Declaration and Payment of Rental Income in 2025
When it comes to income derived from renting property and rights, the Turkish Income Tax Law classifies it as real estate capital income. The law outlines the specific types of property and rights that are taxable, with real estate being the most common. In this article, we will summarize the declaration and taxation of rental income, focusing primarily on real estate income.
When is Rental Income Considered Earned?
As a general rule, rental income is taxed based on the cash receipt method. If rent is not collected, it is not included in the tax return. Prepaid rents, however, should be declared in the year to which they pertain, not the year they were received.
For example, rental income collected in 2024 for the years 2024 and earlier will be included in the 2024 income tax return, which must be submitted by the end of March 2025 (or April 2, 2024, if March 31st is a holiday).
Tax Tip: If you receive your 2024 rent income in 2025 you will not add to your 2024 tax statement
How to Calculate Rental Income in Foreign Currency?
If the rental income is agreed upon in a foreign currency, the rental income should be calculated using the exchange rate from the Central Bank of Turkey on the date the rent is collected.
If the rental income is paid in something other than money, the rental income is valued at the market value (fair market value) to determine the amount.
Who Needs to Declare Rental Income?
Individuals whose rental income consists solely of real estate capital income are required to submit a tax return if:
Residential Rental Income exceeds the exemption limit of 33,000 Turkish Lira.
Commercial Property Rental Income exceeds 230,000 Turkish Lira in gross income. (Note: When calculating whether the 230,000 Lira limit is exceeded, both residential and commercial rental income are considered together, including the exempt portion of residential rental income.)
Non-taxed rental income (those not subject to withholding tax or exempt from tax) exceeds 13,000 Lira, in which case a tax return must be filed.
The 13,000 Lira limit refers to the threshold for submitting a tax return. If the total rental income exceeds this amount, it is fully taxable.
In Turkey, there is no family head declaration. Therefore, if family members have taxable rental income, each individual must file a separate tax return for their own income.
Rental Income Exemption
For the year 2024, the first 33,000 Lira of residential rental income is exempt from income tax.
However, this exemption does not apply to:
Individuals who declare income from commercial, agricultural, or freelance work.
Individuals whose total income from wages, movable and real estate capital income, and other earnings exceeds 870,000 Lira for the year 2024.
Those who fail to declare rental income above the exempt amount or under-declare it will not benefit from the exemption.
If multiple individuals share ownership of a residential property, each co-owner can apply the exemption separately. However, if one person earns rental income from more than one property, the exemption is applied only once to the total rental income.
Deductions from Rental Income
There are two methods available for deducting expenses from rental income:
Flat-rate Deduction Method: Under this method, 15% of the rental income can be deducted from the gross rental income without the need to provide actual receipts for the expenses.
Actual Expense Deduction Method: Under this method, the actual expenses related to the rental property, as listed in Article 74 of the Income Tax Law, can be deducted from the rental income.
The flat-rate deduction method applies to both residential and commercial rental income. However, once you choose this method, you cannot switch to the actual expense method for the next two years.
If the actual expense method is chosen, the deductions can include maintenance costs, property management fees, and other eligible expenses related to the property. However, if the taxpayer is claiming the residential rental income exemption, they cannot deduct the portion of expenses corresponding to the exempted income.
Declaration and Payment of Rental Income
Rental income must be declared by the end of March 2025 (or April 2, 2025, if March 31st is a holiday), and the tax return must be submitted by this date.
Individuals whose income consists solely of wages, real estate capital income, movable capital income, or other earnings can use the Pre-Prepared Tax Return System, also known as the Preliminary Tax Return System, to file their returns. This system is facilitated by the Turkish Revenue Administration, which uses data from various sources to prepare the tax return for the taxpayer. The taxpayer then reviews and approves the return online.
Once the tax return is filed, the calculated tax must be paid in two installments: March and July.
Consequences of Not Declaring or Under-Declaring Rental Income
If rental income is not declared or is under-declared, the following consequences may occur:
The 33,000 Lira exemption for residential rental income will be forfeited.
Income tax will be assessed on the undeclared or under-declared income, and a tax penalty equal to the amount of tax underpaid will be imposed.
A late payment penalty of 4.50% per month will be applied to the overdue tax amount.
If no tax return is filed, a double penalty for failure to file will be imposed.
Examples of Rental Income Declaration
Example 1:
Taxpayer (A) resides in Germany and rents out an apartment in Ankara, earning 12,000 Euros in rental income for the year 2023. Taxpayer A does not have other taxable income and has chosen the flat-rate deduction method.
Assuming the exchange rate at the time of collection is 26 TL per Euro, the income tax calculation will be as follows:
Rental Income: 12,000 Euros × 26 TL = 312,000 TL
Exemption Amount: 33,000 TL (Residential Rental Exemption)
Taxable Income: 312,000 TL - 33,000 TL = 279,000 TL
Flat-Rate Deduction (15%): 279,000 TL × 15% = 41,850 TL
Net Taxable Income: 279,000 TL - 41,850 TL = 237,150 TL
The income tax will then be applied to the taxable amount, and the total income tax payable will be calculated accordingly.
Example 2:
Taxpayer (B) resides in the Netherlands and rents out an apartment in Antalya for 15,000 USD in 2023. Taxpayer B does not have other taxable income and has chosen the actual expense deduction method. The total expenses for the property amount to 2,000 USD.
Assuming the exchange rate at the time of collection and expense payment is 24 TL per USD, the income tax calculation is as follows:
Total Revenue: 15,000 USD × 24 TL = 360,000 TL
Total Expenses: 2,000 USD × 24 TL = 48,000 TL
Now, since the exemption amount is 33,000 TL for residential rental income, the taxable income will only consider the amount exceeding the exemption. The calculation for taxable income is as follows:
Taxable Income: 360,000 TL - 33,000 TL = 327,000 TL
Expenses: The actual expenses related to the taxable income are deducted. This is calculated as follows:
Deductible Expenses: (327,000 TL / 360,000 TL) × 48,000 TL = 43,650 TL (deductible)
Net Taxable Income: 327,000 TL - 43,650 TL = 283,350 TL
The income tax will then be calculated based on this net taxable income.
These examples illustrate how rental income should be calculated and declared, ensuring that taxpayers follow the correct procedures to minimize tax liabilities.
Need Help with Rental Income Declaration or Have Questions?
Navigating rental income tax rules can be complex, but we’re here to make it easier for you. If you need assistance with declaring your rental income, understanding deductions, or calculating your tax liability, don’t hesitate to reach out to us. Our team of experts is ready to guide you through the process and ensure compliance.
Contact us today for personalized support and expert advice on rental income taxation!
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