Law on Amendments to Tax Laws and Certain Other Laws and Decree Law No. 631

LAW ON AMENDMENTS TO TAX LAWS AND CERTAIN OTHER LAWS AND

DECREE LAW NO. 631

Introduction

On 04.12.2025, the Draft Law on Amendments to Tax Laws and Certain Other Laws and Decree Law No. 631 was adopted by the Grand National Assembly of Türkiye and enacted into law.

A significant portion of the regulations introduced by this Law will apply to income and earnings for the year 2025, while another portion will apply to transactions as of 01.01.2026 and thereafter. The amendments are of a nature that will directly affect both tax and fee obligations as well as certain licensing/permit processes. In this article, the main amendments are summarized:

Interest Expenses in Real Estate Acquisitions

(For taxation periods starting as of 1 January 2025)

Until now, when a real estate property purchased using a loan was leased, the interest related to that loan could be deducted as an expense in the declaration of rental income. In contrast, taxpayers who purchased real estate without financing did not benefit from such an expense advantage. This situation led to differences in tax burden among taxpayers earning the same type of income.

With the new regulation, the aim is to reduce this disparity, direct savings toward productive investments, and limit the excessive reduction of the tax base through interest on loans used primarily for wealth acquisition.

Accordingly:

• A limitation is introduced on the deductibility of interest expenses related to debts for leased assets and rights, excluding residential properties.
• For one residential property leased as a dwelling, an amount equal to 5% of the acquisition cost may be deducted as an expense for a period of five years starting from the year of acquisition.

Restructuring of Provisional Tax Periods

(For taxation periods starting as of 1 January 2025)

The periods for determining the earnings of provisional tax taxpayers are being restructured. Under the new system:

• Earnings will be determined for 3, 6, 9, and 12-month periods,
• Accordingly, the fourth provisional tax period will be reintroduced into the system,
• A new provisional tax return covering the results of activities for the last quarter of the year will also be required.

New Regulations on Title Deed, Notary, and Licensing Fees

(To enter into force as of 1 January 2026)

Tax Loss Penalty for Understatement in Title Deed Transactions: In the purchase and sale of real estate, the title deed fee is currently calculated based on the declared transfer and acquisition value, which must not be lower than the property tax value. Following the transaction:

• If it is determined that the fee was paid based on a value lower than the property tax value, or
• If it is determined that the declared transfer and acquisition value does not reflect the actual situation,

the fee corresponding to the difference is collected from the taxpayer, and a tax loss penalty of 25% is imposed on this amount. With the new regulation:

• The penalty rate is set at “one-fold,”
• In other words, an additional penalty equal to the amount of the underpaid title deed fee is envisaged (effectively increasing the penalty rate to 100%).

On the other hand, significant increases are anticipated in the property tax bases for 2026 and the property tax values used in the calculation of title deed fees. This indicates an environment in which declarations at values closer to the actual transaction amount will become mandatory in practice, increasing transaction costs.

In addition, in the transfer of real estate in return for consideration, through contracts of care until death, or by exchange, the title deed fee will be applied separately for the transferor and transferee based on the transfer and acquisition values not lower than the property tax value; in cases of compulsory execution and dissolution of joint ownership, based on the sale price; and in expropriations, based on the appraised value.

Notary Fee for New and Used Vehicles: With the amendment to the Fees Law, a significant innovation is introduced regarding notary transactions:

• The initial registration of new vehicles carried out at notaries, and
• The sale and transfer transactions of registered (used) vehicles

will be subject to a proportional notary fee calculated over the sale/transfer price. This fee will be at least TRY 1,000.

The notary fee will not be charged for the sale and transfer of registered vehicles to entities holding a second-hand motor vehicle trade authorization certificate.

According to the amendment to the Highway Traffic Law, the exemption from fees for the sale and transfer of registered vehicles (used vehicles) conducted by notaries will be abolished.

Annual Fees for Licenses in Healthcare, Veterinary Services, Jewelry, Real Estate and Motor Vehicle Trade, Precious Metals, and Aviation: With the Law, an annual fee system is introduced for many licenses and authorization certificates that were previously subject only to an application/initial license fee or not subject to any fee at all. Accordingly, annual fees payable each year are envisaged for:

• Private healthcare institutions providing outpatient diagnosis and treatment (clinics, polyclinics, medical centers),
• Private healthcare institutions providing oral and dental health services,
• Private hospitals and laboratories (including private food control laboratories),
• Veterinary clinics, polyclinics, and animal hospitals,
• Authorization certificates issued for jewelry trade, second-hand motor vehicle trade, and real estate trade,
• Permits/activity certificates for precious metal refineries and intermediary institutions,
• Commercial airline and general aviation operating licenses,
• Tourism facility operating certificates.

