Withholding tax for rents: Based on proposal by Ministry, 20% of monthly rent to go to treasury

According to an article in Sözcü Newspaper, a clause in the new tax package suggests that landlords might soon have to pay their annual rental income tax in advance each month. It’s claimed that 20% of the rent deposited in the bank will be deducted as tax, and the remainder will be transferred to the landlord. With the implementation of this withholding tax on rent, the government is expected to collect 40 billion lira in rental income tax from landlords.

 Annual Rental Income Tax to Become Automatic

The report states that the current system, where landlords pay rental income tax (Real Estate Capital Income – GMSI) annually by filing a declaration, might be replaced with an automatic tax deduction system. Under the proposed tax package prepared by the government, tenants will deposit their rent into the bank every month. The bank will deduct 20% of this amount as tax and send it to the Treasury, leaving the remainder in the landlord’s account.

 Impact on Monthly Rental Income

For example, under this new arrangement, a landlord renting out a property for 10,000 lira per month would see their monthly rental income decrease to 8,000 lira. Currently, rental income tax is paid annually based on the total rental income of the year. During the declaration, an exemption amount that increases each year based on the revaluation rate is deducted from the total income, and a tax starting at 15% is applied to the remaining amount.

 Implementation Timeline

In the proposed new system, rental income might be subject to monthly tax deductions similar to the tax withholding from employees’ salaries. All rental payments will be made through banks, which will deduct 20% as withholding tax, similar to interest and other earnings. The remaining amount will be deposited into the landlord’s account as taxed rental income. This change effectively raises the rental income tax rate from 15% to 20%. Landlords can later declare their expenses and request a refund of the tax they paid if applicable.

The new system is reportedly set to take effect for rental incomes starting from 2025.