This report is about the new requirement for registering guests renting out holiday villas and apartments.
We get the impression that the implementation of these rules is a fluid and dynamic chain of events and that the practical details are yet to be finalised. We have seen this before when new rules and regulations are introduced in Turkey. Things will become clearer over time.
Those who have been eagerly awaiting this article are no doubt hoping that we have done what we normally do - spoken with the people who have got the facts (rather than the gossip) so that we can clearly signpost what it all means.
We have indeed spoken to lots of people and they have given us the facts - as they see them. Regretfully, on this occasion the facts don’t stack up neatly to give us a totally clear sense of direction.
So in this report we are simply going to be honest with you and explain what we believe to be the genuine facts, but you need to be aware that other views exist. There is no point in pretending there is a universally agreed view. There isn’t. You will have to draw your own conclusions.
We wish to stress that this is our considered view but you are perfectly entitled to disregard it or disagree with it. Furthermore we urge you to make your own independent enquiries. KTLN will not be held responsible for any actions you take, or do not take, on the strength of this article. For the purposes of this article where we refer to foreigners we mean non-Turkish citizens who do not possess a work permit.
Before we get into the why, when, how and who is affected, for the sake of clarity let us set out the timeline of how we got to where we are today.
22nd November 2016
Statutory Decree No. 678 was announced in the official gazette amending Law No. 1774 on the Declaration of Identities. This introduced a legal obligation for everyone doing short term property rentals in Turkey to report details of guests to the authorities.
2nd December 2016
KTLN reported this development. We visited the Kalkan Jandarma to ask what people needed to do and set out what we were told in our article. It all seemed so simple then. It’s not so simple now.
16th March 2017
The Fethiye Times published a report on this subject on 16th March 2017. It was soon followed up with another article on 22nd March 2017. Both reports set out the way in which the authorities in Muğla Province are implementing the regulations. It would be fair to say that the reports pulled no punches and set out in stark terms what needed to be done, plus the consequences of non-compliance.
We were introduced to the system that is being used to collect guest details, GIYKIMBIL Geçici İkamet Yerleri ve Kimlik Bildirme Projesi (Temporary Place of Residence and Identification Project). These Fethiye Times reports sparked a flurry of online chatter, liberally sprinkled with barely concealed panic. We urged KTLN readers to remain calm and not to panic.
Fast forward to April 2017
For personal reasons it was not possible for us to undertake detailed research locally during March 2017. (We were out of the country). Now we are back in Kalkan we can see there is a flurry of activity going on as people involved in holiday rentals and property management attempt to get to grips with this new reporting system.
The first and most obvious point to make is the varied and contrasting perspectives we have encountered in researching our report. We will set out some of the key differences below.
We have written to the British Consulate on this subject asking if they will seek guidance from central government in Ankara, and they have confirmed in writing that they are doing exactly that, so hopefully at some point we will get some clarity. We are also aware of a number of local Turkish business people who are seeking guidance from Ankara.
In the meantime the reality is that we are faced with implementation of a regulation that seems to vary from place to place. This subject can only be understood by breaking it down, so let's do that.
One part is understanding the background as to “why” this new requirement has been introduced and “when” it becomes effective. Then we can look at the actual process for registering guest details on GIYKIMBIL - what you might describe as the “how”. And perhaps most important of all is “who” should be doing it.
The official line on this is that requiring all providers of short term rental accommodation to register their guests with the authorities is a necessary step in the fight against terrorism. Introduced under Turkish State of Emergency powers it will enable the authorities to keep a better track on people moving around Turkey and will make it easier to locate individuals who are of interest to the security services. This is the main reason given.
We have seen online statements saying that this requirement is no different from other western countries including the UK. We can categorically say that this type of reporting system is not in place in the UK, apart from registered hotels. Small guest houses and B&Bs do not submit daily guest details to the authorities, although they must keep records of guests who stay.
By a happy coincidence this move will be welcomed by those people in the Turkish hotel industry who have complained in the past of an uneven playing field, where they have been required to register guest details but privately owned villas and apartments have not. Their complaint is not so much about the extra administration they have to do to register guest details on a daily basis, because in truth for the hotels this is a simple task. It’s more to do with unfair competition, and this is where things start to get complicated.
You may have read in the news recently how the Turkish Travel Agencies Association (TURSAB) won a court case to restrict the operations of online holiday web site Booking.com in Turkey. Their argument was that this Dutch based business has no office in Turkey, employs no staff in Turkey and pays no taxes in Turkey, which means that Turkish based companies offering a similar service are at a competitive disadvantage. A Turkish judge agreed this is unfair and has limited the operations of Booking.com inside Turkey.
