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Renting your property in 2018 - GIYKIMBIL and tax - sticking to the rules PDF Print E-mail
Wednesday, 31 January 2018

Property rentalsARTICLE UPDATED 30TH MARCH 2018: We last wrote on this subject on 10th November 2017.  Click here to read what we said: GIYKIMBIL: short term property rentals and related matters - update November 2017.  Today's report brings you details of what is required for 2018.

If you own property in Kalkan and rent it out to holidaymakers there are some additional factors for you to consider this year.  If approached calmly and logically these requirements are entirely manageable.  It just takes a little planning and organising, although admittedly it is a little more difficult if you are not here to do things for yourself.

Two considerations - GIYKIMBIL and business tax
Last year saw the local Jandarma starting to enforce the GIYKIMBIL rules, whereby rental properties must be registered with them, and details of guests (paying or non-paying) advised on a daily basis.

In addition to this, following a period of confusion it became apparent  towards the end of last year that the local tax office in Kaş was shifting its position on the tax status of rental income.  Hitherto they were content for property owners to pay personal income tax on rental income, but it emerged that they are now minded to view this as business income.

Consequently all property owners engaged in the commercial activity of holiday rentals (not long term rentals), are now required to establish a business. 

Professional advisors in Kalkan are getting up to speed with these requirements which have actually been in place in other parts of Turkey for some time.  Our local tax office is now aligning itself with those other places.

Below we outline some key points concerning the enforcement of these rules in our area.  This information was mostly produced by Nigel and Mel Denby of Truffle Residences in Kalkan.  We are grateful for their permission to publish details of their research.

We would caveat what follows by saying that readers should make their own enquiries and consult with professional advisors, rather than simply relying on this article.  The way in which the rules are implemented is liable to be reviewed and may change.  Whilst we believe this information to be accurate at the time of publication we accept no responsibility if you rely on it without making your own checks, and it turns out to be incorrect.

GIYKIMBIL screen

GIYKIMBIL
First a brief word on submitting daily details to the Jandarma.

If you submitted guest details last season the chances are you sent a document to the Jandarma notifying them that rentals had stopped over the winter months.  If you did, you need to send another letter notifying them when you are resuming rentals.  Thereafter daily submissions must be made without fail, even if there is nobody in your property. 

There are strict penalties if you (or your agent) fail to make a submission.  Our understanding is that the first failure to submit details can result in a 5,000 TL fine.  The second time it's 8,000 TL and if it happens a third time it's 13,000 TL.  Persistent failure to submit daily information may lead to an order to stop renting altogether.  We are aware of Turkish citizens and foreigners who were fined in 2017. 

We believe that the standard letter typically sent to the Jandarma at the end of the tourist season refers to rentals being suspended.  If you have decided to stop renting commercially altogether you should make this known to the Jandarma.

If you are forming a limited company this year for your holiday rentals business you should make the Jandarma aware of this change.  This is not required if you are establishing your business as a sole trader.

Taxation - the changes
Below we outline what is required for last year and the changes coming in 2018.  It assumes that in 2017 you did not already have a business registered in Turkey for your holiday rentals.

Tax Year 2017 (01/01/2017 to 31/12/2017)  UPDATED 30TH MARCH 2018
The basis of paying Turkish Income Tax on net rental income (gross rental income less costs) in 2017 is the same as applied in prior years.

Turkish Income Tax of 15% will be payable on net rental income of between 0 - 13,000 TL (12.600TL in 2016), and 20% between 13,001 - 30,000 TL.

UPDATE 30TH MARCH 2018: We have recently heard that the advice on this from accountants has changed.  It is now being reported that the new rules applicable for 2018 may also be applied retrospectively for 2017.  Clarification is awaited.

Tax Year 2018 (1 Jan. to 31 Dec. 2018)
New tax rules are being introduced with effect from 1 May 2018.

The following is the proposed situation understood at the present time and could be subject to changes over the coming months.  It is also understood that representations have been made to the Turkish authorities concerning the issues and concerns that some people have.

The fundamental change is that the short term holiday rental income (this does not apply to long term rental income) on immovable property will be treated as "commercial activity" and subject to business tax rules.

