Merry Christmas and Best Wishes for 2015

We wish you a merry Christmas and a happy new year.

Law practice Selma Ören.

www.selmaoren.av.tr

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Property Tax Turkey 2015

Amendment proposal property Tax 2015
Increment value tax– upcoming amendment 2015

In most Western European tax systems do levy tax over real assets property, but in Turkey the situation differs. There are no tax charges in Turkey for real asset property on individuals.  Perhaps that is the main reason why Turkey has a pleasant investment climate for indivuduals and of course foreigners.

However, Turkey does apply value tax, based on price increment by real estate sales. The main rule is: The seller is obliged to pay increment value tax, if the real estate property is sold within five years of purchase with price increment above the deductible amount.

The deductible amount for 2014 is 9.700, -TL.
The increment value tax charges are between 15% to 35%.
In addition to is also levied 10% fund (fonpayı).
For more details on the tax rates, I refer you to my website or blog address.

Increment value tax is just applicable on real estates sales, in the same fiscal year.
This is called in Turkish “değer artis kazancı” and depends on your personal declaration to the tax office. The tax office will not send you any tax declaration form ("beyanname") automatically. You must fill up the form yourself at the Tax office. If multiple sales occur in the same fiscal year, you have to  declare all of them in the same declaration.

It is true that the base for increment value tax is not determined by the actual purchase price, but on the base of the reference value determined by the Municipality.

For instance:
You buy a house for 80,000 Euro, but on the Tapu you only see a reference value of 80,000 TL.
Within five years you are selling it for 85,000 Euro but on the Tapu you are declaring the increased value given by the municipality of 100,000 TL. The difference between the purchase amount and sale amount with the exemption amount reduced to this brings your base of increment value taxation to be declared.

The tax levies on property in Turkey are constantly subject to changes. My regular readers will know that the Turkish government has increased the Tapu costs and charges for the last 10 years.

The most recent publication scheduled for 2015 is related to the expected increase of reference value in contrast to fair market value of real estate property. This could mean that with a possible sale of your home, you will pay significantly more Tapu transfer costs and pay on an increment value tax as described above.

The amendment proposal by November 2014 is a fact and we will see the implementation soon.

The importance of a Turkish will

The general rule in Turkish inheritance is that the children together with the surviving spouse automatically are the heirs of the testator. Therefrom it is unnecessarily to draft a will that concerns a property in Turkey, as long the heirs are the children and the surviving spouse.
This is what we call the normal family set up according the inheritance.

When there is no case of a normal family set up it is wise to draft a will.
Situations where it is wise to draft a will could be when:

• the testator has no children
• the testator is unmarried, but lives together with a partner, or when the testator has a registered partnership.
• the testator wants to disinherit the heirs.

This time I don’t want to talk about how to draft a will or how the probate division would look like, I would like to talk about the importance of having a Turkish will in contrast to a will made in your own home country.

My experience shows me that the Turkish court earlier grants execution to a Turkish will then to a will drafted in a foreigner country.
To be clear: a will drafted in a foreigner country has the same value as a Turkish will. The difference lies in the manner in which effect is given to the content of the will. You already understand that this has consequences for the expenses, and the involved time of the inheritance settlement.

Procedure Turkish will
During a hearing all involved parties will be invited and the contents of the Turkish will, is read by the judge. Parties who are not present during the hearing will get a sworn translated  will by mail in person. The objection period against the contents of the will is 1 month.
In case there are no objections during this period is the will between the involved parties in law, regardless of whether the legitimate portions are respected or not.

Procedure foreign will
A foreign will must be provided with an apostil stamp and a sworn translation of the will before an application van be filed to the court. Because the will is already opened and read abroad there is no need that the Turkish court has to do this again. The court must ascertain whether the will is complied with in accordance the wishes of the deceased. Here it is relevant to prove and to convince the judge that the will has been carried out according to the law in their own country.

In case you don’t have a normal family set up(husband-wife-children) I would strongly recommend you to get advice about your options with an unexpected death incident, or to be sure to draw up a will in Turkey.

Sales with Installment Payments

Everyone is familiar with buying luxury goods on credit. You can buy a car or a washing machine where you get the opportunity to pay it in installments. Even goods such as jewelry and carpets you can buy on credit. You speak a term plans and gets the carpet or jewel right away. This is called in Turkish “Taksitli Satis sozlesmesi” and is described in detail in the consumer protection law.

