New rules on rental income

[baclava]

According to a local accountant in Kalkan, from 2018 everyone renting a property for holiday lets in Kalkan will need to account for their rental income on a "commercial" rather than "personal" basis.
This entails setting up a basic/small business which can be set up for approx 600-700tl.
The accountant will need to submit monthly returns to confirm income and expenses, and receipts for everything will be needed. The major cost will be accountancy fees - up to 2500tl pa.
VAT of 18% is also likely to be paid along with the 15-20% income tax.
Thanks to Martyn Ellis for flagging this up, but does anyone else have any more info on this.


Linkback: https://www.enjoykalkan.com/forum/index.php?topic=13854.0

[Mags]

There's a piece to similar effect on KTLN's website today.

[baclava]

The hoteliers have got this through deliberately to force private renters out of business. T hey want tourists, but they want them in the hotels not in private houses; the government want the taxes to stay in Turkey, not in some private citizen´s account in Europe.

So the new rules will work just fine from their point of view.

Unfortunately there may be unintended consequences, such as tourists not coming at all. Many holidaymakers like the freedom of staying in apartments and villas instead of hotels.

[Fender76]

Given that the 2018 booking season is well under way (although for us it seems so far to be the by far the quietest year in the last 10), these changes would be imposed 'retrospectively' if they are to come in force from January as suggested in the KTLN article. In which case 2018 could be be very unprofitable as owners have little choice but to honour their bookings. 2019 could then see a very quiet Kalkan indeed! We would certainly not continue with rentals. I'll see if our management team can find out anything more.

[Tomcat]

We have just taken our adverts with HL and OD offline until we receive clarification from our managing agents.  If what is being reported is true we will definitely not be setting up a business for renting (with all the additional costs and hassle that it will inevitably bring) and will effectively be removing our property from the rental market.  Thankfully we only have one booking so far for 2018 which we will honour even if it means giving it away for free to avoid being in receipt of 'commercial' letting income.   

[Bob & Jayne]

Copied from Turkish Living Forum (TLF) member Juco's post (a bit like baclava's post on this thread, although that was copied from TLF member  immac):

Source Voices:

There has been much speculation on Facebook and elsewhere about the rental law and who it affects, etc. So Voices put these facts together as described by one of the management companies:

Register: The property being rented has to be registered with a limited company which has the Gayrimenkul (real estate) license and is Chamber of Commerce registered;

Tapu holder: If the TAPU holder is not present when the property is being rented on a short-term basis, the property MUST be registered;

Long-term: If the property is being rented long-term (monthly) and the owners are registered with the Nufus office, then that is ok;

Family, friends: Even if you are not taking any money from family and friends to stay on a short-term basis, you should still legally register the property

Passwords: Individual owners CANNOT simply download the software for their property. Passwords will only be given out by the police once the property is registered.

Only in Turkey: The software system can only be operated within Turkey’s borders and the users have to have a static IP address. Foreign owners living in their home countries with second homes in Turkey, and renting them out on a short-term basis, NEED to register their Turkish properties.

Free: The software system is free to download once the property is fully registered. So it may pay to use a rental manager in Turkey to shoulder the admin burden.

Fines: Failure to register the property is a 10,000TL fine. Failure to register people staying on a short-term basis is 5,000TL a day. Even if no-one stays at the property, a zero has to be entered on the system to reflect that.

B

[Fender76]

Thanks tomcat and Bob and Jayne. We have also taken our villa off line with all websites and will only use it ourselves next year. What a mess!!

[Charlie]

Bob & Jayne are your comments in relation to the changes implemented last year i.e. Registration of guests?

[Tomcat]

Charlie - I think that article was published some time ago and since then we have had a season where we have had to register our guests.  My interest and concern is in what additional requirements are placed on owners for 2018.  In the meantime we have withdrawn our property from the rental market and will not rent in the future if this means that we will have to set up a business to do so.   

There's an updated article on KTLN about this issue too if you haven't seen it already, it doesn't sound very positive I've got to say;

 http://kalkan.turkishlocalnews.com/portal/kalkan-news/534030-giykimbil-short-term-property-rentals-and-related-matters-update-november-2017

[baclava]

I am going to the accountant today to try and put more detail on the charges that are currently been discussed. If I find anything more I will post.

