Capital Gains Tax on Property Sales

Capital Gains Tax (CGT) is levied on the profit an individual makes from selling assets that have increased in value. In Turkey, this tax typically applies to real estate, including land, buildings, and apartments. It applies to both residents and non-residents selling properties located in Turkey.

For property sellers in Turkey, having a clear understanding of when and how exemptions apply can significantly impact the financial outcome of a sale. This article aims to simplify these important exemption rules.

The Golden Rule: The 5-Year Ownership Exemption

The most significant and widely applicable exemption from Capital Gains Tax on property sales in Turkey is the 5-year ownership rule. If you have held a property for more than five full years from its acquisition date, any profit derived from its sale is entirely exempt from CGT. This rule applies universally to all real estate sales, regardless of the seller's nationality or residency status.

Monetary Exemption (2025 Updates for Shorter Holdings)

Even if a property is sold within the 5-year ownership period, a certain amount of capital gains is still exempt from tax. For 2025, the official capital gains tax exemption amount for property sales is set at 120,000 Turkish Lira. This means that if your profit from the sale is equal to or less than this threshold, you will pay no CGT.

The increase in this monetary exemption (from 87,000 TL in 2024  to 120,000 TL in 2025 ) reflects annual adjustments likely made to offset inflation and reduce the tax burden on smaller gains.

How Capital Gains Tax is Calculated (If Not Exempt)

When CGT applies (i.e., the property is sold in less than 5 years and the profit exceeds the monetary exemption), the taxable gain is determined by deducting the original purchase price from the selling price. A crucial adjustment is made: the original purchase price is adjusted for inflation. This means the cost basis is increased to reflect changes in purchasing power, effectively reducing the taxable profit and, consequently, the tax liability.

This adjustment ensures that individuals are taxed only on their real economic gain, not on nominal gains that are merely a result of inflation.

Capital gains are subject to progressive tax rates, meaning different portions of your taxable profit are taxed at increasing rates. These rates align with Turkey's general income tax brackets for "other income."

Key Table: 2025 Capital Gains Tax Rates (for profits exceeding the 120,000 TL exemption)

• Note: The tax calculation is progressive. These rates are from the most authoritative Turkish tax sources for 2025.

Important Considerations for Property Sellers

Declared Price vs. Actual Sale Price

In Turkey, it is common for the declared sale value on title deeds to be lower than the actual price paid. This is often done to reduce property transfer taxes. However, it is crucial to understand that CGT is calculated based on the actual profit made from the sale. Discrepancies can lead to higher tax liabilities and potential penalties if discovered.

Tax Payment and Declaration

Any applicable CGT must be declared as part of your annual tax return. The tax is typically paid in two equal installments, usually in March and July of the year following the sale. Failure to report or pay CGT on time can result in penalties and late interest.

Common Misconceptions: Who is NOT Exempt (from Capital Gains Tax)?

Annual Property Tax Exemptions vs. Capital Gains Tax

A common misconception is that certain groups are exempt from all property-related taxes. While some groups, such as retirees, disabled individuals, veterans, and widows/orphans, may qualify for exemptions from annual property tax under specific conditions (e.g., owning only one property and living in it).

It is crucial to understand that these specific exemptions do not apply to Capital Gains Tax on property sales. CGT is levied on the profit from a sale, which is distinct from the annual property ownership tax.

Key Takeaways for Property Sellers in Turkey

• Prioritize Holding Period: The most effective and straightforward way to avoid CGT on your property in Turkey is to hold it for more than five years.
• Utilize Monetary Exemption: For sales made within the five-year period, remember the significant profit exemption amount of 120,000 TL for 2025.
• Understand Calculation: Be aware that inflation adjustment applied to your purchase price helps reduce the taxable gain.
• Professional Advice: Turkish tax laws can be complex and are subject to annual updates. Always consult a local tax professional or financial advisor for personalized advice tailored to your specific situation.