But recently, the legislature has created a different kind of sales model. The most important difference with this sale on credit is that you only get the goods delivered if all the installments have been paid off. This model is called the "ön ödemeli Satis' mentioned agreement and finds its basis in the contract law.

The reason I write this is that I'm investigating the statutory basis of sales under installment, based on multiple complaints mails of mostly elderly tourists. The typical complaint of tourists about a too expensive purchase, which has been done on a whim or under pushy sales practices, has been around a while. Though a much too expensive purchase in itself is no reason to cancel the purchase, but the Consumer Protection Law provides a number of legal options to terminate the purchase contract.

Consumer Protection Law offers the possibility to terminate the contract, if the (economic) qualities of the purchased do not meet the promises from the seller. For example, the carpet that is sold is not a Turkish carpet but a Chinese or gemstone in the ring does not meet the provided certificate. The precondition is that within 30 days of purchase, the buyer must request his will to undo the purchase in writing to the seller.
In such case, it is then to recover the deposit that has been done.

However, this is not the case with the new sales model. With the new sales model, the seller is not obliged to deliver the purchased to the buyer, until the full purchase price has been paid. The purchasing tourist can only undo the sale if the purchased good is delivered to him. But this means that he first has to pay the full purchase amount before he can undertake his undo actions towards the seller. And as you would agree with me; as long as you do not possess the purchased goods you are not able to check (or rather not prove) whether there is a lack of the purchased goods.

In short: Make sure you get the goods delivered immediately when you make a purchase in installments.

Scammed through a Proxy

In my practice I see many cases of swindle in many various types. People can easily wander during the process of buying a property or can get scammed through deception or misguidance. And over and over again I keep wondering what the main cause of this kind of swindle is. Of course it is always about the money, but money is not the cause. It is the reason why people get scammed. My question is about the cause of scams singly. I think the answer is very simple: It is our built trust in our fellow human.

The story I am going to tell you now has affected me and I am sure you are not indifferent.

This lady has bought together with her husband a nice apartment in Alanya from a construction builder. In this period she met a sworn translator whose services they needed at the Tapu Office. He helped them very good and they stayed in touch. At the moment that the couple had divorced, the property in Turkey was assigned to the lady. Half of the house was on name of her ex husband and had fully come to her name. Again she used the services of the same sworn translator and also this time it went smoothly. The lady got the Tapu completely on her name. She was happy.

After a couple of years, she thought it would be a good idea to transfer the Tapu to her children, in case something would happen to her. Till now she always used the services of the same sworn translator, who also became a friend during the past years. Someone she trusted completely and it was clear that also this time she would ask him to take the job. On his request she gave him a notarized power of attorney; she signed a couple of documents and gave him the needed documents from the children.

After 6 months she was told by the sworn translator that her property had been sold to somebody else. At first she thought he was making a joke, but when she found out that he was very serious she went looking for a lawyer to look into her case and to claim her tapu. After 2 years her lawyer told her that it is a lost cause. And that is how I met this lady when she visited me in my practice for a second opinion.

Now the question arises whether this lady can claim her property back or not. The answer on this question depends on the evidence. Can she prove that this man, who she trusted completely, has scammed her? And what about the rights from the people who bought her property?

She gave this man a notarized power of attorney to sell and transfer the property on her behalf. She never thought about the fact that this power of attorney was drafted too broadly. In this case my advice to her would have been to give a power of attorney that only gives the right to sell and transfer the property on behalf of her children. THAT was her intention. This way the sworn translator would never be able to sell the property to a third party. The third party could never have relied on the power of attorney that he held. And because of this it is that the court has deemed the case not proven.

The sad thing about this case is that during the court case she found out that the sworn translator had pilfered her signature on a blank paper and later wrote on this paper himself that she had  received the complete amount of money from the sale. This lady not only lost her holiday home, she also lost her rights to reclaim the money from the sworn translator. And with this a dream and trust in a fellow human turned into a nightmare.

  

In Turkey it is easy to become a sworn translator. Don’t get me wrong, it is a respectable profession. As long the translator does what he should do, The Translation, I have no qualms.