These fees will be applied at double rates in metropolitan municipalities and in districts with a population exceeding 30,000 according to TURKSTAT data.

These regulations create a fixed annual licensing cost for businesses operating in the relevant sectors and require these new items to be taken into account in budgeting and cash flow planning.

Property Tax Base and Real Estate Values

“Double Cap” for the 2026–2029 Period:

• The 2026 building and land tax values calculated based on the land and plot square meter unit values to be determined in 2025,
  • May not exceed twice the tax values applicable for 2025.
• In cases of revision of the tax value or change of the taxpayer, the minimum square meter unit values determined in 2025 will be taken into account for 2026; these also may not exceed twice the 2025 values.
• For the years 2027, 2028, and 2029, building and land tax bases and minimum square meter unit values will also be calculated within the framework of the same cap system.

This limitation appears to be introduced to control potential sharp increases in property tax and related financial obligations, such as title deed fees, particularly in 2026.

Change in the Property Tax Increase System: With the new regulation, the method for determining the annual increase rate of property tax values is permanently redefined:

• Starting from the year following the commencement of tax liability, for each year, the previous year’s tax value
• Will be increased by the revaluation rate determined for the relevant year.

Taxes, fees, and other financial obligations applied based on property tax values or minimum square meter unit values will also be calculated based on these new values.

Social Security Premiums and Changes to the Upper Limit

(Gradual entry into force as of the beginning of 2026)

With the Law, amendments are also made to the Social Insurance and General Health Insurance Law and the Pension Fund Law of the Republic of Türkiye. The main highlights are as follows:

• Increase in long-term insurance premium rates: Premium rates for disability, old-age, and survivors’ insurance are increased, redefining the premium burden for certain insured groups.
• Revision of premium rates for specific insured groups:
  • Voluntary insured persons,
  • Those working intermittently in agriculture and forestry,
  • Certain part-time employees,
  • Domestic workers and apartment caretakers

  are subject to changes in applicable premium rates.

• Increase in the upper limit of earnings subject to premiums: The upper limit of earnings subject to premiums, currently applied as 7.5 times the minimum wage, will be increased to 9 times the minimum wage.
• Increase in borrowing and reinstatement costs:
  • The premium rate applied for the reinstatement of suspended insurance periods is increased;
  • For Pension Fund and Turkish Armed Forces personnel, a rate of 45% will be applied in borrowing, aiming to ensure equality among insured persons.
• Deductions from income/pensions: Premiums and premium debts arising from the insured persons themselves or due to entitlement of beneficiaries may be collected by deduction from income/pensions received from the Social Security Institution, up to a maximum of 25%.

All these regulations will have impacts on premium costs, payroll planning, and cash flow for employers and employees alike. Implementation will enter into force gradually as of the beginning of 2026.

Regulation on Check Law

With the amendment to the Check Law, the duration of a provision closely affecting commercial life is extended. Accordingly, the regulation rendering invalid the presentation of a check to the drawee bank before the issue date written on it is extended until 31 December 2028.

Regulation on Withholding Tax Exemption for Equity-Heavy Funds

Changes are also made to the withholding tax regime for funds whose portfolios consist of at least 51% of shares traded on Borsa Istanbul on a continuous basis. For funds whose participation units are sold only to qualified investors, not traded on the Turkey Electronic Fund Trading Platform (TEFAS), and not subject to any proportional limitation regarding assets and transactions eligible for inclusion in the fund portfolio, it is envisaged that the withholding tax exemption conditional upon holding the participation units for one year will not apply. On the other hand, it is envisaged that participation unit holders of other funds meeting the same portfolio ratio condition but not possessing these characteristics will continue to benefit from the existing withholding tax exemption.

Conclusion and Evaluation

The regulations introduced envisage structural changes across a wide range of areas, from the taxation of real estate income to title deed and fee practices, from the withholding tax regime on capital market instruments to fees related to licenses and authorization certificates, and to social security premium rates. In particular, the aggravation of sanctions regarding title deed fees and tax loss penalties, the determination of property tax bases under the new system, and the changes in the withholding tax regime for equity-heavy funds bring to the fore the need for taxpayers to reassess their current and future positions. In this context, considering the effective dates and scope of the relevant provisions, it would be beneficial to review potential impacts on a taxpayer-by-taxpayer basis and, if necessary, adapt tax and investment planning accordingly.

Sincerely,

Atabay Law Office