How to Calculate Stamp Tax in the Event of a Lease Contract Transfer?

Stamp Tax In The Event Of A Contract Extension

I want to extend the lease term of the apartment I live in for another year starting from August. However, the landlord says this would be subject to stamp tax. Is this correct?

In case the current lease agreement is valid for one year and there is a provision in the part covering special conditions for the lease contract to be extended for the same duration, if the parties consent to, and you decide upon extending it for a year, then the extension is subject to stamp tax. Thereby, according to the Stamp Tax Law, parties must fulfill the liability. By force of the third paragraph of Article 14 of the Stamp Tax Law, in the event of the contract extension, the same amount or same proportion is collected as tax. By this provision, the current lease agreement between you and the owner is now extended for a year, and this transaction you conduct is the status of redetermining the current lease duration by extending it for a year.

Additionally, as it is known, the stamp tax rates increased in 2010 and the rate to be applied in lease contracts is 1.65 per thousand. This rate will apply for the annual rent as you extend the contract for a year.

Long-Term Construction And Repair Contracts

1. The decision No. E.1999/3010, K.2001/4807 and dated 27.12.2001 made by the Third Chamber of Council of State is as follows: “Certificates of payment in construction contracts are official documents showing the cost of the construction and the amount the constructors shall receive from the management. In the certificates of payment, the amount of the building materials used that are calculated with price per unit and are fabricated are shown in detail. Thereby, the amount of the material used such as iron, cement, and wood can be identified from the certificate of payment. (…) Even though the burden of proof belongs to the claimant and no proof was given regarding that a part of the building material was used in the temporary worksite building fabrication, which was fabricated by force of the contract, or for the work done free of charge upon the contracting authority’s request even though the contract does not cover it, the certificate of payment shall not accept this claim and such fabrications shall not be identified by the tax administration.”

2. The Decision No. E.1999/5322, K.2000/4860 and dated 16.11.2000 made by the Fourth Chamber of Council of State is as follows: “The following provision is proper and legal: The changes in benefit that are resulted from evaluation of the progress payment shall qualify as an element of the progress payment, and shall be taken into consideration along with progress payment when determining the income received in the end of the construction and that is subject to tax, since the tax claim of the long-term construction and repair contract arise in the year when the construction is complete, according to the Income Tax Law No. 42 of the Tax Court regarding the case opened for the cancellation request of the corporate tax assessment which is done on the grounds that when auditing the accounts of a limited liability organization which conducts contract work, the income and bank deposit income received from the service sale of the company, sale of the fixtures that are subject to expired amortization, and machinery and vehicle rental should be subject to annual declaration without evaluating them with the long-term construction. Since such incomes may affect the profit and loss when the construction is complete, their taxation as the completion of the construction by adding it to the calculation as an element of the income received from the construction is required by Income Tax Law No. 42; and this income qualifies as an income obtained from a source other than the construction, and thus the tax assessment shall not apply.”

3. The Decision No. E.2000/2917, K.2001/1732 and dated 01.05.2001 made by the Fourth Chamber of Council of State is as follows: “In order for a work to be included in the scope of special income regime regulated by the Income Tax Law No. 42 and 44, certain conditions should be met, which are: the activity should be construction and repair work, the work should be done depending upon official or private undertaking, and the work should spread over the years. As for the case; the decision of the Tax Court that partly approve the tax assessment which made based upon the evaluation report and the judgment delivered by the defendant by evaluating the work within the scope of long-term construction work and that states the income will require declaration by the end of the construction was not regarded as justifiable since the court decided the following upon reviewing the contract between the demandant and S.S. (…) Members Building Society: the contract does not specify the starting and completion dates of the work, how to pay the progress payments is not clear, some amount of the expenses will be met by the advanced payments given to the contractor company within the bounds of possibility and some amount will be met by the contractor company and the invoice of all the expenses will be issued to the building society at the end of the year, it was clear that the advanced payments will be deducted from the invoice issued by the company, in this case, the work done within the scope of the contract is not a long-term construction and repair contract but an independent work done and completed within years.

Fees In Special Instructions

1. The special instructions of the Ministry of Finance Revenue Administration are as follows: “It is enacted by the Article 63 of the Act of Fees No. 492 that the title deed fees in the property transfers and acquirements shall be calculated over acquisition cost provided that it is no fewer than the property tax, and in case it is detected that a fee fewer than the property tax is paid or the declared transfer and acquirement cost do not reflect the actual situation, the fee covering the gap between amounts shall be subject to complementary tax assessment by an ex-officio decision. On the other hand, it was announced in the Internal Circular of the Act of Fees that the value added tax shall be disregarded when identifying the title deed tax assessment. Accordingly, in property transfers and acquirements that are subject to the value added tax, value added tax shall not be included in the title deed assessments.

2. The special instructions of Izmir Tax Office Directorate dated 21.10.2009 and numbered 2628 are as follows: “The Article 11/ç of the Law no 5766 and the last paragraph of the Article 123 of the Act of Fees were amended to ‘Joint-stock companies and limited liability companies are exempt from the fees stated in this law for their transactions of establishment, capital increase, merge, transfer, and such kinds of changes (…).’ This amendment aims to ensure that the transactions of the companies within the scope of establishment and capital increase are exempt from fee. In accordance with these announcements, the transaction of registering the property in the Limited Liability Company as an in-kind capital, which is a result of the capital increase, shall not be subject to title deed fee.”

3. The special instructions numbered 8719 and dated 18.03.2009 of the Large Taxpayer Office Directorate are as follows: “According to the Article 42 and 44 of the Act of Fees and the tariff numbered 2 that is included in the law, when company partners transfer shares to each other, each of the transferring partners and the partners who receive the transfer shall calculate notary fee over the amount in question per sign and 0.90 per thousand separately. In case when the share is transferred to persons other than the partners, the transferring partner shall pay a fee over the amount he/she transfer, and the person who becomes the partner by buying shares shall pay a fee over the total amount of the capital.

4. The special instructions of the İzmir Tax Office Directorate dated 1.10.2009 and numbered 2470 are as follows: “It was regulated in the fourth paragraph of the Article 63 changed with the Act of Fees Law No. 5766, in the transfers and acquirements of the properties, the land registry and cadaster fee shall be calculated over the declared transfer and acquirement cost provided that it is no fewer than the property tax. As for the fee rate, in the 20/a article of the tariff numbered four included in the law, it was stated in brackets that in cases of compulsory enforcement and severance of joint tenancy, the fee shall be collected over the sale value of the fee while in acquirement cases, it shall be collected over the appraised cost. In cases of compulsory enforcement or severance of joint tenancy and acquirement, there is no title deed registry due for the new owner of the property. According to these explanations, the sale value of the fee is collected in cases of registry transactions, compulsory enforcement, and severance of joint tenancy while 15 per thousand over the appraised cost shall be collected in cases of acquirement by force of the Article 20/a of the tariff numbered 4 included in the law.

5. The special instructions of the Adana Tax Office Directorate dated 30.04.2009 and numbered 1071 are as follows: “According to the provision in the notarized lease contract, in cases of putting an annotation on the title deed regarding the extending the annotation for 10 years in benefit of the tenant, by force of the Article I-10 of the tariff numbered 54 of the Act of Fees, a fee worth of 5.4 per thousand over the amount calculated through multiplying the annual rental stated in the contract by ten shall be collected.” Reference: Veysi Seviğ - Bumin Doğrusöz