But most of the time they also do consulting work or worse attorney work. There is no guild or order that effectively controls their actions or calls them to order. Be careful with the trust that you give away. 

Minimum Wages in Turkey (2nd period)

The Turkish Ministry of Social Affairs and Employment, has announced the minimum wage for 2014, the 2nd period of 2014, (1st July 2014 - 31 December 2014).

Every year on the 1st of  January and the 1st of  July the government announces the new wages for the next coming 6 months.

Structure minimum salary

The statutory minimum wage is based on the gross salary for normal working hours, without overtime. You receive this wage on the agreed payment period, f.e. weekly, monthly or every 4 weeks. The gross salary may consist of:

• the (basic) salary in your employment contract has been agreed;
• the allowances for performance, shifts, irregular hours, standby duty and working conditions;
• the fixed bonus for the sales you make any payment and you will receive;
• the rewards of third parties caused by the work.

The total of these amounts shall not be less than the minimum wage.

Pay slip

To avoid problems in the future with the tax authorities, es we recommend to pay the wages exactly as mentioned on the pay slip. If you pay in cash, let your staff monthly sign the pay slip (your accountant will create the slip monthly).

Apartments staff

The legislation distinguishes apartments staff. There are more than 200,000 people who are registered as apartment staff (kapıcı). The government has made ​​an exception for this group allowing an exemption from income tax (gelir vergisi) and withholding tax (withholding tax). The exemption creates a higher net income. The total cost to the employer will remain the same.

MINIMUM SALARY TURKEY
(Period 01.07.2014-31.12.2014)
	Employees	Apartment personnel (kapıcı)
Gross salary	1.134,00 TL	1.134,00 TL
Social insurance employee (14%)	158,76 TL	158,76 TL
Unemployment insurance contribution employee (1%)	11,34 TL	11,34 TL
Income tax (15%)	64,26 TL	---
Cost of living allowance (sagri) (Single and no children)	80,33 TL	---
Stamp tax (0,759%)	8,61 TL	---
Total deductions	242,97 TL	170,10 TL
NET SALARY (incl aig)	891,03 TL	963,90 TL
Total cost for employer	1.132,45 TL	1.132,45  TL

(UN)legitimate employment issues?

Last winter I looked several employment matters in which employee’s claimed compensation from their employer’s. The employer in these cases was Home Owners Association and/or the director(s) thereof. During the handling of these cases it became clear to me that, no matter how unfair the employee’s claim was, the evidence that the employer submitted, determined the outcome of the case.

That is why I want to emphasize, to all directors of Home Owners Association, the vital importance of a carefully prepared personnel file for every person employed. The judge will request that the defendant submit the personnel file to the court. If this file is lacking in any detail, the case will be decided in favour of the employee. Now you may be wondering: what is a personnel file and what documents should be contained within it. A personnel file is an employee’s dossier and it should contain the following as an absolute minimum:

• A full employment contract
• A work schedule and/ or division of tasks 
• Certificate of good behaviour
• Salary information
• Medical data
• Education, certificates and references
• Discharge letters and formal notices

Mostly, employee’s claims are related to financial matters. It is therefore very important to keep salary related information up to date. This should include for example: proof of all salary payments, amount paid, holiday pay, overtime payments, national holiday payments, record of annual leave, employer’s liabilities and most importantly, the employee must sign all documents personally. A husband cannot sign on behalf of his wife for her monthly pay check nor can another staff member on her behalf; this has no legal status in court.

The role and legal expertise of the accountant or company that deals with your payroll administration, is very important. All accountants or management companies engaged by Home Owners Association, must take a full and active role in all aspects of the administration process, it is not enough for them to just be involved in the payment of wages and SGK premiums.

If a Home Owners Association doesn't have the legal expertise in-house, they would be well advised to seek advice from a lawyer, so that the necessary payroll administration can be fully complied with. Ultimately, the Home Owners Association is fully responsible. The board of management has a statutory obligation to ensure that all employment obligations are complied with in full with respect to all employees. 

The Kapıcı - Caretaker - Part I

Every Apartment owner will be familiar with the phenomenon kapıcı (congierge/caretaker/janitor). A Kapıcı is a person who is operating in paid employment and is responsable for the daily (cleaning) activities of one or more buildings.