Similarly many hotels have been unhappy that private individuals (Turkish as well as foreigners) have been in competition with them to provide short term holiday accommodation. These individuals have not had the same business overheads, giving them an unfair competitive advantage.
So to recap on the “why” question, we have the official explanation of the security imperative. Then you have this background factor that has been rumbling along for years of trying to make the playing field more level for those providing accommodation. But there is one more thing to consider here, which we are calling “the vexation of vacation accommodation taxation”.
It is sometimes alleged that some property owners don’t pay tax on their rental income here in Turkey. Income that is generated from Turkish property rentals is taxable here in Turkey. There is a double taxation treaty in place with other countries, including the UK that ensures you only pay the tax once, (this applies only to personal income tax).
Some people are suggesting that details submitted to the GIYKIMBIL system will at some stage in the future become available to the Turkish tax authorities and this will enable them to identify where rental income is being generated, and they will then be able to check if appropriate tax is being paid.
Just to be clear, the GIYKIMBIL system is operated by the Police and Jandarma not the tax office. They are quite separate areas of the state but it is highly likely that information will at some point be shared. So maybe it is another happy coincidence, but one of the consequences of this new regulation could be that the government collects more tax.
A tax amnesty
We have read online that registration on the GIYKIMBIL system by a certain date will result in a “tax amnesty”. It has been interesting to read online comments from people who have been discussing what an amnesty means. For those who believe an amnesty means any undeclared taxes will be forgotten and the slate wiped clean, we do wonder if that is being a little over optimistic.
We assume an amnesty would mean that no legal action will be taken to penalise anyone who has broken the law, however we see no logic for assuming the tax authorities will simply forget about unpaid taxes. After all that would be a little unfair on those who have done the right thing and paid their taxes.
In any case this appears to be something of a hypothetical issue here in Kalkan because when we asked the local tax office in Kaş about a deadline for a tax amnesty, they told us there is no amnesty.
We will return to the subject of tax later in this report.
So we have explained the “why” but when does this all come into effect? The answer is 22nd November 2016. It is already in effect now.
We spoke to the Police and Jandarma about the fact that many foreigners are unsure of what to do. Even if they feel they know what to do most of them are living abroad and are unable to take immediate action. Perhaps unsurprisingly their response was to say that ignorance of the law is no defence. The fact that it may be impractical to take action due to being out of Turkey is not an argument that is going to cut any ice, or indeed buy any time.
Before we move on to say “who” is responsible for taking action we should make clear who does not need to do anything.
- If you own a property for your own use (you and your family) and you do not market it in any way for short term rentals you don’t need to do a thing. This regulation is not aimed at you. You should just enjoy your villa or apartment as a private property owner.
- If you rent out your property under a long term rental agreement contract you don’t need to do anything. This regulation is for short term rental agreements.
So who does need to do something?
If you own a property that is being rented out for short term holidays you are directly responsible for ensuring that the property is registered on the GIYKIMBIL system and that details of guests are submitted. It makes no difference how many days a year your rent out your property; renting out to just one person for one day is enough for you to have to register.
Unfortunately it is not possible for a foreigner to personally register on GIYKIMBIL unless he/she has a work permit, and for the purposes of this article we assume you don’t have one.
The only way to register is if you have a business (sole trader, partnership or a limited company). Most foreigners who own property in Turkey do not have a business here. As we will go on to explain this is a serious issue. In fact registering on the GIYKIMBIL system, important though that is, is far from being the biggest thing you need to concern yourself with. In a sense GIYKIMBIL is the easy part.
This is where we have come across a whole range of solutions being suggested. We are not endorsing or confirming as correct any of the following solutions. You need to make your own enquiries and satisfy yourself on the way to proceed.
Solution No 1
The property owner needs to set up a Turkish business (sole trader, partnership or a limited company) and register on the GIYKIMBIL system at the Jandarma station in Kaş. A log in ID and password are issued to the owner. This can cover more than one property where an owner rents out multiple properties.
The property owner is then responsible for submitting guest details on a daily basis (including “nil returns” on dates when there are no guests). The submission software is free but it is also possible to buy extra software that is more user friendly, which interacts with the basic free software. The GIYKIMBIL interface only works on computers using a Windows operating system. The system is in Turkish only - there is no foreign language option.
The Police and Jandarma use GIYKIMBIL systems that operate in parallel. Because Kalkan has Jandarma rather than Police, Kalkan property owners must register on the Jandarma GIYKIMBIL system. If you are in Kaş we believe that you would need to register with the Police.
Solution No 2
The property owner enters into an agreement with a local Turkish management company who will register their property on to the GIYKIMBIL system and then provide an ongoing service (at a price) to submit guest details on a daily basis.
