A New Era in Tax Advantages: Limitation on Fund Exemption

The Draft Law on the Amendment of “Tax Laws, Certain Laws and Decree Law No. 631” (“Draft Law”), dated 17 October 2025 and numbered 2/3320, has been submitted to the Planning and Budget Committee of the Grand National Assembly of Türkiye (“Committee”). The Draft Law introduces a series of significant amendments with the objectives of strengthening taxation justice, combating the informal economy and increasing budget revenues.

Under the current regime, participation shares of investment funds with at least 51% of their portfolio consisting of shares traded on Borsa İstanbul benefitted from an income tax exemption, when such shares are held for more than one year. This exemption aims to encourage long-term investments in the equity markets.

The Draft Law currently under discussion at the Committee seeks to remove this exemption for certain hedge funds.

1. Removal of Income Tax Exemption for Residential Rental Income

• The income tax exemption applicable to residential rental income under the Income Tax Law No. 193 will be abolished.
• However, this exemption will continue to apply for individuals receiving retirement, disability, widow or orphan pensions.

2. Limitation on Deductibility of Loan Interest

• The deductibility of loan interest as expenses for credits related to the non-residential leased properties will be abolished.

3. Reintroduction of the Fourth Provisional Tax Period

• The filing of the fourth provisional tax return for the last quarter of the year will be reintroduced for income and corporate taxpayers.

4. Increased Penalties for False Declarations of Real Estate Transfer Tax

• The 25% tax loss penalty applicable in real estate transactions where the declared sale price does not reflect the actual price, will be increased to 100%.

5. Removal of Vehicle Registration Fee Exemption

• The exemption from fees for the sale and transfer of second-hand vehicles carried out by notaries will be abolished. A notary fee of 0.2% of the sale price, with a minimum of TRY 1,000, will be imposed.

6. Clarification of Real Estate Transfer Tax Base

• The tax base for real estate transfers will be explicitly set as “the declared value, which cannot be lower than the real estate tax value”, to eliminate uncertainties in practice.

7. Annual Fees for Licenses and Permits

• Annual license and permit fees will be introduced for activities such as: Jewelry trade, second-hand vehicle and real estate trade, private healthcare institutions, veterinary clinics, precious metals sector, commercial aviation and tourism businesses.
• The fee amount will be doubled within the metropolitan municipalities.

8. Regulation on Tuition Fees in Foundation Universities

• For classes other than the preparatory and first year, tuition fee increases will no longer be set by the Board of Trustees of the university but will be determined by the Council of Higher Education, taking into account the annual CPI–PPI increase rates.

9. Establishment of the Central Black Sea Free Zone

• An additional article to the Coastal Law No. 3621 will authorize the construction of buildings and facilities for industrial, commercial and service activities within the designated free zone.

10. Presidential Authority over State Contributions in Private Pension System (BES)

• The President will be authorized to increase the current 30% state contribution up to 50% or reduce it to zero.

11. Increase in Social Security Debt Premium Rates

• The premium rate for borrowings other than maternity leave will be increased from 32% to 45%.
• The Bağ-Kur reinstatement premium rate will also be set at 45%.

12. Increase in Voluntary Premium Rates

• Voluntary social security premium rates will be increased from 20% to 21%.

13. Changes in Employer Premium Rates and Incentives

• The employer share of long-term insurance branches will be increased from 11% to 12%.
• The 4-point Treasury premium incentive in non-manufacturing sectors will be reduced to 2 points.
• The one-year premium support for young entrepreneurs will be abolished.
• The upper limit of the base for premium earnings will be increased from 7.5 times to 9 times the minimum wage.

14. Extension of the Check Law Provision

The provision that will render the submission of cheques before the date written on the cheque invalid, will enter in force on 31 December 2028 (extended from 31 December 2025).