We are informed that the tax office has access to GIYKIMBIL data which means that they can easily check the level of rentals at your property.

Registration
Owners will be required in person, before 1st May 2018, to register their property as a "business" with the Chamber of Commerce in Kaş.  There is no requirement to form and register a Turkish Limited Company.  You may instead register a sole trader business - this is what most small businesses concerns do.  The set-up cost of doing this is estimated to be 500 TL.  It is assumed, as with a Turkish Limited Company, there will be an annual fee to be paid to the local Chamber of Commerce.

It is believed that, in the case of joint ownership, only one of the owners need register but it is not yet understood how this works as all joint owners have to pay their proportionate share of Turkish tax.

We have been asked the question, what happens if you can't get to Kalkan before 1st May?  The honest answer is we don't know.  However given that it has taken our local tax authorities a long time to catch up with what tax offices in other parts of Turkey are doing it would be harsh to say the least if they did not show some leeway and understanding for foreigners not due to be in Kalkan before the deadline.  You should make your own enquiries if this situation applies to you.

Apartments designated as a depot or wood store (bodrum/odunluk)
During our research for this report we came across a potential issue for some properties that may have been rented as apartments, but where the title deeds (tapu) show them as a depot or wood store (bodrum/odunluk).

When registering your business we are informed that you must show the tapu for the property.  According to the planning department officer we spoke to in the Kaş Belediye it is not possible for permission to be given to someone proposing to operate a business from a depot or wood store.  This may sound like common sense, however the reality is that some apartments that are so designated are de-facto being used as apartments.

If these apartments are to be used for holiday rentals this throws up something of a dilemma.  We should point out that we are not aware of any individual who has found themselves in this situation and had their attempt to form a business thwarted.  If you think you may be in this situation we recommmend that you seek professional advice.  We would be interested to get feedback from KTLN readers on this point.

Accounting/Taxation
For each month of the calendar year (by the 29th of the month following), a Turkish accountant will be required, on behalf of an owner(s) to submit details of rental income and costs.  The accountant will have to submit a monthly KDV (VAT in UK) return. KDV is currently 18% for a "business".

Each month the owner (or agent) will have to prepare a Fatura (Turkish invoice) for each rental booking, dated on the day of arrival of the guest(s).  KDV of 18% is charged on the rental income.  After registration, each owner will need to get a book of pre-numbered Faturas printed for this purpose.  As bookings for Kalkan properties are generally made in GBP sterling, an exchange rate pertaining at the time will need to be used to convert the GBP sterling into Turkish lira.

The owner (or agent) will also have to collect Faturas issued by suppliers of all services supplied and for all costs incurred.  These will include a KDV charge at 8% or 18%.  It is understood that the same costs previously claimed (under personal taxation rules) can still be claimed in the future but a Fatura is required.  Till receipts (satiş fişi) are not Faturas but it is understood that they are acceptable but only for small value items (say up to 100TL).

It is understood that if an owner(s) has a relevant UK invoice for a cost (e.g. cost of a website, marketing agent commission, building insurance), a copy of it needs to be given to the Turkish accountant with an exchange rate to convert into a Turkish lira equivalent.  UK VAT is ignored.

These original documents will need to be given to the Turkish accountant each month.  Costs not supported by a Fatura or small item till receipts are not allowed to be claimed against rental income.

As in the UK, the output KDV and input KDV are netted off and the balance KDV is paid over to the tax office on a monthly basis.  If the input KDV exceeds the output KDV, it is thought that the balance is carried forward to the following month.

In addition, on a monthly basis, "business" tax at 15%, on the surplus between income and costs, will have to be paid over to the tax office.

Typically a monthly fee of a minimum of 100 TL + KDV (118 TL) will be charged by a Turkish accountant to provide this service.  In addition a notional tax charge of 35 TL per month will have to be paid irrespective of any actual business tax liability.

There is no requirement to pay sigorta (Turkish national insurance) unless the owner(s) directly employs Turkish staff.

