UPDATE ON THE VALUABLE RESIDENTIAL PROPERTY TAX

The Valuable Residential Property Tax, which was difficult to implement as it was first enacted, was made much more understandable and many issues were clarified upon the amendments introduced by the Law No. 7221.

Dear Fortune Readers,

I would like to share with you my views on the final version of the publicly-debated Valuable Residential Property Tax in this article.

As for the initial regulation, immovable properties were valued much higher than their actual values and the regulation did not have any robust legal basis, which fueled debates and objections concerning the Valuable Residential Property Tax and many taxpayers raised an objection and brought a lawsuit. However, a chaotic environment materialized during the litigation process as the relevant regulation contained matters conflicting with our legal system.

Finally, the Valuable Residential Property Tax was amended by the Law Amending the Law on Geographical Information Systems No. 7221 and Some Laws and the law was rendered enforceable in a way. The new regulation considered the value of Real Estate Tax instead of a value ascertained by the General Directorate of Land Registry and Cadastre as for the value of the immovable property. In addition, residential properties with a tax value below TRY five million were exempted from the tax. Similarly, the immovable property of those possessing a single residential immovable property within the borders of Turkey as well as the lowest-valued residential immovable property of those possessing more than one residential immovable property were exempted from the Valuable Residential Property Tax irrespective of their value (including the possession of usufruct).

Besides, it was also regulated that the values previously ascertained by the General Directorate of Land Registry and Cadastre would not be valid and, accordingly, no tax return would be issued for 2020. On the other hand, the new regulation still provides that the total value of the residential immovable property will be taken into consideration for the calculation of tax basis in case of joint ownership and co-ownership.

However, in cases where there is a single jointly or co-shared immovable property, the exemption for the possession of a single immovable property will also be valid in this instance.

Taxpayer for the Valuable Residential Property Tax will be the owner of the residential immovable property, those who hold a usufruct, if any, and, in the absence of both, those disposing the residential immovable property as if they are the owners thereof.

Tax rate will be paid according to a specified tariff. Accordingly, residential immovable properties with a tax value of TRY 5,000.001 to TRY 7,500,000 (including this amount) will be subject to a tax of 3 per thousand, TRY 7,500,001 to TRY 10,000,000 to a tax of 3 per thousand for the first TRY 2,500,000 and 6 per thousand for the portion exceeding this amount and over TRY 10,000,001 to a tax of 3 per thousand for the first TRY 2,500,000, 6 per thousand for the second TRY 2,500,000 and 10 per thousand for the portion exceeding this amount.

Leon Aslan Coskun