Capital Gains Taxation in Turkey
In Turkey, capital gains are subject to taxation under the Income Tax Law No. 193. Article 8 of the law defines capital gains as the profit realized from the sale or disposal of assets, including:
- Real estate properties
- Stocks and shares
- Bonds and other debt instruments
- Business assets
The law does not differentiate between short-term and long-term capital gains.
Calculating Taxable Capital Gains
Taxable capital gains are calculated as the difference between the selling price of the asset and its acquisition cost. The formula is:
Capital Gain = Selling Price - Acquisition Cost - Expenses
Expenses related to the sale, such as brokerage fees and legal fees, can be deducted from the selling price. Additionally, any improvements made to the asset during ownership can be deducted from the acquisition cost.
Tax Rates
Capital gains are taxed at a flat rate of 20%. However, certain exemptions and deductions may apply, such as:
- Gains from the sale of real estate held for more than five years are exempt from tax.
- Gains from the sale of stocks and shares held for more than two years are subject to a reduced tax rate of 10%.
Legal Framework
The taxation of capital gains in Turkey is governed by the following articles of the Income Tax Law No. 193:
- Article 8: Definition of capital gains
- Article 32: Calculation of taxable capital gains
- Article 33: Tax rates applicable to capital gains
- Article 34: Exemptions and deductions
These provisions aim to ensure that individuals and businesses contribute their fair share of tax on profits realized from investments and asset disposals. By applying a flat tax rate to capital gains, Turkey seeks to maintain a neutral tax treatment across different sources of income and promote investment.
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