After 'mother-in-law tax', 'guest tax' is now on the agenda: 'The property owner will pay the tax'

The Ministry of Treasury and Finance, while examining contracts between landlords and tenants, identified that mothers-in-law are residing in 2 million residences. Experts have pointed out that a new tax could be levied under the name of "mother-in-law tax." The mother-in-law tax relates to the income tax that brides and grooms would pay based on the imputed rental value for housing their mothers-in-law in properties they own without charging rent.

While the mother-in-law tax is on the agenda, Abdullah Tolu on ekonomim.com also drew attention to the "guest tax." Tolu used the expression, "Of course, the guest will not pay; the property owner with whom they are staying in their house or apartment will pay."

Tolu stated the following in his article:

"Among the taxes currently in force, there is no tax called 'Mother-in-Law Tax' or 'Guest Tax.' However, although they are not exactly named 'Mother-in-Law Tax' and 'Guest Tax,' there is a tax arising from these!..

The mother-in-law tax attracted a lot of attention!

Our column titled 'Are you ready to pay the mother-in-law tax?', published in our newspaper on Monday, February 19, 2024, received significant attention. It became the subject of numerous shares and news reports in print and social media. Through this, we also understood that one of the most important issues for the public is mothers-in-law!

The 'Mother-in-Law Tax' was about the income tax that brides and grooms would pay based on the imputed rental value for housing their mothers-in-law in homes they own without charging rent. Many interesting questions were received on this subject. The questions received were not only about mothers-in-law; there were also those about spouses, friends, and relatives.

So, what is the 'Guest Tax' about?

The 'Guest Tax' concerns guests who reside in the home with the property owner, other than their relatives. If the person residing in the home with the property owner is not a relative, the property owner is required to pay the 'Guest Tax'!

Of course, this regulation does not concern guests who stay for a few hours or days. It concerns guests who stay for longer periods. When a guest stays for a long time, things get complicated, and this tax comes to the agenda. For example, a stay of 3 months or more.

Is this a new regulation?

You might immediately object, 'Why should tax be paid for a guest in the house?' Actually, you are quite right, but there is such a regulation in the Income Tax Law, and it is not even new; it has been in force for many years!

What does the law say?

Article 73 of the Income Tax Law, titled 'Imputed Rent,' is exactly about this subject.

According to the regulation in question, the rental prices of leased goods and rights cannot be lower than the imputed rental value. The imputed rental value of residences left for the use of others free of charge is considered the rent of these residences. In residences, the imputed rental value is calculated as 5 percent of the property tax value of the residence. According to this regulation, for example, the imputed rental value of a residence left for the use of others free of charge is considered the rent of this residence, and taxation is carried out based on the imputed rental value.

The aforementioned Article 73 also determines the situations where the imputed rental value basis will not be applied through an enumeration method. The situations where the imputed rental value will not be applied are exactly as follows according to the order in the article:

1) Leaving real estate that remains empty to the residence of others free of charge for the purpose of their protection,

2) Allocating buildings to the residence of the property owners' ascendants (mother-father, grandmother-grandfather), descendants (children, grandchildren), or siblings,

3) Relatives residing in the same house or apartment together with the property owner,

4) In leases made by general and special budget administrations, provincial special administrations, and municipalities, and other public institutions and organizations.

Which regulation is related to the 'Guest Tax'?

The regulation in clause 3 of Article 73 of the Income Tax Law is related to the 'Guest Tax.'

According to the regulation in question, if 'relatives' also reside in the same house or apartment together with the property owner, the 'Guest Tax' is not collected based on the imputed rental value. However, if the person residing in the house or apartment together with the property owner is 'not a relative,' then the 'Guest Tax' is collected based on the imputed rental value.

So, who will pay the 'Guest Tax'?

A good question; of course, the guest will not pay the 'Guest Tax'; the property owner with whom they are staying in their house or apartment will pay it.

What is the tax the property owner will pay?

Property owners who host guests in this way in the house or apartment they own are required to file an annual income tax return as if they had earned rent based on the imputed rental value and pay income tax.

What will property owners do?

Property owners who hosted guests who were not relatives in their homes in 2023 are required to file an annual income tax return between March 1 and April 1, 2024, as if they had earned rental income, and pay the accrued income tax.

How will the guest tax be calculated?

In the calculation of the income tax to be paid due to the guest staying in the house, the 'property tax value' of the house and 'how many people are staying in the house' are extremely important.

First of all, 5 percent of the property tax value of the house will be calculated as the annual imputed rental value. Then, the calculated imputed rental value will be divided by the number of people staying in the house, including the property owner; in this way, the imputed rental value falling to the non-relative guest/guests will be found. For example, if one property owner and one guest are staying together in the house, half of the calculated value will be the imputed rental value of the guest staying in the house. If the guest has stayed for less than 1 year, the portion of the annually calculated imputed rental value corresponding to the number of months the guest stayed will be accepted as the imputed rental value for the period they stayed. If the guest stayed for 6 months, a 6-month imputed rental value will be calculated.

No tax will be paid for an imputed rental value not exceeding 21 thousand TL!

In this way, 21 thousand TL (33 thousand TL for 2024) of the imputed rental value calculated for a non-relative guest staying in the same house with the property owner is exempt from income tax for 2023 (GVK. Art. 21). Therefore, if the imputed rental value calculated for the guest remains below 21 thousand TL for 2023, an annual income tax return will not be filed, and no tax will be paid.

However, if the imputed rental value in question exceeds 21 thousand TL for 2023, an annual income tax return will be filed, 21 thousand TL of the amount calculated as the imputed rental value will be exempt from income tax, and the exceeding portion will be subject to tax.

The Treasury is quite sensitive about the declaration of rental income!

Yes, the Treasury is quite sensitive about the declaration of rental income. It attaches great importance to this issue and has recently concentrated its efforts on it. The Treasury has determined that approximately 2 million residences have the potential to earn rental income and has started on-site inspection work in these residences. In this way, it will determine which of these residences are for rent and who is residing in them. It requests information from tenants regarding the rental contract, from which date they have been renting, the rental price, and how they made the payment. For this purpose, it created a 'Rental Notification Form' in the Digital Tax Office. In this way, tenants identified can fill out this form via www.dijital.gov.tr or e-devlet without going to the tax office and report the requested information to the Treasury.

In our opinion, in order to prevent informality in rental income, it is necessary to make it mandatory to conclude rental contracts via e-devlet. There is a need for a legal regulation for this!

Taxes that are like a joke!

Those who house their mother-in-law, uncle, aunt, niece/nephew in the residences they own without charging rent are required to declare rental income 'as if they were receiving rent' based on the imputed rental value of these residences and pay income tax!.. In other words, there are mother-in-law, uncle, aunt, niece/nephew, and friend taxes...

Apart from these, now we also have a 'Guest Tax.'

Actually, aren't all these like a joke? But it's not a joke; they are all real; there are regulations regarding these in the Income Tax Law! It is time to get rid of such funny regulations. For this, most of our Tax Laws, especially the Income Tax Law, need to be rewritten according to the changing conditions of the day! The time for this has come and is passing..."

News Source: 12punto