Kapıcı is an honourable profession that earns well, and social rights are adequately protected by legalisation. The minimum salary of a janitor is even official revised every six months by the government, while this is not obvious for a civil servant.

An Owners Association is not obliged to employ a janitor unless it concerns a complex with more than 30 apartments that makes use of a central heating system that works with solid fuel (like charcoal). In complexes with more than 60 apartments, even two caretakers need to be hired.

It is also required to hire a caretaker in a complex with more than 50 apartments with a central heating system that works on liquid fuel (like natural gas or diesel). The number of janitors needs to be doubled when it concerns a building with more than 125 apartments. The idea about this is that the centrally managed system of a complex, like the heating system, needs to be maintained by the same person that is also the central contact person for everyone in the building. The Concierge law therefore requires that the association, in all these cases, provides housing at the complex for the janitor, but also to (make) follow the proper training for the operation and maintenance of the central installations of the complex.

Although in some situations it is obliged to employ a janitor, this doesn’t mean that the director of an association can hire or fire a caretaker to his own judgement. Namely, a concierge can only be hired or dismissed based on the decision of the Owner Association. The decision should be made by majority of votes. A director is an executive body of the association, and not the deciding body.

If it is decided to hire a janitor, the director also needs to take care for the signing of a well-designed employment contract. This written agreement should include the general, as well as the special conditions. For example, the duration of the contract, the task description, distribution of hours, holidays, salary and social conditions like housing on the complex and weather he can make use of the public utilities of the complex freely.

According the Concierge Law, cleaning the public areas like the stairs hallway, the basement, the garage or the swimming pool, as well as delivering services to home owners at fixed hours, are part of the fixed responsibilities of the janitor. But also picking up the trash and taking care of the general pool and gardens belong to the general duties of a concierge.

A person, or persons, that provide only parts of the services to the complex cannot hold the title of caretaker. You can think of a gardener, or cleaner who are responsible for specific tasks. If these people are operating in paid employment or not, depends on the circumstances of each individual.

The article above is limited only to the general rules concerning the janitor employed by an Owners Association. The next article will focus more on the housing of a concierge and the criteria this property must meet. Until next month…..

Minimum Wages Turkey 2014 (1st period)

The Turkish Ministry of Social Affairs and Employment, has announced the minimum wage for 2014, the 1st period of 2014, (1st January 2014 - 30 June 2014).

Every year on the 1st of  January and the 1st of  July the government announces the new wages for the next coming 6 months.

Structure minimum salary

The statutory minimum wage is based on the gross salary for normal working hours, without overtime. You receive this wage on the agreed payment period, f.e. weekly, monthly or every 4 weeks. The gross salary may consist of:

• the (basic) salary in your employment contract has been agreed;
• the allowances for performance, shifts, irregular hours, standby duty and working conditions;
• the fixed bonus for the sales you make any payment and you will receive;
• the rewards of third parties caused by the work.

The total of these amounts shall not be less than the minimum wage.

Pay slip

To avoid problems in the future with the tax authorities, es we recommend to pay the wages exactly as mentioned on the pay slip. If you pay in cash, let your staff monthly sign the pay slip (your accountant will create the slip monthly).

Apartments staff

The legislation distinguishes apartments staff. There are more than 200,000 people who are registered as apartment staff (kapıcı). The government has made ​​an exception for this group allowing an exemption from income tax (gelir vergisi) and withholding tax (withholding tax). The exemption creates a higher net income. The total cost to the employer will remain the same.

MINIMUM SALARY TURKEY
(Period 01.01.2014-30.06.2014)
	Employees	Apartment personnel (kapıcı)
Gross salary	1.071,00 TL	1.071,00 TL
Social insurance employee (14%)	149,94 TL	149,94 TL
Unemployment insurance contribution employee (1%)	10,71  TL	10,71 TL
Income tax (15%)	56,22 TL	---
Cost of living allowance (sagri) (Single and no children)	80,33 TL	---
Stamp tax (0,759%)	6,46 TL	---
Total deductions	225,00 TL	160,65 TL
NET SALARY (incl aig)	846,00 TL	910,35 TL
Total cost for employer	1.258,43 TL	1.258,43 TL