A New Tax Controversy: Valuable House Tax

January 2021 Özge Kısacık
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In accordance with the Valuable House Tax (“VHT”) that is regulated through Law Numbered 7194 on the Digital Service Tax and the Amendment of Certain Laws and Law Decree Numbered 375 (“Law No. 7194”), and which is quite new and controversial to Turkey, households in Turkey whose tax value is more than TRY 5,000,000 are also subject to the VHT in addition to real estate tax.

As a result of the criticisms and lawsuits filed regarding the VHT, many changes were made in the VHT through Law No. 7221, published in the Official Gazette dated February 20, 2020, and the effective date of the VHT was postponed to 2021. Through the implementation of the VHT as of 2021, the details of the procedures and principles of the VHT were included with the Valuable House Tax General Communiqué ("Communiqué"), which was recently published.

Despite many changes regarding the VHT, it is expected that the discussions on the issue will continue, considering that VHT liability is disputable in terms of some essential taxation principles, such as the equality and faculty principle of taxation. Within this scope, taxpayers may evaluate to submit their declaration with reservation and initiate the tax litigation procedure, subsequently.

The Scope of Valuable House Tax and Determination of Tax Liability

Residential immovable properties located within the borders of Turkey and with a building tax value exceeding TRY 5.000.000 (TRY 5.227.000 for 2021) are the subjects of the VHT. In the VHT application, the concept of "residential property" is explained in the Communiqué as "residential buildings and each independent section in buildings consisting of more than one independent section." Each independent section is evaluated separately in terms of taxation.

Pursuant to the Communiqué, when evaluating whether the immovable property has the characteristics of a residence, the actual usage status of the immovable property is also considered, in addition to its qualification in the records. Considering this regulation, it is considered that no tax is collected for immovables that are included in the title deed records as a residence, but actually used as a workplace, and a separate tax inspection should be made by the tax administration to determine this situation.[1]

Prior to Law No. 7221, the immovables with a value of TRY 5.000.000 or more, determined as a result of the valuation made, or made by the General Directorate of Land Registry and Cadastre within the scope of the relevant legislation, were announced on the website of the General Directorate of the Land Registry Cadastre, accessible by those concerned and notified to the relevant person, separately. However, a change was inevitable, since the appraisal of the current values of the houses, which are also the subject of real estate taxes, by the valuation commissions for property taxes, and by the General Directorate of Land Registry and Cadastre for the VHT, could lead to the determination of different fair values, in practice.[2] In accordance with the latest changes, the building tax value, which is also valid for real estate taxes, is taken as a basis in determining the current values of real estate that are subject to the VHT.

In addition, (i) owners, (ii) if available usufruct right holders, (iii) or those making dispositions of the residential immovable property in the absence of an owner or a usufruct right holder will be VHT taxpayers. The owners who own property under shared ownership will be the taxpayer in accordance with their shares. As per joint ownerships, the owners will be severally responsible for the taxes.

VHT liability starts from the beginning of the year following the dates stated, below.

  • The date when the building tax value of the residential real estate exceeds the declaration limit (amount) valid for the relevant year,
  • In the event of reasons that modify the tax value (for example, the purchase or transfer of the covered property), the date of such changes,
  • In cases where the exemption is benefited from, the date upon which the exemption is suspended (lost).

Tax Base and Ratio of Valuable House Tax

While certain tax bases and fixed rates were envisaged in the calculation of VHT before Law No. 7221, an appropriate and relatively equitable practice was adopted through the change made by Law No.7221, and a progressive tax system was introduced. The rates to be applied for the calculation of VHT in 2021 are regulated, as follows:

  • For houses having a value between TRY 5.227.000 and TRY 7.841.000: 3 per thousand for the part exceeding TRY 5.227.000;
  • For houses having a value between TRY 7.841.000 and TRY 10.455.000: TRY 7.842 in relation to the value of TRY 7.841.000; 6 per thousand for the value exceeding TRY 7.841.000;
  • For houses having a value higher than TRY 10.455.000: TRY 23.526 in relation to the value of TRY 10.455.000; 10 per thousand for the value exceeding TRY 10.455.000.

We would like to emphasize that the total value of the property is taken into consideration when calculating the tax base, regardless of whether the property is under shared or joint ownership.

Tax Exemption

One of the most important changes brought by Law No. 7221 is that taxpayers owning only one residential property within the borders of Turkey will not be required to pay VHT regardless of the value of this property. In this context, taxpayers owning only one residential property within the borders of Turkey do not submit any declaration or make any notification.

Also, those who have more than one house within the scope of the VHT, will not be required to pay VHT for the house with the lowest value. The exemption is also applied to the portion belonging to their shares if these persons own a single residence with a share. In this context, those who have more than one house within the scope of the VHT submit a declaration for their other immovables, except for those with the lowest value. For immovables that are not declared within this scope but are within the scope of the VHT, the form attached to the Communiqué is filled and attached to the declaration.

