Turkish and Danish taxation
Danes who own property in Turkey will be liable for taxation in Turkey as well as in Denmark on any rent income. The Danish tax authorities only levy tax, however, if Danish tax on the income exceeds the tax payable in Turkey Any profit on the sale of real estate will not be taxed in Turkey if the property has been owned for at least four years. Nor will profit be liable for taxation in Denmark if the property is embraced by what is known as the “parcelhuslov” (home ownership law), i.e. is used as private holiday accommodation.
If the Turkish property investment is via a Turkish company, the company will be liable to pay tax on the current income. The Danish taxpayer will only be liable for taxation in Denmark on the company’s profits (Turkey is, however, able to levy tax at 10% on the proceeds). If shares in the company are sold, tax will payable in Denmark on the proceeds in accordance with the ordinary rules governing share premiums.
Moving from Denmark will result in payment of a general cessation tax. Property will, however, be tax-exempt in this situation so long as the property comes under the homeownership rule.
Pension payments received from Denmark by a Dane resident in Turkey are taxed according to special rules. Denmark generally has the right to levy tax on current pension payments.
In the case of private pension schemes relating to tenure, including old age pensions, graduated pensions schemes, etc., Danish tax is reduced by 50% and the Turkish tax will in these circumstances reduced by an amount equivalent to the Danish tax payable. In the case of private pensions schemes not related to tenure, Turkey has the right to levy tax.
The above is only a very general summary of various tax issues related to Danes’ investment in property in Turkey. We would advise investors to obtain tax advice themselves before making an investment.
Henrik Reedtz
Chartered accountant, partner