Letting a Shop or Office in Turkey: Withholding Tax and VAT

A company views your empty shop in Istanbul and says: "we will pay 100,000 lira a month." You sign. The first payment lands and it is 80,000. Nobody has cheated you. In Turkey a business tenant does not hand over commercial rent in full. It deducts income tax from the rent before paying, and pays that slice to the tax office in your name.

If you have only let flats, or only let property somewhere the landlord settles their own tax afterwards, this is the biggest surprise in commercial letting here. It also changes how you read every offer you get.

Withholding at source: your tenant collects your tax

The nearest familiar thing is an employer deducting tax from a salary before it reaches the employee. Here the tenant plays the employer's part.

The rule applies where the shop, office, depot or workshop belongs to you as an individual and the tenant is a business that is itself an income tax or corporate tax payer. The tenant must then by law deduct income tax withholding (stopaj) from the rent, declare it on its own periodic withholding return (muhtasar beyanname), and pay it to the tax office. The tax is collected before you have filed anything. You remain the taxpayer; the tenant is only the collecting agent.

Two situations produce no withholding. The tenant is not a business taxpayer, or is taxed on the simplified basis (basit usul): you collect the full rent and declare it yourself. Or the property is not yours personally but sits on a company's books: the company invoices the rent as corporate income instead. Establish which case you are in before you price the letting.

The gross/net trap

Withholding is calculated on the gross rent — the figure in the lease, which is not the figure reaching your bank. To work backwards from the amount you want to receive:

Gross rent = Net rent / (1 − withholding rate)

With a 20% rate:

If the lease says only "monthly rent ₺100,000", that figure is treated as gross and ₺80,000 reaches you, ₺20,000 a month less than you planned. It is among the hardest mistakes to repair after signature: the tenant may rely on the contract figure and need not top it up.

The cure is one sentence in the kira sözleşmesi (lease): "The monthly rent is ₺... gross; withholding tax shall be deducted from this amount by the tenant and declared to the tax office."

It also changes how you hear offers. When a rent is quoted to you, ask it plainly — gross, or net to me? An offer that sounds higher stated gross can be worth less than a lower one stated net.

The rate is not a fixed number

The rate is set by Presidential decree and it moves: it was cut for a period in recent years, then restored. The rate in force in 2026 is 20%, which is what the table uses. Do not build a lease on a rate you half-remember. Confirm the rate applying on the signature date with the Revenue Administration or a Turkish accountant.

Is the withheld tax lost? Your annual return

No. Withholding is a payment on account, not an extra tax. If your gross commercial rent for the year exceeds that year's declaration threshold, you file an annual return and offset the tax withheld against the tax calculated; often the offset covers the whole liability. Below the threshold, the withholding is your final tax and no return is needed.

Two points bite non-resident owners in particular.

Your declared income will not match your bank statements. You declare the gross rent — the 125,000 in the table, not the 100,000 you received. Owners abroad who reconstruct the year from transfers into their Turkish account under-declare without meaning to.

The offset only works if the tax was actually paid over. Ask your tenant every year for the withholding receipts, or a copy of the return covering your rent. A tenant that deducts and never pays can leave you settling your own tax a second time.

The rest of the annual machinery matches residential rent: filing month, instalments, expense methods, and how double taxation treaties usually stop you being taxed twice at home. It is set out in our guide to rental income tax for landlords. One difference matters: the annual exemption described there covers residential rent only, so do not plan a commercial letting around it.

KDV: when VAT joins, and when it does not

It depends entirely on how the property is held.

Held in your personal name, outside any business. The letting is exempt from VAT (KDV). No invoice, no VAT calculated, no VAT registration. That does not change because the tenant is a large company, since their side is handled through withholding.

Held on a company's books, or part of your own commercial enterprise. The rent counts as a service and must be invoiced with VAT. The lease must then say whether the agreed figure is VAT-inclusive or VAT-exclusive, or "rent ₺100,000" starts the same argument in a new form.

Two in-between situations need an accountant rather than a rule of thumb. An owner letting several commercial units through a continuous, organised operation may be treated as carrying on a commercial activity. And where the property belongs to an economic enterprise but the landlord is not VAT-registered, the tax may fall to be declared by the tenant as the responsible party.

A landlord who can invoice suits a corporate tenant, which wants the expense and the VAT deduction. But moving property into a company has its own tax consequences, including on a future sale. Decide that before you let.

What a commercial lease adds

A business tenant is protected as strongly as a residential one. The term expiring is not a ground for eviction, and no right to terminate without cause arises for you until the ten-year extension period has run. Build your protection at signature.

The increase ceiling binds you too. Article 344 of the Code of Obligations covers residential and roofed commercial premises together. At renewal the increase cannot exceed the twelve-month average change in CPI, and a higher rate or a different index in the lease does not lift that ceiling. The method is in the legal rent increase cap; the headline inflation figure is the wrong number for it.

Three things sit outside that rule. The temporary 25% cap of 2022–2024 covered residential leases only, which is why commercial rents did not fall as far behind the market. Unroofed sites (land, open yards, open car parks) are outside these provisions altogether, with far wider contractual freedom. And rent in foreign currency has its own rules and is not open to every party.

After five years either side can ask a court to redetermine the rent; there the judge is not bound by the CPI ceiling and looks at comparable rents instead.

Four clauses then do the rest of the work:

Assignment and subletting should also need your written consent, and a fire and liability policy from the tenant is standard.

Payment and default. Commercial rent must be documented through a bank or the PTT whatever the amount, with the month in the transfer description. Cash is penalised against landlord and tenant separately, as set out in collecting rent in cash. That record drives the default machinery: a notice must give a commercial tenant at least thirty days, and two justified notices in one lease year found an eviction claim. The rest of the checklist carries over from what a Turkish rental agreement must include, with the gross-rent, VAT and reinstatement clauses on top; the statute itself is published at mevzuat.gov.tr.

Two documents to check before you advertise

The unit's designation on the title deed. A unit recorded as residential cannot obtain a workplace licence, and converting it depends on the consent of the flat owners.

The building's management plan. Many plans expressly prohibit restaurants, cafés or noise-generating activity, and in buildings containing homes such uses additionally require the flat owners' unanimous consent.

Both take minutes, and they tell you which trades the unit can serve. A tenant from the wrong trade pays less or leaves once the licence is refused, which is why letting to the first candidate is the most expensive reflex in this market.

Before you sign

We are estate agents, not tax advisers or lawyers. The above is the shape of the rules as they stood in September 2026. Rates and thresholds are revised regularly, and your own position turns on how the property is held, where you are tax resident and which treaty applies. Take the numbers to a Turkish accountant (mali müşavir) and the draft lease to a lawyer before you commit.

What we can do is the part in front of the tax: what the unit is worth, which trades it suits, who is really behind an offer, and whether the rent quoted to you is the rent you think it is. That wider picture is in our guide to letting a shop, office or warehouse in Istanbul. It covers lease length, which tenant type suits which unit, why eviction is slower on a commercial lease and what to build into the contract because of it. For owners outside Istanbul, our work continues after signature through property management, including collecting the tenant's withholding records each year, so the offset on your return rests on a document rather than a hope.