Turkey’s strong emergence from the global recession has been documented countless times already, and whilst positive press reports have helped put it under the spotlight in terms of being a potentially sound investment opportunity with further room for growth and development, less has been said about opportunities for the tax-savvy investor looking at Turkey.
Did you know that the most recent Revenue Statistics report by the Organisation for Economic Cooperation and Development (OECD) unearthed Turkey as having the second-lowest tax to GDP ratio amongst OECD countries? That’s surely interesting news for anyone thinking about buying a property in Turkey and enjoying rental income from it for example.
What’s more, there has been a small upsurge in the number of British investors using a Self Invested Personal Pension (SIPP) to buy property – which could indicate that Turkey presents a series of significant tax-friendly opportunities for would-be British property investors.
On the one hand, any Britons thinking of moving to live in Turkey or who want to earn an income from Turkey in the form of rent for example, will be interested to learn more about Turkey’s relative low-tax status. And on the other hand, anyone looking at diversifying their pension will be interested to explore the SIPP options for buying properly overseas in a country like Turkey, where there is apparently strong potential for positive price advancement.
Buying a property through a SIPP allows the investor to benefit from tax savings on the investment of up to 40%, explains Turkish property expert Graham Flaherty. He explains: “we are seeing a growing trend in structured financial investments in property. Adding an overseas property to your SIPP can make complete sense because you receive tax relief equal to your income tax rate. Higher level earners receive an impressive 40% of the amount invested therefore.”
What’s more, these investment types are not exclusively restricted to certain individuals, anyone can theoretically benefit from a SIPP. So it’s important to note that individuals are able to transfer funds from existing pension plans into a SIPP, (if it’s deemed appropriate for them to do so) if they’re keen to take advantage of investing in property through a SIPP for example.
“If you have more than one pension fund you can still transfer them into a SIPP, giving you the opportunity to take 25% of the total amount out as a lump sum when you come to retire.” Says Flaherty, and the emergence of theoretically tax-friendly property investments in Turkey will undoubtedly attract interest amongst buyers, as will the positive statistics the country is currently generating.
In particular, hotel room occupation across the country is back to its pre-recession best, with coastal areas like Akbuk, a seaside town close to Bodrum airport, benefiting from the increase in investor and tourism attention.
Flaherty states: “Harmony Bay is one property development in Akbuk that is attracting SIPP investors already, and with its affordable properties starting at just £49,000 which generate 6% yields, it’s clear to see this particular development’s appeal.”
So, with strongly emerging Turkey fast-becoming the location of choice for property investors keen on a sustainable return, the question now is how much of a long-term role will the tax-friendly SIPP play in driving more investors to make property purchases as part of their pension portfolio.
Note, this article does not constitute financial advice: anyone interested in exploring SIPPs and determining whether they can make a tax-advantaged purchase of property abroad in a country like Turkey needs to speak to an independent financial adviser.