Ruling Number: 62030549-120[70-2014/489]-2206 Introduction In a private ruling dated September 11, 2014, the Istanbul Tax Office (Taxpayer Services Income Taxes Group Directorate) addressed the taxation of rental income derived from real estate owned in the United Kingdom by a person resident in Türkiye. The taxpayer stated that: They have a domicile in both the United Kingdom and Türkiye. They reside in Türkiye for more than six months. They own one real estate property in the United Kingdom and derive rental income (real estate capital income) from it. They are taxed in the United Kingdom on this income. The taxpayer requested clarification on: Whether they are required to declare this income in Türkiye, and If so, whether the taxes paid in the United Kingdom can be set off against the tax payable in Türkiye. Legal Framework – Domestic Law Income Tax Law (Law No. 193) Article 3(1)(1) – Full Liability: Real persons resident in Türkiye are taxed on their worldwide income (both within and outside Türkiye). Article 4 – Residence in Türkiye: The following persons are considered resident in Türkiye: 1. Those whose domicile is in Türkiye (domicile is defined in Articles 19 and following of the Civil Code); 2. Those who stay continuously in Türkiye for more than six months in a calendar year (temporary absences do not interrupt the period). Article 70 – Real Estate Capital Income: Income derived from leasing the properties and rights listed in the article (including real estate) by their owners, trustees, possessors, usufructuaries, or lessees constitutes real estate capital income. Double Taxation Treaty Provisions Türkiye-United Kingdom Double Taxation Treaty (Article 6 – Income from Immovable Property): 1. Income derived by a resident of one Contracting State from immovable property (including income from agriculture and forestry) situated in the other Contracting State may be taxed in that other State. Article 23 – Elimination of Double Taxation: Provides for a foreign tax credit mechanism. Ruling Conclusion Step 1 – Residency Status of the Taxpayer The taxpayer has a domicile in both countries but resides in Türkiye for more than six months. Under Article 4 of the Income Tax Law, the taxpayer is considered a resident of Türkiye (full liability taxpayer). Step 2 – Taxing Right under Article 6 of the DTT Under Article 6 of the Türkiye-UK DTT: State Taxing Right United Kingdom Yes (immovable property is situated in the UK) Türkiye Yes (the taxpayer is a resident of Türkiye) Both countries have the right to tax the rental income. Step 3 – Prevention of Double Taxation (Article 23) Under Article 23 of the DTT, the taxes paid in the United Kingdom on the rental income shall be credited against the tax payable in Türkiye on the same income. Conclusion: The taxpayer must declare the UK rental income in Türkiye (as a full liability taxpayer). The UK taxes paid on this income may be set off (credited) against the Turkish income tax calculated on the same income. The credit cannot exceed the Turkish tax attributable to that income. Summary Table Question Answer Is the taxpayer a resident of Türkiye? Yes (domicile in Türkiye OR stays >6 months) Does Türkiye have the right to tax UK rental income? Yes (full liability taxpayer – worldwide income) Does the UK have the right to tax the rental income? Yes (Article 6 – property situated in the UK) Is the taxpayer required to declare the income in Türkiye? Yes (file annual income tax return) Can UK taxes be set off against Turkish tax? Yes (foreign tax credit under Article 23) What is the limit on the credit? Cannot exceed Turkish tax on that income Practical Note The taxpayer must: Declare the UK rental income in their annual income tax return in Türkiye. Calculate the Turkish income tax on that income. Claim a credit for the UK taxes paid, up to the amount of Turkish tax attributable to the UK rental income. Provide documentation proving the payment of UK taxes (e.g., UK tax assessment, payment receipts). Important Notes This private ruling is based on Article 413 of the Tax Procedure Law No. 213. The ruling becomes invalid if incorrect information is provided, or if there is ongoing tax audit, litigation, or reconciliation related to this matter. Acting in accordance with this ruling protects the taxpayer from tax penalties and default interest for the related transactions. Legal Notice: The information in this article is intended for information purposes only. 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