Pension and tax
Pension issues
If the apartment is used as a holiday home and you retain your status as a resident of Denmark, you pension will still only be taxed in Denmark.
If you settle in Turkey and thus no longer reside in Denmark, the way your pension is taxed will change. Before you move you should arrange the sequence of events in co-operation with your accountant, as e.g. particularly large pension payments received immediately before moving will be liable to migration tax. In addition, you should make sure that capital pensions are redeemed prior to moving or altered to an instalment pension.
The issue with a capital pension is that it is taxed conclusively in Denmark in the form of a one-off payment of 40%, but if it is redeemed while you are in Turkey an extra tax will be payable in Turkey.
As far as old age pensions are concerned, you can only take the basic amount of DKK 4,836 per month with you, while the supplement of DKK 2,273 for married individuals and DKK 4,868 for singles will be annulled. You can also take your ATP (Danish Labour Market Supplementary Pension) with you. Old age pensions and ATP are taxed in Turkey only, with a progressive tax of 20% - 40%. It is, however, not usual for pensioners to be taxed in Turkey.
Retirement pensions from employment in the public sector and pensions not related to former employment will still be taxed in Denmark.
Payments from private pension schemes drawn up as part of previous employment are also taxed in Denmark as this tax will be reduced by 50%.
Tax is not usually payable on pensions in Turkey, but if it is, the tax payable of 20% - 40% will be set off against tax paid in Denmark.
Tax issues
If you only use your apartment in Turkey for holiday purposes, and remain registered as resident in Denmark, you will still be liable to pay tax in Denmark. The only tax payable in Turkey will be property tax, which amounts to 0.1% of the value of the property per year. In Denmark you will also be liable to property value tax of 1% of the apartment’s value, which in practice means the purchase price.
Profit on the subsequent sale of the holiday apartment is not taxed in Denmark as the owner has used it as a holiday home. This also applies even though the apartment has been rented out for part of the period of ownership. The profit will also be free of tax in Turkey if you have owned the property for at least four years. If the property is sold within four years you will be liable to income tax of up to 45%. Profit liable for tax in Turkey is, however, reduced by the cost of any improvements made and inflation regulation of the purchase price. Finally, there is a tax-free basic deduction of some DKK 56,000.
If you are going to rent out the apartment you may wish to take advantage of what is known as ‘virsomhedsordningen’, which allows for the deduction of all operating expenses and interest paid in relation to the apartment. You can also elect to use the 40% method”, in which the first DKK 7,000 of rent income is tax-free, after which you pay 60% on all rent income over and above this amount and are not able to deduct expenses. Interest relating to the purchase can still be deducted as with any other interest.