Tax Changes Introduced by
Law No. 7566

This alert has been prepared to summarize the main changes introduced into tax legislation by Law No. 7566 “On Amendments to Tax Laws and Certain Laws and Decree Laws” and to help taxpayers adopt these changes in practice.

The draft law “On Amendments to Tax Laws and Certain Laws and Decree Law No. 631,” which was submitted to the Grand National Assembly of Türkiye (TBMM) on 17 October 2025, was adopted on 4 December 2025 and enacted as Law No. 7566.

Law No. 7566 was published in the Official Gazette on 19 December 2025 and entered into force on the same date.

1. MAIN TAX CHANGES INTRODUCED BY LAW NO. 7566

• Abolition of the interest expense deduction in the taxation of residential rental income
• Reinstatement of the fourth interim tax period
• Inclusion of income derived from disposal of certain investment funds within the scope of withholding tax
• Increase in the tax loss penalty for value understatement while registering title to real estate
• Application of a 0.2% fee on vehicle sales and transfers
• Clarification of the land registry fee base wording in real estate transfers and registrations
• Expansion of the annual fees application scope to taxpayers in various sectors
• Introduction of an upper limit on real estate tax increases for 2026 and determination of valuation increase rates for 2027–2029
• Introduction of a VAT exemption for UEFA events
• Income Tax and Corporate Income Tax Exemption of income and earnings derived from UEFA organizations
• Ten-year extension until 2035 of the period during which certain activities are not deemed to constitute an enterprise
• Tax exemptions granted to Investment Monitoring and Coordination Presidencies

2. SUMMARY OF TAX CHANGES

2.1. Abolition of the Interest Expense Deduction in the Taxation of Residential Rental Income (Income Tax Code)

Article 1 of Law No. 7566 amends Article 74 of the Income Tax Code, abolishing the deduction of interest expenses from residential rental income where the residential property was purchased through borrowing and then rented out.

This regulation entered into force on 19 December 2025 and applies to tax returns to be filed for income and earnings for taxation periods starting from 1 January 2025.

2.2. Reinstatement of the Fourth Interim Tax Period (Income Tax Code)

Article 2 of Law No. 7566 amends Repeated Article 120 of the Income Tax Code, reinstating the fourth interim taxation period. Taxpayers’ income will be determined for three-, six-, nine-, and twelve-month periods, with an interim tax return required for the last quarter of the year.

This regulation entered into force on 19 December 2025 and applies to income and earnings for taxation periods starting from 1 January 2025. Entities that have a calendar year as their reporting period must file the fourth interim tax return for October–December 2025.

2.3. Inclusion of Income derived from Disposal of Certain Investment Funds within the Scope of Withholding Tax (Income Tax Code)

Article 3 of Law No. 7566 amends Temporary Article 67 of the Income Tax Code, redefining and narrowing the scope of the withholding tax exemption for gains derived from investment fund participation units held for more than one year.

Previously, gains from participation units of investment funds, where the portion of shares traded on Borsa Istanbul accounted at all times for at least 51% of the portfolio, were not subject to withholding tax, and no tax return was required, if the units were held for more than one year.

With the new regulation, investment funds whose participation units are sold only to qualified investors, are not traded on the Turkish Electronic Fund Trading Platform (TEFAS) and are not subject to portfolio limitations have been excluded from the scope of the withholding tax exemption.

Therefore, the exemption has been limited to investment funds that are open to general investors and whose participation units are traded on Borsa Istanbul, with the aim of encouraging long-term capital market investments.

This regulation entered into force on 19 December 2025.

2.4. Increase in Tax Loss Penalty for Value Understatement While Registering Title to Real Estate (Fees Law)

Article 6 of Law No. 7566 amends Article 63 of the Fees Law, increasing the tax loss penalty for understating values in real estate transfers and acquisitions.

Previously, registry fees were calculated based on the purchase and sale price declared by taxpayers, which could not be lower than the tax value of the property. If the declared amount was found not to reflect the actual value, the difference was claimed together with a 25% tax loss penalty.

With the new regulation, the tax loss penalty previously applied at 25% will apply as one fold of the tax loss amount.

This regulation is also applicable from 19 December 2025.

2.5. Application of a 0.2% Fee on Vehicle Sales and Transfers (Fees Law)

Article 7 of Law No. 7566 rearranges the repealed paragraph (5) in the section “I – Proportional Fees Based on Value or Weight” of Tariff No. (2) annexed to the Fees Law.

