What is Valuable Residence Tax and How Should the Appeal Process be Conducted?

Valuable Residence Tax is a type of tax which has been created by virtue of the amendment made to the Property Tax Law numbered 1319 under the “Omnibus Law” published in the Official Gazette dated 07.12.2019. In the article 42 of the Property Tax Law numbered 1319, Valuable Residence Tax is defined as follows:

 “Of the real estates of dwelling nature which are located within the borders of the Republic of Turkey, those whose building tax value or value determined by the General Directorate of Land Registry and Cadastre is 5,000,000 Turkish Liras and over are subject to valuable residence tax.”

The notifications for Valuable Residence Tax which came into our lives with the new legal arrangement and brought about criticisms in many aspects have started to be sent to the relevant persons although it has been a short while since its enactment. Given the fact that the 15 days’ appeal and the 30 days’ litigation terms start to run upon the notification is served, the necessary preparations should be made without delay.

If the tax appeal is rejected; in the tax case which contains the request for stay of execution and will be filed before the Tax Court, the details of the same grounds of appeal should be submitted, and the appeals should be supported particularly by the valuation report obtained from an independent valuation entity for the same real estate as well as any other documents.

In the event that this tax is not appealed against and the relevant case is not filed in a timely manner, there is also the risk of assessment of Property Tax on the basis of the value determined by the administration, in addition to the risk for the Valuable Residence Tax to become final.

Real estates which are subject to the tax

Of the real estates of dwelling nature which are subject to Valuable Residence Tax as per the legislation, those with the following values are subject to Valuable Residence tax at the following rates:

For those with the value in the amount between TRY 5,000,000 and TRY 7,500,000: 3 per thousand;

For those with the value in the amount between TRY 7,500,001 and TRY 10,000,000: 6 per thousand; and

For those with the value exceeding TRY 10,000,001: 10 per thousand.

The owners, the beneficial owners (if any) of the real estates of dwelling nature, or if such real estates do not have an owner and a beneficial owner, those that possess the real estate as if the owner are the payers of this tax.

It should be stated that the second paragraph of the relevant article regulates the liability for valuable residence tax in the cases of common ownership and joint ownership. Accordingly, those that own a real estate of dwelling nature in the form of common ownership are liable for the tax at the rate of their shares. In case of joint ownership, the owners shall be severally liable for the tax.

The article 46 of the Property Tax Law regulates additionally the matter of exemption from Valuable Residence Tax.

Appeal and litigation process

The real estates of dwelling nature with the value in the amount of 5 million Turkish Liras and over in result of the valuation carried out by the General Directorate of Land Registry and Cadastre (“the GDLR”) or the valuation carried out upon the GDLR’s request are announced on the GDLR web site and are additionally notified to the relevant persons.

In case the values of the real estates of dwelling nature are not appealed against before the GDLR by the end of the 15th day as from the date that the relevant notification is served, these real estates’ values become final.

The appeals submitted in a timely manner shall be evaluated and concluded within 15 days, and the final value shall be notified to the relevant person and be announced in accordance with the same procedure.

In case the appeal is rejected by the administration, the tax case containing the request for stay of execution should be filed before the court within 30 days. For this tax case, the court of jurisdiction is the court in the province at the location of the tax office to which the tax declaration has been submitted and then, which has issued the accrual voucher; and the competent court is the tax courts.

In conclusion; as stated by the article 2 of the Constitution, the Republic of Turkey is governed by rule of law, respecting human rights. The valuable residence tax-related provision introduced by the Law numbered 7149 is in violation of the principle of “rule of law”.

This is because, in a rule of law country, legal control mechanisms should be effective, public authorities should perform transactions within the framework of legal rules and should not act arbitrarily and unreasonably while exercising their discretionary power.

A severe intervention in the right to property by means of such provisions which are unforeseen, unpredictable, amorphous and whose new ones might be invented every day, as this is the case with valuable residence tax, may lead to the State’s indemnification liability due to the violation of the right to property that is under protection by the article 1 entitled “Protection of property” contained in the Additional Protocol 1 to the European Convention on Human Rights and by the article 35 entitled “The right to property” contained in the Constitution.

Therefore, given the fact that the 15 days’ appeal and the 30 days’ litigation terms start to run upon the tax notifications are served, we are of the opinion that the necessary preparations should be made without delay.