Question: My partner and I bought a two bedroom apartment in Side, Turkey in may 2005 (this was your letter of the month-may 2007).
We are now thinking of selling it but don’t seem able to get a satisfactory answer as regards to capital gains tax in Turkey. Do your experts or yourself know how long you have to own the property before you are no longer eligible to pay this tax.
Kind regards
Answer: For the purpose of this question I will assume that you are tax resident and domiciled in the UK. If you are not then the situation will be different depending on where you are tax resident or domiciled. I also assume for the purpose of this answer that you did what you should have done and declared the full amount in the title deed rather than declare a smaller amount and pay the rest in cash (an under-declaration). If you did an under-declaration when you bought then unless you do a similar under-declaration when you sold then you will have an artificially high Capital Gain and therefore the amount of tax that you will pay will be higher than it should be.
In Turkey when you sell a property you pay tax on the increase between the amount that you bought it for and the amount that you sold it for. The resulting amount is taxed at between 15% and 35% depending on the level of Capital Gain (there is a table which sets out how much is payable between certain bands). If you sell the property after 5 years then you don’t pay Capital Gains Tax in Turkey. I suspect that the reason why you were finding it difficult to get an answer on this is that until May this year the property was Capital Gains Tax free after 4 years. However, that is not the end of the story because you will have to declare the Capital Gain on your tax return in the UK. You won’t pay tax twice as there is a Double Taxation Treaty between UK and Turkey which means that you will only pay any difference here. Therefore if there is no Capital Gains Tax payable in Turkey you will end up paying the full amount back in the UK.
Just one final point and that is that the tax systems change each year in every country with the new budgets and that by the time you come to sell these rules may have changed.
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