Understating the sale price in property title deed transactions can create serious problems not only for the seller but also for the buyer. Although parties may try to pay less by declaring a lower amount, this practice can ultimately lead to higher payments and legal consequences.
Declaring a lower sales value during real estate transactions can initially appear beneficial for both buyer and seller by reducing immediate costs. However, if authorities discover the discrepancy, declaring a false or reduced price on the deed causes significant issues. Once detected, tax and contractual complications may arise. If the state determines that the value was manipulated or declared lower in the title transfer process, penalties and sanctions can be imposed.
Penalties for Declaring a Low Sale Price on the Title Deed
Declaring a low value on the title deed may seem advantageous because it reduces title deed transfer fees for both buyer and seller. In practice, title deed transfer fees are charged as 2% from the seller and 2% from the buyer, totaling 4%. The seller also pays income tax on the sale. When buyer and seller agree to report a lower price, they may gain financially in the short term. However, if that underreporting is detected by authorities, the state applies penalties.
How Can Underreported Values on the Title Deed Be Corrected?
It is possible to correct underreported values on the title deed, provided that tax officials have not already launched an audit of the transaction. If a correction is requested before an inspection begins, the unpaid taxes and fees must be paid within 15 days. Buyers and sellers can make this payment together, including a regret penalty (pişmanlık zammı). By settling the outstanding amounts, the property is recorded at its true value, avoiding further punitive measures and reducing legal exposure.
What Is the Penalty for Underreporting on the Title Deed?
When the true value is not declared, both seller and buyer face two main types of penalties. If the Ministry of Treasury and Finance determines that the declared sale price is lower than the actual value, a delay fee may be charged to both parties. Additionally, the title deed transfer fee due to underreporting is increased by 25% over the original amount.
For example, for a property worth 1,000,000 TL, the buyer should pay 20,000 TL and the seller should pay 20,000 TL in title deed fees. If underreporting is detected, the 20,000 TL fee can be increased to 25,000 TL, and interest or delay penalties may be added on top of that.
Underreporting also triggers separate tax penalties related to income taxes. The seller may face an additional tax charge based on the value increase assessment. In such cases, the seller may be required to pay a penalty amounting to a significant portion of the income tax—commonly resulting in an additional payment roughly equivalent to 35% of the declared income tax liability.