We have seen examples of this service being offered where the property owner has been asked to give a Power of Attorney to the management company, and we have seen examples where a simple agreement form is being used.
The local Police and Jandarma appear quite happy with this approach (i.e. the use of an agent). However please note that whilst you may indeed appoint an agent to do the submissions for you that does not mean you can forget about setting up a business - as per Solution No 1 above.
We do have some concerns about the capacity of local businesses to undertake this work, given the huge numbers of rental properties in Kalkan and the thousands of guest registrations that would be required every single day over the entire season. Some companies could conceivably end up being committed to reporting guest details on a daily basis for scores, if not hundreds of properties.
We would also make this general legal point: where you as a principal appoint an agent to act on your behalf, you remain responsible for the actions of the agent you have appointed. You need to be sure that whoever you appoint is going to do what is required, because if anything goes wrong you will be the one who is held to account. So for example, if your agent is submitting daily guest details to the Jandarma for your property you should probably be provided with some kind of periodic report or audit trail so that you can be sure the details submitted are correct. If the details submitted are incorrect you can't just throw up your hands and say, "Nothing to do with me".
Solution No 3
A variation on the above solutions is where a number of property owners form a joint company (a type of co-operative arrangement) for several rental properties, with this company registering on the GIYKIMBIL system and undertaking the daily guest reporting duties for all properties.
The advantage of this approach appears to be that setting up and running costs of the company are shared between many people, making it less expensive for each owner. The disadvantage is that co-operative arrangements depend upon harmony and agreement between members of the group, and whilst you may have this on day one, it is not always easy to maintain over a long period. It can get messy.
Moreover this approach would not necessarily satisfy the need to establish a business for each owner's individual property, for their own short term letting business, unless of course it is proposed that the shared company is not simply used to submit guest details, but is the trading company for all transactions concerning all properties being rented out.
Solution No 4
You could give a long term rental agreement to a Turkish company and allow them to sub-let on a short term basis, for holidays. This means that a you are not required to register on the GIYKIMBIL system, but they are. It means handing over the more lucrative short term rentals to someone else, and you will just have to negotiate the money you will get for the long term rental.
It assumes you can find a Turkish business that is willing to participate in such an arrangement. In theory it involves them paying rent to you up front and taking the risk that they will gain more rental income over the season. So from an owner’s perspective it’s not as lucrative, you hand over control of your property to a third party (if you can agree terms) but you do not have anything to do as far as this registration system is concerned.
Solution No 5
Stop renting out your property for short term holiday lettings. Quite a harsh option for some, but it effectively removes the problem at a stroke.
Which solution to go for
We can’t advise you on what to do. Our only advice is for you to take professional advice from a lawyer or an accountant or both.
Returning to the question of tax and the need to be registered as a business
As promised there is one more thing to say on tax and your business status. It’s quite a significant point - perhaps the biggest issue of all.
There is a point of view that anyone providing short term accommodation (holiday lettings) is operating a business. Some would say it's not a point of view, it's a fact. This message came through loud and clear from the Fethiye Times reports. We have to say that it is a view that has some support here in Kalkan and Kaş too, although we have also found those who challenge this interpretation of the law.
A guide (in English) was published by the Turkish tax authorities in 2008. It was entitled “GUIDEBOOK FOR THE RENTAL INCOME DECLARATION FOR FOREIGNERS WHO DOES NOT HAVE A PLACE OF RESIDENCE IN TURKEY AND TURKISH CITIZENS WHO LIVE ABROAD”. You can read the entire 2008 document here.
The relevant section in this document reads as follows:
What is the Rental Income?
The income obtained from lease of the properties and rights ( land, building, rights, etc.) which are stated in the Article 70 of the Income Tax Law are subject to income tax as “Real Property Tax”. On the other hand, properties and rights which are in use of business or agricultural establishment, income obtained from them is calculated according to provisions of determination business or agricultural income.
On the other hand, for a nonresident taxpayer income obtained from operating his/her house as a pension or apart hotel is subject to business income and it is required to be a taxpayer and to give income declaration to tax offices according to the provisions of business income.
Those who make the assertion that short term rentals (such as holiday lettings) constitute a commercial activity would point to the second paragraph to support their argument. Having said that the very latest 2017 guide (in English) from the Turkish tax authorities makes no mention of this. You can read the entire 2017 document here.
To see all the Turkish tax guides available in English click here.
Turkish Finance Minister comments
But there is additional strong evidence to back this view. The Turkish Finance Minister himself Mehmet Şimşek spoke on the subject back in February 2015. In the Hurriyet newspaper he referred to foreigners who bought holiday properties in Turkey and then advertised them for rent. He went on to say that such rentals can create unfair competition and that whoever is involved in commercial activity, be they Turkish nationals or foreigners, must pay their taxes. He said that action would be taken in this regard. Note there is no distinction between Turkish citizens and foreigners.