[brian j p]

Our property  is  already registered  with the Jandarmeri   for taking guests on a short term basis.  WE did this last year as I suspect most renters did.   At the end of our renting season We handed a letter to the Jandarmeri   late October 2017 stating our property is closed until June 2018 .  We  had already  withdrawn our  advertisement on HL  as we decided  not to rent in 2018  owing to  so few bookings  ,  and not least to see how things pan out .  If  it turns out true  that the suggested  new regulation  come into force  we  will inform the Jandarmeri  the property  will  no longer being used  for letting  full stop , and we will ask our accountant to de register the villa formally  in respect of rental income /tax  also . However lets not forget that things were no where near as bad as some were suggesting when villas had to be registered   and software used for registering guests  last year ,  yes it had to be done but is was quite simple  . There are always forces at work with vested interests when ever we hear of new regulation being implemented and I suspect it will be a while before we find out exactly what is what.  Fingers crossed it will not happen as I do agree it will have an immense impact on Kalkan  in respect of English tourism with I suspect  75+%  of tourism and income being generated  from renters . Interesting times indeed   and I will keep an eye out for KTLN updates   on the matter

[Fender76]

Yes brian jp, they are pretty good a finding solutions!  The guest registration seemed to be a problem but actually was OK with the help of local business, and I'm sure that someone will find a way to take some of the some of the pain away on this latest 'government initiative'! It's the cumulative effect coupled with the random implementation, as well as the effect on profit (18% VAT on income, on top of existing taxation) that grinds you down. And the OD and HA websites forcing you to use their finance systems doesn't help either. After 11 years of rental, we've decided over the weekend that we're not going to rent market our villa any more.

[msr]

I am just hoping it won't be as bad as predicted. There was a lot of panic last year about the property registration, but that turned out OK. It doesn't make any sense, just as the tourism numbers are recovering they(whoever they are)want all this extra  jumping through hoops which will result in a substantial rise in taxes plus higher accountant fees.
We are almost fully booked for 2018 but if this all goes ahead will probably, after 12 years of successful renting will remove our property for 2019. Financially it will not be a viable option. I sometimes think the Turkish authorities assume that if you own a property in Turkey you are millionaires. If only! Also the change in OD and HL have not helped at all.

[baclava]

MSR- if you are fully booked for 2018 then absorbing the costs as discussed above should not be a problem for you. The problem occurs when you only have a few bookings and still have to fork out for the accountants fee which has to be paid irrespective of your income. He has to submit monthly accounts to the tax office throughout the year. To enable him to do this you will have to submit to him your monthly income and expenditure. This could be a bit tricky if you are back in the UK. One thing I did find out is that the VAT of 18% is paid on the net income after all expenses are taken off. Then the 15% tax is applied.

[Blue Lizard]

We have been renters for many years simply because we like our own space and quiet....from our point of view we understand that any rises in taxes ,registration costs and other addons will have to be added on to prices.No problem with that .I do not wish to be forced into a hotel or complex as we have been there and done that and renting as we do now suits us better.Do I want to worry every year about the possibility of my booking being cancelled? it certainly has been like that last year and now next year! flights are booked as is our villa accommodation and we should be looking forward to our holiday not thinking about what if? It just seems that just as the green shoots start to appear along comes a big hobnailed boot to trample on things again leaving local business people asking "why don't people come here?"What with poor press coverage from British media and stupidly inflated air fares already taking it's toll  ..Yes we love Kalkan/Turkey but I find myself asking as I have done before do I want to bother in future?

[msr]

I know some people cancelled bookings last year because of the registration rumour mill, but the majority of people would stick with it so to speak. I for one would never cancel a booking, especially as a knee jerk reaction to something that as yet is still an unknown quantity.
It is so true what you say BL, as the green shoots begin to show...... If only the authorities would leave well alone.

[Tomcat]

Just wanted to ask if anyone has heard any more on the new rules for renting as it all seems to have gone quiet lately?  We've taken down all advertising for our property currently as we do not want to take bookings that we may have to cancel at a later date.  Appreciate any update or news that anyone might have on the current situation.  Thanks. 

[caradog]

Yes, Martyn E of Kalkan Secrets has let us have a very full and comprehensive opinion (too long to reproduce here). In essence his opinion, after local accountancy advice, is that it will not be necessary to set up a local company but will need to be a local business. Similar to UK sole trader. This will require monthly returns to tax office, vat invoices for all expenditure, payment of business tax and vat.
Sounds like a lot of effort for small returns.
Interesting to see what other opinions/interpretations develop in the next couple of months.

