Turkey Rental Income Tax and Capital Gains for Foreign Property Owners 2026

Tax Obligations for Foreign Property Owners in Turkey

Foreign nationals who own property in Turkey are subject to Turkish tax law on their Turkish-source income. The primary taxes affecting foreign property owners are rental income tax (kira geliri vergisi), capital gains tax on property sales (gayrimenkul satis kazanci), annual property tax (emlak vergisi), and value-added tax (KDV) in certain transactions.

Turkey's tax framework for property is governed primarily by the Income Tax Law No. 193, the Corporate Tax Law No. 5520, the Property Tax Law No. 1319, and the VAT Law No. 3065.

Rental Income Tax

Who Must File

Any person earning rental income from Turkish property must file a Turkish tax return, regardless of their residency status. Non-residents are taxed only on their Turkish-source income under Article 6 of Income Tax Law No. 193.

Tax Brackets for 2026

Turkey uses a progressive income tax scale. The 2026 brackets for rental income (updated annually by the Revenue Administration) are expected to follow the pattern of recent years. The rates run from 15% on the first bracket up to 40% on income exceeding the top threshold. Check the current year's brackets at the Revenue Administration (Gelir Idaresi Baskanligi) website at https://www.gib.gov.tr, as they are adjusted each January.

Rental Income Exemption

Under Article 21 of Income Tax Law No. 193, there is an annual rental income exemption for residential properties. For 2025, this exemption was 33,000 TRY (the 2026 figure will be updated by the Revenue Administration). This exemption applies only to residential (mesken) rentals, not commercial. It is not available if the property is rented through a company. The exemption is per taxpayer, not per property.

Deduction Methods

Foreign property owners can choose between two deduction methods.

The lump-sum deduction (goturu gider) allows you to deduct 15% of gross rental income as a flat expense. No receipts required. This is simpler but may result in higher tax if your actual expenses are significant.

The actual expense deduction (gercek gider) allows you to deduct documented expenses including property management fees, maintenance and repair costs, insurance premiums (including DASK), depreciation (buildings can be depreciated over 50 years at 2% annually under the Tax Procedure Law No. 213), interest on loans taken for the property, municipal property tax, and utility costs borne by the landlord.

Once you choose a method, you must use it for two consecutive years before switching.

Withholding Tax

If the tenant is a company or other withholding agent (stopaj), they are required to withhold 20% of the gross rent and remit it to the tax authority. This withholding is credited against your annual tax liability.

If your tenant is an individual (not a company), there is no withholding. You are responsible for declaring and paying the full tax.

Filing and Payment

The annual rental income tax return (yillik gelir vergisi beyannamesi) must be filed by March 31 of the following year. Tax is paid in two installments: the first by March 31 and the second by July 31.

Non-residents must either file directly or appoint a tax representative (vergi temsilcisi). Filing can be done electronically through the interactive tax office (interaktif vergi dairesi) at https://ivd.gib.gov.tr.

Capital Gains Tax on Property Sales

The Five-Year Rule

Under Article 80 of Income Tax Law No. 193, gains from the sale of real property held for more than five years are completely exempt from income tax. This is the single most important tax rule for foreign property investors in Turkey.

If you sell within five years, the gain is taxed as regular income at the progressive rates described above. The gain is calculated as the sale price minus the acquisition cost (indexed for inflation using the Domestic Producer Price Index/Yi-UFE published by TUIK). Selling costs (agent commissions, notary fees) are also deductible.

Inflation Indexing

The acquisition cost is adjusted for inflation using the Yi-UFE index, but only if the index increase exceeds 10% from acquisition to sale. Given Turkey's high inflation environment (the Yi-UFE increased substantially between 2021 and 2025), this adjustment significantly reduces the taxable gain for properties held for even a few years.

CBI Three-Year Hold Interaction

For CBI investors, the three-year no-sale requirement means you cannot sell within three years. If you sell in year four or five (before the five-year exemption kicks in), you will owe capital gains tax on the indexed gain. Holding until after the five-year mark results in zero capital gains tax.

Annual Property Tax (Emlak Vergisi)

Under the Property Tax Law No. 1319, all property owners (Turkish and foreign) pay annual property tax to the local municipality. Rates for 2026 are 0.1% for residential properties (0.2% in metropolitan municipalities), 0.2% for commercial properties (0.4% in metropolitan municipalities), 0.1% for land (0.2% in metropolitan municipalities), and 0.3% for agricultural land (0.6% in metropolitan municipalities).

The tax base is the declared value (beyan degeri), which is reassessed every four years and updated annually using a coefficient. Payment is in two installments: the first by May 31 and the second by November 30.

Value Added Tax (KDV)

VAT on property transactions in Turkey varies. New residential properties under 150 sqm net area sold by developers were previously subject to reduced VAT rates (1%, 8%, or 18% depending on location and value), but the rates were adjusted in 2024 to a general 10% for qualifying new residential sales, with the standard 20% rate applying to larger or higher-value properties. Resale of residential properties by individuals is generally VAT-exempt. Commercial property sales may be subject to 20% VAT depending on the parties and circumstances.

Foreign buyers who do not have a Turkish residence permit and pay in foreign currency may be eligible for VAT exemption on new property purchases under Article 13/i of the VAT Law. This exemption requires that the buyer has not been resident in Turkey for the preceding six months and that payment is made in foreign currency through the banking system.

Double Taxation Treaties

Turkey has double taxation avoidance agreements with over 80 countries. These treaties typically provide that property income (rental and capital gains) is taxable in the country where the property is located (Turkey), but the taxpayer's home country must provide a credit or exemption for Turkish taxes paid.

Key treaties for major foreign buyer groups include agreements with Germany (1985, amended 2011), the United Kingdom (1986, amended 2010), Russia (1997), Iran (2002), and Iraq (2007). The full list is available on the Revenue Administration website.

Tax treaty benefits do not happen automatically. You must claim them in your home country's tax return.

Practical Tips for Foreign Owners

Register with the tax office (vergi dairesi) and obtain a tax number before renting out your property. Keep all expense receipts for at least five years. Consider the five-year hold rule when planning your exit. For CBI investors, the optimal strategy is often to hold past five years to eliminate capital gains tax entirely. Appoint a local accountant or tax advisor for annual filings if you are not resident in Turkey.

For updated tax guidance for foreign property owners in Turkey, Bektu provides resources at https://bektu.com.