New Taxes Imposed on Valuable Houses in Turkey – Valuable House Tax in Effect
For the first time in the history, Turkey ratifies the Valuable Housing Tax (the “VHT”) under the law numbered 7194 which was published on the Official Gazette No. 30971 dated December 7, 2019 (the “Law”) and makes crucial amendments to the Real Estate Tax Law No. 1316. According to the Law, owners of houses valued as below will be subject to Valuable Housing Tax effective from 2020:
Taxpayers will be determined by the General Directorate of Land Registry and Cadaster (“GDLRC”) by having the value of houses determined by reputable real estate valuation expert firms and informing the owners in relation to the value of their houses and tax obligation. Valuation results of the houses will be initially published on the website of GDLRC (http://tasinmazdegerleme.tkgm.gov.tr/) and then written notification will be made to the owners of the houses exceeding 5.000.000 Turkish Liras by the GDLRC.
Having received the notice on VHT, owners may object to the valuation determined by GDLRC within 15 days after the notification has been served. The decision of GDLRC in relation to the value of the real estate will be finalized and the real estate will become taxable unless the owner raises an objection to GDLRC in writing within the statutory time period. GDLRC will evaluate the merits of the objection raised by the owner and response the objection in writing within 15 days after the objection is made. The valuation in the response of GDLRC will be the finalized valuation and the owner may only initiate legal proceedings before the relevant Tax Courts within 30 days after receiving such response by the owner in order to challenge the final valuation of GDLRC.
Following the year in which the house becomes taxable, the owner must declare VHT until 20th February of the relevant year. The calculated tax will be paid in two equal installments in February and August of the relevant year. Taxpayers may reserve their rights to initiate legal proceedings while declaring the VHT if they intend to challenge the valuation before Tax Courts. However, it should be noted that reserving your rights does not suspend the payment of the tax. Taxpayers may file a lawsuit before Tax Courts within 30 (thirty) days after reserving their rights to legal proceedings while declaring VHT.
It is crucial for owners to obtain real estate valuation reports from reputable real estate valuation firms indicating the real value of the house in order to support your objection or lawsuit with documentary evidence.
If the real estate is owned commonly by multiple owners, the owners will be liable for payment of VHT in line with their proportion of shares. However, taxability of the real estate will be considered according to the total value of the real estate, it will not be subject to share proportions of respective owners. In the event of joint ownership, owners will be jointly liable for the payment of the VHT.
Real estates listed below are exempt from VHT according to Law:
- Real estates which are owned or used subject to right of usufruct by administrative or governmental authorities or universities.
- Real estates which are owned by those who does not have any other real estate and who does not have an income except for social security incomes.
- Real estates which are owned by foreign states and used as consulate or embassy buildings or used for accommodation of ambassadors (subject to reciprocity) and real estates owned by international organizations having their center in Turkey or their Turkish agencies
- Real estates which are owned by corporations mainly engaged with construction activities yet have not been sold, transferred or assigned to third parties. (Except for the situations where such real estates are leased to third parties)