Recent Development
Law No. 7566 on Amendments to Tax Laws and Certain Laws and Decree Laws (“Law No. 7566”), drafted with the aim of expanding the scope of taxation to areas previously excluded from taxation, abolishing certain exemptions, combating the grey-economy, and strengthening the equality in taxation, was published in the Official Gazette dated 19 December 2025 and numbered 33112.
Law No. 7566 introduces significant changes to tax legislation by making comprehensive amendments under various matters concerning the property tax, income tax and fees legislation. The Law foresees impactful changes in several areas, particularly including the restructuring of the provisional tax system, expansion of withholding tax mechanisms applicable to financial markets, clarification of the fee base for real estate transactions, revision of the penalty regime applicable to title deed fees, and the introduction of an upper limit on increases in property tax values.
In this legal alert, we summarize several key amendments to the property tax, income tax and fees legislation introduced under Law No. 7566.
Amendments Concerning Property Tax, Income Tax and Fees Under Law No. 7566
A. Introduction of an upper limit on increases in property tax values
Pursuant to Article 10 of Law No. 7566, the provisional Article 23 of the Property Tax Law has been amended to introduce an upper limit on the increase in property tax for 2026. Accordingly, the property tax values for buildings and land calculated for 2026 based on the minimum unit square meter values for land and plots appraised for 2025 may not exceed twice the tax values applied in 2025.
For the following years 2027, 2028 and 2029, property tax values will be determined by increasing the previous year’s tax value at the revaluation rate determined for the respective year. Prior to this amendment, Article 29 of the Property Tax Law provided that the tax value was determined each year by increasing the previous year’s value by 50% of the revaluation rate.
The same rule applies to situations requiring the establishment of new tax liability due to circumstances affecting the tax value. Accordingly, where a tax liability must be established in 2026, the minimum unit square meter values determined for 2025 will be taken as the basis when calculating the tax values for buildings and land; however, these values may not exceed twice the 2025 unit values.
These amendments entered into force on 19 December 2025, the date of publication of Law No. 7566.
B. Key amendments regarding income tax
I. Narrowing of the withholding tax exemption on long-term fund gain
Under Provisional Article 67 of the Income Tax Law, participation shares of investment funds whose portfolios consist of at least 51% shares traded on Borsa Istanbul were not subject to withholding tax if held for more than one year, and such income was not required to be reported through an annual tax return.
However, Article 3 of Law No. 7566 redefines the scope of this provision to prevent tax planning practices that go beyond the original intent of the rule. Accordingly, the following parenthetical clause has been added immediately after the phrase governing the exemption: “(excluding investment funds whose participation shares may only be sold to qualified investors, which are not traded on the Turkish Electronic Fund Trading Platform, and which are not subject to any portfolio composition limits on assets and transactions to be included in the fund portfolio).” With this amendment, the exemption is now limited strictly to publicly offered funds traded on Borsa Istanbul, and it prevents unrestricted “free funds,” which are not subject to portfolio limitations, from being used as a mechanism to avoid withholding tax through long‑term holding.
Therefore, the scope of the withholding tax exemption applicable to gains derived from participation shares held for more than one year has been narrowed and the rule has been reshaped accordingly.
This amendment entered into force upon publication of Law No. 7566 on 19 December 2025.
II. Reintroduction of the fourth provisional tax period
Article 2 of Law No. 7566 removes the phrase “for the first nine months” from bis Article 120/1 of the Income Tax Law. This phrase formed the legal basis for the current practice under which provisional tax was assessed only on income derived for the 3‑, 6‑, and 9‑month periods.
With the amendment, provisional taxpayers may once again determine their taxable income on the basis of the 3‑, 6‑, 9‑ and 12‑month periods. Thus, the fourth provisional tax period, which was abolished by Law No. 7338 published in the Official Gazette dated 26 October 2021 and numbered 31639 and was not applied for tax returns submitted for the 2022 fiscal period onwards, is now reinstated.
This amendment entered into force on 19 December 2025, the date of publication of Law No. 7566, and applies to provisional tax returns to be filed for taxation periods beginning on 1 January 2025.
Accordingly, provisional taxpayers whose fiscal year corresponds to the calendar year will be required to file a provisional tax return for the fourth provisional tax period of 2025.
III. Removal of the deduction of interest expenses relating to residential rental properties from gross rental income
Article 1 of Law No. 7566 amends Article 74 of the Income Tax Law to abolish the deduction of interest expenses relating to debts incurred for residential rental properties from gross rental income. The interest deduction is now limited exclusively to commercial (non‑residential) rental properties.
This amendment entered into force on 19 December 2025, the date of publication of Law No. 7566, and applies to income and earnings declared for taxation periods beginning on 1 January 2025.
C. Amendments to the fees legislation
I. Imposition of a one‑fold tax loss penalty for under‑declaration in transfers and acquisitions of real estate
Article 6 of Law No. 7566 amends the Fees Law to revise the penalty applicable when it is determined that the title deed fee has been paid on a value lower than the property tax value or that the declared transfer/acquisition value does not reflect the actual transaction value. Under the amendment, the tax loss penalty applicable to the title deed fee corresponding to the difference will no longer be calculated at 25% as previously; instead, it will be imposed at “one fold”.
II. Clarification of the title deed fee base for real estate transfers and registrations
Article 8 of Law No. 7566 amends Schedule (4) attached to the Fees Law by revising the phrase under the heading “I – Title deed transactions.” The phrase “the property tax value, not being less than the declared transfer and acquisition value” has been replaced with “the declared transfer and acquisition value, not being less than the property tax value.” Thus, the existing practice regarding the determination of the title deed fee base in real estate transfers and acquisitions has been reinforced through the textual alignment made under Article 63 of the Fees Law and Schedule (4).
Through this wording amendment, the existing practice -under which the title deed fee is calculated based on “the declared transfer/acquisition value, provided that such value is not less than the property tax value”- is explicitly and consistently reflected in the statutory text, thereby eliminating the inconsistencies between different provisions.
These amendments concerning fees entered into force upon publication of Law No. 7566 in the Official Gazette on 19 December 2025.
Conclusion
Law No. 7566 introduces significant amendments to the tax legislation regarding property tax, income tax and the fees regime. Taxpayers should carefully assess these changes and take the necessary steps to ensure full compliance with the new regulations.
