December 6, 2022

IN CASE OF OCCURRING LOSS / RENTAL INCOME IN TÜRKİYE

At the adding up income, losses arising from part of the sources of income (except those arising from other income and gains written in Article 80 of the Income Tax Law) are deducted from the gains and losses of other sources.

Any decrease occurring in the capital itself which is subject to income from immovable property is not considered as loss and is not accepted as expense when determining the gross income amount. Losses arising from the expenditure surplus in the calculation of the net amount of income from immovable property can be deducted from income to be declared in the following years not for more than 5 years.

There are two exceptions for this rule:

  • In the event of any loss resulting from deducting the amount of the rent of the house or lodging paid by the lessor from the rental income of their house, such loss cannot be subject to deduction from the income from immovable property to be obtained in the following years.
  • Non-deductible part of the amount corresponding to 5% of the acquisition value which has been subject to deduction of income from the one immovable rented as house is not considered as an
    expenditure surplus.

Accordingly, it is not possible to consider an expenditure surplus as loss in these situation.

TAX WITHHOLDING IN RENTAL PAYMENTS

Persons, corporations and entities who rented property and rights in accordance with Article 94 of Income Tax Law are obliged to withhold income tax on the gross amount of payments made for rent. Persons, corporations and entities in question that are tenants have to withhold income tax from the gross amount of their rental payments at the rate of 20%.

Pursuant to the President of the Republic of Türkiye Decision No. 2813 and dated July 30th, 2020; the withholding rate applied in accordance with the Income Tax Law on rental payments made in cash or account between the dates of July, 31st 2020 – December, 31st 2020 has been determined as 10% and the effective date of the withholding rate, which has been determined by various President Decisions issued later for a provisional period, has been extended until September, 30th 2021 (including this date). Thus, the withholding rate will be applied as 10% for rent payments made between the dates of July, 31st 2020 -September, 30th 2021.

This withholding tax will also be made from the rent paid in advance for the upcoming months and years.

If tenants are taxpayers whose earnings are determined in the simple earning basis; Since they have not obligation to withhold taxes, they will not withhold on rent payments.

In case the immovable property leased out is used both as house and workplace; the total rent is subject to the withholding tax as long as it is used as workplace partially or in whole.

Source: Revenue Administration of Republic of Türkiye
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