Colordarcy - What Investors Need To Know About The KDV Tax On Turkish Property

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The Turkish government has made a change to its tax law involving new-build property, which means that more property will fall within the standard 18% tax band. Experts at say that investors should make sure they do thorough research before purchasing new-build or off-plan property in Turkey as a result.

Turkish Property Laws
If an investor is in any doubt, it is always possible to request documents from sellers which will show if the new KDV rate has been added to the value.

Analysts at Colordarcy say that the hike in Turkish property tax for smaller apartments means that prices could well increase by more than 18% this year. Those already owning property in Turkey or who are purchasing key ready might well benefit from the resulting uplift in 2013.

This is the good news.

The bad news is, this latest change means that KDV tax, which once amounted to just 1% on property with a closed living area of less than 150 square metres and 18% for properties over 150sqm, will now be 18% for most properties – even those less than 150 square metres.

Will this make a big difference to overseas property investors?

“Not if investors are thinking of investing in a property above 150 square metres or in many cases if a property is already built.

What may happen is, tax rises could have an impact on property values as it may push up the price of smaller apartments and, in turn, place upward pressure on apartments that are a larger size.

This makes buying off-plan apartments in Turkey a little more tricky for anyone looking for a good deal. It will depend on three things: are developers prepared to absorb the cost? The value of the land the property is built on and when they built it.” says Loxley McKenzie, Managing Director of Colordarcy.

Colordarcy are keen to point out that if investors are looking at investing in a key-ready apartment in Istanbul, then you may well escape the increase in KDV. The new law only applies to building plans submitted in 2013.

If the land is assessed as being low in value, then the KDV rate may be 8% or less, so it is best to check before making a purchase.

When asked how investors might be able to avoid the impact of the change to KDV tax on Turkish property, Colordarcy’s legal expert in Istanbul said, “Since this is now law, there is no possibility to avoid it, however, before making an investment, we do advise our clients to obtain official information from the seller which shows the KDV amount of the real estate.

For example, if the seller obtained building permission and completed other legal requirements for construction in 2012, new KDV rules will not apply to this project.

If an investor is in any doubt, it is always possible to request documents from sellers which will show if the new KDV rate has been added to the value.”

Interestingly the new KDV tax law will only apply to new build properties sold by developers and not to those properties exchanged privately or those that are considered used.

Investors should not be too worried by this development according to Colordarcy, as the tax will be a direct cost to developers, though there is a strong chance they will pass it on to the buyer at some point.

Large developers may well delay passing on this cost to gain an advantage over smaller competitors. Even so, 75% of all properties purchased by overseas property investors in Turkey is under 150 square metres.

Colordarcy strongly advise choosing a large reputable developer, or a trustworthy property agent to ensure they get the best deal in 2013.

Notes to the editor:

Colordarcy is a leading property investment company that specialises in finding positive cash flow investment properties worldwide. Colordarcy investment property portfolio includes some of the best properties for sale in Brazil, Florida, Turkey and the United Kingdom.

For more information, supporting pictures or logo artwork, please contact:

Brett Tudor
PR Manager

Tel: +44 (0) 207 100 2393
Email: press(at)colordarcy(dot)com

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