Finally, residential properties that are exempt from the VHT are as follows:

  • Residential immovable properties or usufruct rights owned by general and special budget administrations, municipalities, and universities;
  • Residential immovable properties owned by Foreign States that are used as embassies, consulates, or residences for ambassadors; residential immovable properties belonging to representatives of international organizations located in Turkey; and international organizations with their headquarters in Turkey;
  • Newly built residential immovable properties registered to enterprises whose main activity involves construction that have not yet been subject to initial sale, transfer, or assignment (including residential immovables left by the contractor who undertakes the contracting work in construction works in return for land).

Declaration, Place of Payment and Payment Period of Valuable House Tax

The VHT is declared to the tax office in the location of the immovable by the end of February 20 (February 22 for 2021) with the "Declaration of Valuable Housing Tax," numbered 1 or 2, attached to the Communiqué. While the taxpayers submit their declarations, they receive the document showing the tax value of the building tax for the year in which the declaration is submitted, and the previous year from the municipality of the place where the residential immovable is located, and then add them to the declaration. The tax levied and accrued by the tax office will be paid in two equal installments by the end of February and August, respectively, of the relevant year.

It is also possible to submit the declarations in the form of e-declarations. In this case, the document showing the building tax value to be added to the declaration is submitted to the relevant tax office by hand or by e-mail within 15 days following the filing date of the declaration.

If the taxpayer of the VHT has a corporate tax or income tax liability, the VHT declaration is submitted to the affiliated tax office. If there is no income or corporate tax liability, the declaration is submitted to the tax offices stated, below:

  • Tax office serving the location of the relevant real estate;
  • If more than one real estate is to be declared, the tax office in charge of the location of any of these real estates;

Pursuant to the Communiqué, in the event of a situation requiring the commencement of the tax liability within the year, the tax liability starts from the following year, and the declaration is submitted by the end of the 20th day of February of the following year. For example, the tax liability of the person who purchases the residential real estate that is subject to VHT in 2020 starts from the following year, and the declaration is submitted by the end of the 20th day of February, 2021.

Controversial Issues Regarding Valuable House Tax and Considerations

Through the regulation of the VHT through Law No. 7194, many discussions and disputes have arisen. The aforementioned discussions and disputes brought to the judiciary have decreased in accordance with the amendments made by Law No. 7221, and the number of taxpayers within the scope of the VHT has decreased. Despite all of these developments, it is expected that the discussions and disputes regarding VHT will continue due to the fact that VHT is contrary to many constitutional principles.

Firstly, as stated in detail, above, it is considered that it is unfair to take the VHT only over residential real estate, but not from valuable real estate that has the characteristics of a workplace and, for that reason, the regulation is ripe for abuse. The situation in question is against the regulatory purpose of the VHT, which has the characteristic of a wealth tax, and is also wrong in terms of legal technique.

As well, collecting both real estate taxes and VHT on the same property is another criticism in terms of taxing the same asset item more than once, and double taxation. In this way, the owners of the immovables will be subject to double taxation. This situation also constitutes a violation of the constitutional principles, the principle of equality, and the principle of proportionality. It is thought that it would be a more accurate taxation method to regulate and combine real estate taxes and VHT under a single tax in order to avoid double taxation arising due to this practice.[3]

Along with all these discussions, it also constitutes a contradiction in terms of the principle of taxation and faculty principle of taxation that a person who owns many immovables below the limit set for the VHT (for example, one who owns four residential immovables worth TRY 4,000,000) is not a taxpayer of the VHT, but a person who owns two immovables worth TRY 5,000,000 is a VHT taxpayer.

Taking all of these contradictions and discussions into consideration, it is recommended that taxpayers of the VHT submit their declarations, with reservation, in February, and then initiate the tax litigation procedure, subsequently, before the tax courts.


The VHT that was added to the Real Estate Tax Law through Law No. 7194, and which has been the subject of many discussions since the day it was regulated, has been implemented as of 2021. The first declaration for the VHT must be submitted by 20 February 2021. However, since the VHT is considered to be contrary to many constitutional principles, taxpayers should evaluate whether or not to submit their declaration with reservation, and initiate a tax litigation procedure, subsequently. In this context, it is expected that the VHT will occupy the agenda in the future.

[1] Sağlam, Erdoğan: “Değerli konut vergisi beyan ve ödeme yükümlülüğü başladı; verginin konusuna hangi taşınmazlar giriyor, verginin mükellefi kim?” https://t24.com.tr/yazarlar/erdogan-saglam/degerli-konut-vergisi-beyan-ve-odeme-yukumlulugu-basladi,29500 (Access date: 21.01.2020).

[2] Noyan, Özgür:”Değerli Konut Vergisine Karşı Dava Açmalı mıyız?” Vergi Algı, https://vergialgi.net/degerli-konut-vergisine-karsi-dava-acmali-miyiz (Access date: 18.01.2021).

[3] Sağlam.

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