Vehicle sales and transfers will be subject to a proportional notary fee equaling 0.2% of the transaction price but no less than TRY 1,000.

However, sales to galleries (authorized dealers and showrooms) are exempt from this fee.

The regulation will enter into force on 1 January 2026.

In addition, Article 13 of Law No. 7566 amends the sixth paragraph of subclause 1(d) of Article 20 of the Highway Traffic Law No. 2918, abolishing the fee exemption for sales and transfers of registered vehicles (second-hand vehicles) conducted through notaries.

2.6. Clarification of the Land Registry Fee Base wording in Real Estate Transfers and Registrations (Fees Law)

Article 8 of Law No. 7566 changes the wording in subparagraph (a) of paragraph (20) in the section “I – Land Registry Transactions” of Tariff No. (4) annexed to the Fees Law.

The phrase “the tax value of the property should be no less than the declared transfer and acquisition price” has been reworded as follows: “the declared transfer and acquisition price should be no less than the tax value of the property.”

This amendment aligns the wording in Tariff No. (4) with Article 63 of the Fees Law and eliminates inconsistencies. It is now clearly stated that land registry fees are to be calculated based on the transfer and acquisition price declared by taxpayers, which cannot be lower than the tax value of the property.

2.7. Expansion of the Scope of the Annual Fee Application to taxpayers in various sectors (Fees Law)

Article 9 of Law No. 7566 expands the list of documents and licenses subject to annual fees under Tariff No. (8) annexed to the Fees Law.

The following have been included within the scope of annual fees application:

• Jewelry trade, second-hand motor vehicle trade, and real estate trade authorization certificates
• Licenses of private healthcare institutions providing outpatient diagnostics and treatment (clinics, polyclinics, medical centers, and oral and dental health centers)
• Licenses of veterinary clinics, polyclinics, and animal hospitals
• Licenses related to precious metals and aviation operations
• Licenses to open private hospitals and laboratories
• Certificates related to tourist activities
• This regulation will enter into force on 1 January 2026

2.8. Introduction of an Upper Limit on Property Tax Increases (Real Estate Tax Law)

Article 10 of Law No. 7566 amends Temporary Article 23 of the Real Estate Tax Law, introducing an upper limit on property tax increases for 2026.

Tax values of properties to be applied in 2026 may not exceed twice their tax values applied in 2025.

In 2027–2029, tax values of properties will be determined by increasing the tax values for the previous year using a predetermined revaluation rate.

This regulation entered into force on 19 December 2025.

2.9. VAT Exemption for UEFA Events (VAT Law)

Article 15 of Law No. 7566 adds Temporary Article 46 to the VAT Code, granting a VAT exemption for deliveries of goods and services related to the organization of the 2026 UEFA Europa League Final, the 2027 UEFA Conference League Final, and the 2032 UEFA European Football Championship.

The exemption covers goods and services supplied by or to UEFA, participating teams without a workplace or legal headquarters in Türkiye, and responsible legal entities.

Input VAT paid on such exempt transactions may be deducted from VAT calculated on taxable transactions, and any VAT that cannot be reimbursed through deduction may be refunded in cash or by offset upon the taxpayer’s request.

2.10. Income and Corporate Income Tax Exemption on Income derived from UEFA Organizations (Corporate Income Tax Code)

Article 30 of Law No. 7566 adds Temporary Article 18 to the Corporate Income Tax Code granting an exemption from income and corporate income tax for UEFA, participating teams without a workplace or legal headquarters in Türkiye, and responsible legal entities with respect to income and earnings derived in Türkiye in connection with the organization of the 2026 UEFA Europa League Final, the 2027 UEFA Conference League Final, and the 2032 UEFA European Football Championship.

This exemption also covers withholding taxes deducted at source. In addition, the UEFA Türkiye Office will not be deemed to have formed an enterprise due to the income obtained in connection with the related sports events.

2.11. Ten-year Extension of the Period during which Certain Activities are not Deemed to Constitute an Enterprise (Corporate Income Tax Code)

Article 29 of Law No. 7566 amends Temporary Article 2 of the Corporate Income Tax Code extending the period during which certain activities are deemed not to constitute an enterprise from 31 December 2025 to 31 December 2035.

2.12. Tax Exemptions to Investment Monitoring and Coordination Presidencies

Law No. 7566 introduces various tax exemptions for Investment Monitoring and Coordination Presidencies (YİKOB), including the following:

• VAT exemption on real estate transfers and sales
• Fee exemption on real estate acquisitions and sales
• Motor vehicle tax exemption for vehicles registered in the name of the Presidencies