The key point is this. If short term lettings are to be regarded for tax purposes as a commercial activity, and here at KTLN we are persuaded that this is in fact the case, then you must establish a business (sole trader, partnership or a company). This applies whether you are Turkish or a foreigner. Furthermore you would require permission from the Belediye for your property to be used as commercial premises. You would also as a business have to employ at least one Turkish person, as there are certain business duties that may only be performed by a Turkish citizen. You would require a business bank account.
N.B. The double taxation treaty we mentioned earlier applies to personal income tax, however if short term rental income is taxed as commercial income we do not believe this treaty will apply. Tax will only be due in Turkey, calculated according to tax rules for businesses.
Running a business in Turkey involves significant set up costs and ongoing running costs. Many foreigners would find such an undertaking both challenging from a logistical point of view and also expensive in terms of ongoing operating costs. Many foreigners are going to have to give this matter some serious thought.
What this means for holidaymakers who wish to rent a property
For holidaymakers this is no big deal. The most obvious thing is that you will have to provide some personal details to the property owner (or their appointed agent) so that they can be entered on the GIYKIMBIL system. It's no different to the requirement to give your personal details in a hotel.
The details that are required are as follows:
- Your nationality (country of origin)
- Your full name
- Your gender
- Your date of birth
- Your passport number (or if Turkish your TC number)
- The dates you are staying at the property
All of this information (except the dates of your stay) is contained in your passport so rather than asking you to set out the details in a note you may simply be asked to provide a copy of your passport. This reduces the possibility of any details being accidentally mis-reported. We think you will find that property owners will wish to have this information in advance. They will probably not wish to leave it to the last minute to ask for this information as this may lead to logisitcal problems in uploading the correct data in a timely manner. Please be prepared to give your full cooperation.
Please note that the holidaymaker is not responsible for submitting guest details to the authorities. This responsibility rests with the property owner or their appointed agent.
Following section clarified and updated:
What about guests who are family or friends - i.e. non-paying invited guests?
If your property is being marketed for short term holiday rentals, no matter how many or how few bookings you get, this means that your property should be on the GIYKIMBIL system and details of all guests (paying holidaymakers and non-paying family or friends) must be submitted. The Jandarma are not interested in whether someone is a paying guest or not, they simply need to know who is there for all properties registered on the GIYKIMBIL system.
If on the other hand you do not market your property for short term holiday lets - if the property is for your own personal use, (you and your family and any friends you wish to invite) then you are not engaged in commercial activity and you do not need to register on the GIYKIMBIL system, therefore no guest details need to be submitted.
Bear in mind there could be some grey areas. For example let’s say you own villa and you don’t in any way market it for holiday rentals and you receive no income from it. So you don’t need to register on the system. But perhaps you are a kind and generous soul with many friends and you allow lots of them to use your villa, week in week out, completely free of charge. You can see how this would look like you were renting, and it is entirely possible that such appearances could result in questions being asked.
Will checks be carried out?
This is entirely a matter for the Jandarma. If they wish to undertake random checks they can. But in a sense these checks will happen as a matter of course through day to day routine operations.
For example, if you call out the Jandarma because there has been some kind of incident (maybe an accident or a burglary), when the Jandarma attend there is every likelihood that they will want to know who is staying at the property. If it is anyone other than the registered owner of the property and it appears that the property has been rented out, they may very well check the GIYKIMBIL system to see whether guest details have been provided.
This new system of reporting is turning out to be a significant catalyst for change. Let's be honest - many tourist destinations along the Aegean and Mediterranean coast are behind the curve on this. We have some catching up to do.
In fact it's not so much the guest registration system itself that is the big issue here, it's the knock on implications of what is required to get you on there. The extension of this new system to all short term rental properties is acting as a huge kick up the backside to bring smaller players into line with other providers of accommodation. It's not dissimilar to the Booking.com issue.
Many will argue that it's a positive thing in terms of security; plus it is fairer in that it helps to deliver a level playing field for all providers of short term accommodation and it helps to ensure the correct payment of taxes.
If this interpretation of the situation is correct, and we believe there are strong indications that it is, then this will undoubtedly be a major concern to many foreigners who own and rent out property in Turkey. The consequences for these individuals, for tourism and for the property market in general will be considerable. This is undoubtedly a subject that we will be returning to over the coming weeks and months. We await further clarification from the British Consulate and others. If you are involved in short term rentals (holiday rentals) our advice is to consider your own circumstances and seek professional advice on the course of action you should take.
We also welcome your feedback on this subject. Contact KTLN
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