[Tomcat]

Thanks caradog, that's very helpful.  If it is the case then it will not be worth our while and we will definitely withdraw our property from renting.  I suspect a lot of other owners will also be of the same mind.  This may be good for hoteliers and accountants but the local businesses in Kalkan must be very concerned that a reduction in accommodation available will adversely impact on visitor numbers.

[caradog]

Mail received from Kalkan accountant:

“To owners of property renting out in Kalkan:
Given recent speculation on changes next year to how tax is charged and collected on short-term (holiday) rental income, I recently met with an accountant in Kalkan. I was given the following information. I can take no responsibility for it's accuracy and would suggest that all owner(s) make their own enquiries.
Tax Year 2017 (1 Jan. to 31 Dec. 2017)
The basis of paying Turkish Income Tax on net rental income (gross rental income (after discounts) less costs) in 2017 is the same as applied in prior years.
Turkish Income Tax of 15% will be payable on net rental income of between 0 - 13,000TL (12.600TL in 2016), and 20% between 13,001 - 30,000TL.
Tax Year 2018 (1 Jan. to 31 Dec. 2018)
The fundamental change is that the short-term holiday rental income (this does not apply to long-term rental income) on immovable property will be treated as a "business" and subject to different tax rules.
Registration:
In this case about new tax rules from  May 2017  the owner(s) will register their property as a "business" with the Chamber of Commerce in Kas. There is no requirement to form and register a Turkish Limited Company. This can be compared, in the UK, to registering a sole trader business. The set-up cost of doing this is estimated to be 500TL. It is assumed, like with a Turkish Limited Company, there will be an annual fee to be paid to the local Chamber of Commerce.
It is believed that, in the case of joint ownership, only one of the owners need register but it is not yet understood how this works as all joint owners have to pay their proportionate share of Turkish tax.
Accounting/Taxation:
For each month of the calendar year (by the 29th of the month following), a Turkish accountant will be required, on behalf of an owner(s), to submit details of rental income and costs. The accountant will have to submit a monthly KDV (VAT in UK) return. KDV is currently 18% for a "business".
Each month the owner (or agent) will have to prepare a Fatura (Turkish invoice) for each rental booking, dated on the day of arrival of the guest(s). KDV of 18% is charged on the rental income. After registration, each owner will need to get a book of pre-numbered Faturas printed for this purpose. As bookings are generally made in GBP sterling, an exchange rate pertaining at the time will need to be used to convert the GBP sterling into Turkish lira.
The owner (or agent) will also have to collect Faturas from suppliers of all services supplied and for all costs incurred. These will include a KDV charge at 8% or 18%. It is understood that the same costs previously claimed can still be claimed in the future but a Fatura is required. Till receipts (satis fisi) are not Faturas but it is understood that they are acceptable but only for small value items (say up to 100TL). It is understood that if an owner(s) has a relevant UK invoice for a cost (e.g. cost of a website, marketing agent commission, building insurance), a copy of it needs to be given to the Turkish accountant with an exchange rate to convert into a Turkish lira equivalent. UK VAT is ignored.
These original documents will need to be given to the Turkish accountant each month. Costs not supported by a Fatura or small item till receipts are not allowed to be claimed against rental income.
As in the UK, the output KDV and input KDV are netted off and the balance KDV is paid over to the tax office on a monthly basis. If the input KDV exceeds the output KDV, it is understood that the balance is carried forward to the following month.
In addition, on a monthly basis, "business" tax at 15%, on the surplus between income and costs, will have to be paid over to the tax office.
A monthly fee of a minimum of 120TL + KDV (118TL) will be charged by a Turkish accountant to provide this service. In addition a notional tax charge of 39TL per month will have to be paid irrespective of any actual business tax liability.
There is no requirement to pay sigorta (Turkish national insurance) unless the owner(s) directly employs Turkish staff.
Estimated Annual Costs:
Set-up Chamber of Commerce for Registration 500TL
(subsequent annual fee - not known)
Stationary (Fatura book) (spread over a number of years) 75TL
Turkish Accountant Charge (141TL per month x 12) 1,699TL
National tax (39TL per month x 12) 468TL
Total of 2,742TL minimum  ( EXCHGANGE RATE 1 GBP = 5 TL)
or approx. £548 GBP
In addition, as foreign owners may be non-resident, there may be agent fees to get the documents prepared and given on a monthly basis to the Turkish accountant.”