Calculation of deductible expenses in case of exception in actual expenses method in rental income

5.5.2020

Expenses to be Deducted When Determining the Rental Income (In Turkey)

Calculation of deductible expenses in case of exception in actual expenses method

Where a taxpayer chooses the actual expenses method and benefits from the exception applied to rental income from house, the amount of actual expenses corresponding to exception is not deductible from gross revenue.

The deductible amount is calculated as follows:

Deductible expenses = Total Expenses x Taxable Revenue*

Total Revenue

(*) Taxable Revenue = Total Revenue – Exception for Rental Income from House

Example: Taxpayer (C) rented her house in 2019 and obtained 44.000 TL of rental income. Taxpayer, who has no any other income, incurred 10.000 TL of expenditure for his property and chooses the actual expenses method.

The amount that taxpayer can deduct as actual expenses will be the amount that corresponds to the taxable revenue of the total expense for 10.000 TL.

Taxable Revenue = 44.000 – 5.400= 38.600 TL

Deductible expense= (10.000 x 38.600) / 44.000= 8.772,72 TL

Deduction of Expenses in the Lump Sum Expenses Method

Taxpayers who have opted for the lump sum method can after deducting the amount of exception from their rental income, set off the lump sum expenses at 15% of the remaining amount against actual expenses.

It is not possible to opt for lump sum expenses method in the case of leasing rights. For instance, taxpayers, who gain office rental income and income from leasing rights, should choose actual expenses method since they should declare rental income from leasing rights at their tax return.

Taxpayers who have opted for the lump sum method can deduct as a Lump sum expenses at 15% of their revenue .Lump sum expenses rate is determined at 15% of the revenue to be applied to rental income from 1/1/2017.

Source: Revenue Administration-Guidebook on Rental Income for Non-Resident Taxpayers
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