be paid in March and July in two equal instalments. (Rental income earned in 2006 (If exceeds exempted amount) must be declared from 1st to 15th of March 2007)

Cumulative Income (YTL)		Income Tax
Lower Limit	Upper Limit	Income Tax
0	7,000		15% of the income
7,000	18,000	YTL 1,050 for the previous slice plus	20% of the rest
18,000	40,000	YTL 3,250 for the previous slices plus	27% of the rest
40,000	--	YTL 9,190 for the previous slices plus	35% of the rest

You’re advised to contact a financial advisor or the local tax office in order to gather information on when to make the rental income declaration and to pay the associated tax.

7.3.11

Minimum wage

In year 2006, minimum gross wage for 30 calendar days is YTL 531 for employees at the age of 16 or more (The cost to employer is YTL 645.17/employee).

In other words, if you establish a firm and recruit employees in Turkey, the monthly minimum labour cost will amount to approximately £260/employee.

Minimum wage is applied nation-wide and updated periodically. The Minimum Wage Commission composed of the social partners advices the Government on what the minimum wage ought to be, and the Government determines the amount taking into account this advised figure.

7.3.12

Social insurance

According to Turkish social security laws, self-employed & farmers, employees (wage earners) and civil servants have to register to Bag-Kur, SSK, and Emekli Sandigi, respectively. These are compulsory schemes.

Contribution rates for these schemes range between 35% and 40% of the contribution base.

The main risks covered by these schemes are old-age, disability/invalidity, health, maternity, mortality, orphanage, widow(ed), unemployment (for the employed).

Minimum retirement age for the new entrants is 58/60 (F/M).

Please have a look at www.csgb.gov.tr, www.ssk.gov.tr, www.bagkur.gov.tr, and www.emekli.gov.tr for further information.

7.3.13

Earthquake Insurance

Property is to be insured by the owner against the earthquake risks. It is compulsory and a national uniform tariff is applied.

Other property insurance types can be freely bought from the market and they cover some risks including theft and fire. For further information please visit our insurance page.

7.3.14

Motorists Insurance

If you possess a car, you are obliged to buy a motorists (traffic) insurance. The cost of policy depends on the cylindrical volume of the engine and the production date of the vehicle.

7.4

Preparation of wills and transfer of property to the heirs

Wills prepared by foreign nationals in their own countries can be executed in Turkey so as to transfer the ownership of a property to the individual(s) stated within the wills.

To carry out the property transfer pursuant to a will, a heir has to gather a court letter confirming the will from the relevant court of his/her own country and to have it ratified at the Turkish Consulate General. Then he/she has to submit that letter to the relevant court of the province in Turkey where the property is located. Then, the Turkish Court issues an official document which allows the transfer. Finally, the heir presents the document granted by the Court to the Tapu Office as well as other documents required for the transfer of ownership.

These transfers are exempt from any military clearance and the other restrictions applied to foreign nationals.

Please note that transfer of ownership of a property to an heir is subject to inheritance tax. Thus, if the heir sells out his inherited property, he is not subject to any personal income tax based on the capital gains.

7.5

Divorce settlements

When a married couple gets divorced and one of the parties is to transfer the ownership of his/her property (or a share) into the name of the other party, then this transaction is not subject to any tax.

Similarly, in Turkey, subsistence payments to be made by a divorced party to the other party are all tax exempt.

7.6

Your UK pensions

Your UK pensions are not be taxed in Turkey. Furthermore, such an income is not gained as a result of a commercial activity carried out in Turkey. In this regard, you can freely transfer your pensions to Turkey. You can either have your pension transferred to your bank account in Turkey or prefer getting cheques sent to you.

Please note that an average Turkish household lives on an average monthly income much less than an average UK pension. Thus, your pension itself will allow you to have a financially-comfortable life in Turkey.

7.7

Agreements for the Avoidance of Double Taxation

Agreements between the Republic of Turkey and 61 countries (including the UK) for the Avoidance of Double Taxation can be reached through the web page of Revenue Administration. (Unfortunately in Turkish)

For Agreement between the United Kingdom of Great Britain and Northern Ireland and the Republic of Turkey for the Avoidance of Double Taxation in English please visit our investment pages.

Agreement between the United Kingdom of Great Britain and Northern Ireland and the Republic of Turkey for the Avoidance of Double Taxation was signed on May 9, 1986 and published in the Official Gazette on November 30, 1988.

The comprehensive agreement has effect

According to Article 6 of the ‘Agreement Between the United Kingdom of Great Britain and Northern Ireland and The Rebuplic of Turkey for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains’ dated December 19, 1986;

According to Article 23 of the aforementioned Agreement, Turkish tax payable under the law of Turkey and in accordance with the agreement, whether directly or by deduction, on income or chargeable gains from sources within Turkey are allowed as a credit against any UK tax computed by reference to the same income and chargeable gains by reference to which the Turkish tax is computed.