Through the The Law No. 7194 on Digital Service Tax and Amendment of Certain Laws and Law Decree No. 375 ("Law") published in the Official Gazette dated 7 December 2020, a new tax called “Valuable House Tax” (“VHT”) was introduced. Afterwards, through the Valuable House Tax General Communiqué (“VHT Communiqué”) published in the Official Gazette dated 15 January 2021 and No. 31365, procedures and principles regarding the VHT liability are regulated. The implementation of VHT has started as of 2021.
The Law imposes special tax on residential immovable properties located in Turkey with a value exceeding TRY 5.000.000 (TRY 5.227.000 for 2021).
A brief summary of the essential issues about the VHT liability are provided below for your information:
a) Taxpayer of the VHT
The taxpayer of the valuable house tax is the owner of the household, the holder of any usufruct right on the household, or if neither exists, those who dispose the household as if they are the owner of the household.
b) Tax Base and Tax Rate of VHT
The value of the property is determined based on the property’s tax value as defined in the Property Tax Law.
The rates which will be applied for the calculation of VHT in 2021 are regulated as follows:
- For valuable houses having a value between TRY 5.227.000 and TRY 7.841.000: 3 per thousand for the part exceeding TRY 5.227.000
- For valuable houses having a value between TRY 7.841.000 and TRY 10.455.000: TRY 7.842 in relation to the value of TRY 7.841.000; 6 per thousand for the value exceeding TRY 7.841.000
- For valuable houses having a value higher than TRY 10.455.000: TRY 23.526 in relation to the value of TRY 10.455.000; 10 per thousand for the value exceeding TRY 10.455.000.
c) Tax Exemption
Taxpayers owning only one residential property within the borders of Turkey will not be required to pay VHT regardless the value of this property is. Also, those who have more than one house within the scope of VHT, will not be required to pay VHT for the house with the lowest value.
Additionally, properties that are exempt from the VHT are as follows:
- Residential immovable properties or usufruct rights owned by general and special budget administrations, municipalities, and universities
- Residential immovable properties owned by Foreign States that are used as embassies, consulates, or residences for ambassadors; residential immovable properties belonging to representatives of international organizations located in Turkey; and international organizations with their headquarters in Turkey, and
- Newly built residential immovable properties registered to enterprises whose main activity involves construction that have not yet been subject to initial sale, transfer, or assignment
d) Declaration and Payment of VHT
The first VHT return will be submitted in February 2021 to the authorized tax office where the residential property is located. The tax levied and accrued by the tax office will be paid in two equal installments until the end of February and August of the relevant year.
Conclusion
The implementation of VHT has started as of 2021. We would like to kindly remind you that there is relatively short time for the declaration of the VHT. The first declaration for VHT must be submitted by 20 February 2021.
Finally, we would like to kindly state that VHT liability is disputable in terms of some essential taxation principles such as equality and double taxation. Within this scope, taxpayers may evaluate to submit their declaration with reservation and initiate the tax litigation procedure subsequently.