Estimated Annual Costs

  • 
Set-up Chamber of Commerce for Registration 500 TL  (subsequent annual fee - not known)

  • Stationary (Fatura book) (spread over a number of years) 75 TL

  • Turkish Accountant Charge (118 TL per month x 12) 1,416 TL

  • National tax (35 TL per month x 12) 420 TL

  • Total of 2,411 TL minimum or approximately £465.

In addition, as foreign owners may be non-resident, there may be agent fees to get the documents prepared and given on a monthly basis to the Turkish accountant.

Issues Arising


  1. Willing to Rent Out/Costs
  Some owners, given their estimate of rental income compared to these new additional costs, and also the burden of complying with the administration of the new tax rules (and GIYKIMBIL daily submissions), may decide it is not worth their while and cease offering their property for rent.  The logical consequence of this would be that those remaining in the game would get a bigger slice of the rentals cake.  In theory rental rates could increase however the over supply of properties makes this unlikely in our opinion. 

  2. Obtaining Faturas
  Turkish suppliers are sometimes reluctant to issue a Fatura (Turkish invoice) unless the owner pays an additional 18% KDV.  Much of Kalkan is a cash economy. Currently we are not aware of any Turkish maintenance company that will voluntary and routinely give an owner(s) a Fatura for the services they supply.  In future they will also have to give owner(s) the original utility bills that they may pay on their behalf.

  3. KDV on Rental Income
  If published rental rates stay the same, owner(s) will lose 18% of their rental income as KDV which has to be paid over to the tax office.  How will owner(s) deal with this?  Should owner(s) increase their rental rates to compensate?

  4. Implications of Monthly Tax Accounting
  As "business" tax at 15% will have to paid monthly on net rental surpluses, what happens if in a particular month, say November, a taxable loss is incurred.  This can arise with a marketing site (e.g. Booking.com) when an invoice for a booking commission is dated up to 2 months after the arrival of guests.  This needs clarifying but we presume in the annual tax return the cost is included and there could be a tax refund as too much "business" tax may have been paid.

Rental Income Tax Calculation Examples
 
Example  1
Monthly income 5,000 TL +18% KDV of 900 TL
Monthly expenses 4,000 TL +18%  KDV of 720 TL (electric bills, water, pool chemicals etc.)
Net Profit  1,000 TL - 15% tax due on this = 150 TL to be paid.
KDV 900 TL - 720 TL = 180 TL net KDV to be paid.
 
Example 2
Monthly income 10,000TL  +18%  KDV of 1,800 TL         
Monthly expenses 6,000 TL  +18% KDV of 1,080 TL (electric bills, water, pool chemicals etc.)
Net Profit 4,000 TL - 15% tax due on this = 600 TL to be paid.
KDV 1,800 TL - 1,080 TL = 720 TL net KDV to be paid.
 
Rental income generated from property located in Turkey is payable in Turkey, but remember there is a Double Taxation Treaty between the UK and Turkey which means you only pay tax once.  If the rates of tax applied in the UK are higher than those charged in Turkey you may still have a residual tax liability in the UK for the difference.

One final thought - the sub-contracting option (long term rental)
So far we have looked at these requirements in simple binary terms - i.e. you either form a business and continue to rent, or you stop renting.  But there is another option, which we mentioned some time ago when GIYKIMBIL first became news, and it may be worth mentioning this again.

You could give a long term rental agreement to a Turkish business and allow them to sub-let your property on a short term basis, for holidays.  This means that you are not required to register on the GIYKIMBIL system, but they are.  It also means that you continue to pay tax as an individual on the income you receive and you don't need to create a business.  It means handing over the more lucrative short term rentals to someone else, and you have to negotiate the money you will get for the long term rental.

It assumes you can find a Turkish agent that is willing to participate in such an arrangement, but as this presents an opportunity to make money we think that businesses will be interested in offering this kind of service.  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 the registration system and forming a business is concerned.

We strongly recommend that those intending to do short term rentals this year employ the services of an accountant and/or other professional advisors.

As always we welcome your feedback so please let us know your own experiences on this subject.  Contact KTLN

 

Kalkan Turkish Local News - your window on Kalkan Turkey.

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Last Updated on Friday, 30 March 2018