Taxation of Short-Term Rentals

Short-term rentals have become increasingly popular in Turkey due to the growing interest in property investment and sharing economy platforms. Nevertheless, this commercial practice has complex tax obligations that require careful consideration. The following information note offers a concise yet comprehensive summary of Turkey's tax system that applies to daily rental income. 

Income Tax

Individuals who earn trade income through short-term rentals must register with Turkey's Revenue Administration. Once the registration is approved, you will receive a taxpayer identification number, which is obligatory for all future tax filings.

It is crucial for taxation purposes and to keep meticulous records in preparation for potential tax audits. This should include invoices, receipts, rental agreements, and other relevant documentation that supports your income and expenditure.

Liabilities stemming from your rental income must be paid by 31st March of the following year, based on the previous year's income declaration. Additionally, quarterly advance income tax declarations are mandatory.

Failure to meet tax payment deadlines or deliberately understating income may result in monetary penalties, including late fees and accrued interest. In cases of significant tax evasion, criminal charges may ensue.

A variety of expenses is eligible for deduction from taxable income. These include commissions, advertising expenses, cleaning and maintenance fees, utilities, insurance premiums, loan interest, and depreciation. Renovation costs are depreciable over a prolonged period.

Property owners might be subject to municipal taxes, contingent upon the property valuation determined by the local governing body.

Value Added Tax

Regarding VAT, long-term rentals are exempt, whilst short-term leases are liable for a 20% VAT charge. Registering for VAT and submitting monthly declarations are necessary,  as your daily rentals constitute trade income, and you must register for VAT. All rental transactions are subject to a 20% VAT, and monthly VAT declarations need to be submitted by the 28th of the following month.

You can claim input VAT credit against the output VAT collected from tenants for expenditures directly related to your rental business, such as maintenance or utilities.

In summary, leasing residential property on a short-term basis in Turkey is subject to multiple tax regulations, including Income Tax and VAT. This makes for a complex tax landscape that requires detailed attention. To ensure fiscal responsibility and legal compliance, it's essential to understand each element, from initial registration to record-keeping, tax payments to potential penalties, local municipal taxes and deductible expenses.

Serdar Tasdoken, LL.M., Attorney at Law, Sworn-in CPA, Independent Auditor, Arbitrator, Expert Witness