In the taxation of rental income, the net amount of the income obtained is determined in two different ways as follows:
- Actual expenses method
- Lump sum expenses method (for other than those who lease rights
The selection of the actual expenses or lump sum method should cover all immovable property, which means that it is not possible to choose the actual expenses method for some part and the lump sum expenses method for the remaining part.
Deduction of Expenses in the Actual Expenses Method
If the actual expenses method is chosen, following actual expenses can be deducted from the gross amount of rental income:
- Lighting, heating, water and elevator expenses paid by lessor for rented property,
- Management costs which are measured according to the importance of property and related with the administration of the rented property,
- Insurance expenses relating to the rented property and rights,
- Interest of debts relating to the rented property and rights,
- 5% of acquisition value of one rented house for 5 years beginning from the date of acquisition (This deduction applies only to rental income of the rented house; non- deductible part is not evaluated as expenditure surplus. This deduction is not valid for houses acquired before 2015),
- Taxes, duties and fees paid for the rented property and rights and rates paid to municipalities for expenses by lessor,
- Depreciation setting aside for rented property and rights, and heat insulation and energy saving expenditures which are made by the lessor and that increase the economic value of the real estate. (These expenditures can be considered as cost if it exceeds 1200 TL for the year )
- Repair and maintenance expenses incurred by lessor for the rented property,
- Rents and other actual expenses paid by sub-lessors,
Rent of the house accommodated by the lessors who rent their own property, (non- deductible part is not evaluated as expenditure surplus),
It is not allowed for taxpayers not residing in Turkey, (including Turkish nationals who reside abroad more than a continuous period of six months with residence or work permit) to deduct the amount of rents they pay in a foreign country from their rental income obtained in Turkey.
- Cost of loss, detriments and compensations paid for rented property and rights based on a contract, law or court
Non-residents who have opted for the actual expenditure method should keep the documents showing the expenses incurred for a period of 5 years and submit to the tax office when required.
Source: Revenue Administration – Guidebook on Rental Income for Non-Resident Taxpayers
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