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BUYERS TAX LAW
When you buy a property, both you and your builder are liable to pay 1.5% of the sale price as a property sale tax, so that in total, three percent of the sale price has to be paid to the government as a tax. However, you and your seller may agree that one of you has to pay all three percent of the sale price as a tax. Base amount for the property sale tax is shown on your title deed and this amount has to be the sale price.
Basically, the amount on the title deed indicates the price you paid to your builder but in most cases the situation is not like that. Builders or sellers tent to declare lower figure on the title deed, so that they pay less tax, this is actually a tax dodge. In addition, when it comes to signing the documents in the Land Registry Office, foreign persons knowingly or without any knowledge, sign the documentation. Therefore, they pay less tax and also help seller to declare less tax. The legal and financial results of this act are very serious. Of course, if this procedure is not checked by the Tax Office, you and your seller may get away with declaring a lower figure on the title deed. However, Turkish resorts, including Didim are under very close watch by the Ministry of Finance these days and I think sooner or later they will start checking property sale transactions and applying fines on both buyers and sellers.
The fine in this case is basically twenty five percent of the true amount and there will be two and half percent interest applied over it each month. If we say that you bought your property for 100.000 YTL and declared 40.000 YTL in your title deed, 1,500 YTL is the amount of the tax you must have paid before you obtained your title deed. On the other hand by declaring 40.000 YTL you had only paid 600 YTL and the difference between the tax you paid and must have paid is 900 YTL. If the tax inspectors find out the actual price you paid, you will be liable to pay 900 YTL, which is a dodged amount, plus 225 YTL as a fine and the monthly interest of two and half percent, so that, in total you will pay 1,125 YTL and the interest applied by the inspectors.
Is there any way to declare the right value later in order to avoid fines although the declared value is low in the title deed? Yes, there is a way to declare the right amount and avoid fines, later you obtain your title deed. Actually, the moment you declare the lower value for the property, you also become liable to pay fines. However, if you apply to the Tax Office in Didim and declare the right amount of purchase saying that you were not aware of the situation and legal requirements in this subject, tax officers are very helpful and you will more than likely pay only the dodged amount and avoid any fines.
Declaring the right value is also in your favour, because if you are to sell your property in four years time after obtaining the title deed. Because, in this case you will be liable to pay capital gains tax as well as property sales tax. In our example above, you paid 100.000 YTL for the property but the declared amount on your title deed is 40.000 YTL and you try to sell it for 120,000 YTL two years after obtaining the title deed. In this case capital gains tax will be calculated over 80,000 YTL where as if you had declared the right amount it would have been calculated over 20,000 YTL.
Another matter related to the subject is that you have to ask your seller to give you an official receipt. You may ask for that after your payment and your seller has to give it to you for the money you paid him. This is a legal requirement and everybody doing business in Turkey has an official receipt, so do not let your seller mislead you with various reasons and avoid giving an official receipt. In addition, if you do not get your receipt from your seller, both you and your seller will be liable to pay a fine of ten percent of the amount which you paid to the seller according to Procedure of Tax Law Art.353. Again in our example, if you had not asked for receipt, you will be liable to pay 10.000 YTL as a fine, this is a very serious matter.
Finally, there is another matter that I have to mention before I finish this article. Knowingly declaring lower figures on your title deed is as I mentioned above, a tax dodge and it is basically a criminal offence. Therefore, in order to avoid any legal consequences from this offence, I strongly recommend our readers to declare the right amount to the Land Registry Office before the title deed procedure is commenced.
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