The tax package was approved by the commission: What's in the proposal?

The tax package was approved by the commission. The 36-article bill includes narrowing VAT exemptions, tax changes for real estate and title deed transactions, combating the informal economy, increasing public revenues, and adjusting the budget balance. Details here.

The Planning and Budget Committee convened under the chairmanship of AK Party Samsun Deputy Mehmet Muş. The committee discussed the "Proposed Law Amending Tax Laws, Certain Laws, and Statutory Decree No. 631," which the AK Party submitted to the Turkish Grand National Assembly last Friday.

The bill, consisting of 36 articles,envisages combating informality, ensuring tax justice and including non-taxable areas within its scope.

The regulation will remove the general exemption for residential rental income earned within a calendar year. This exemption will be re-established only for those receiving retirement, disability, widow, and orphan pensions from social security institutions established by law.

The regulation will reduce the difference in tax deductibility for interest paid on properties purchased with credit and those rented out. The aim is to equalize the tax burden between purchases with and without credit.

With the amendment to be made to the Income Tax Law No. 193, the fourth temporary tax period will be reintroduced into the system, and the determination of the earnings of taxpayers with temporary tax liability in 3, 6, 9 and 12-month periods and the receipt of the temporary tax return for the last quarter of the year will be regulated.

Another amendment to the Income Tax Law will stipulate that the one-year holding exemption for funds whose portfolios consistently consist of at least 51% Borsa Istanbul stocks will no longer apply to certain hedge funds whose portfolios consist of at least 51% BIST stocks and whose characteristics are specified. The amendment will also prevent certain funds not traded on TEFAS, sold only to qualified investors, and with no portfolio limitations from using the exemption.

The regulation will provide that vehicles registered in the names of investment monitoring and coordination directorates established in place of special provincial administrations in metropolitan cities will be exempt from motor vehicle tax.

With the amendment made to the Law on Fees, the title deed fee is calculated on the basis that the declared value in real estate purchases and sales is not less than the property tax value. In cases of untrue declarations, the tax loss penalty applied for the difference will be increased by one fold from the current 25 percent.

With the regulation included in the proposal, a proportional notary fee will be collected from the initial registration of new vehicles and second-hand vehicle sales/transfer transactions carried out at notaries, based on the sales price and not less than the minimum fixed fee.

The regulation will introduce annual fees for documents such as private health institutions that provide outpatient diagnosis and treatment, oral and dental clinics, veterinary surgeries, animal hospitals, precious metal activity permits, second-hand motor vehicle and real estate trade authorization certificates, and commercial aviation licenses, and some license fees will be made annual. (ARTICLE 10)

With the amendment made to the Higher Education Law No. 2547, the authority of the board of trustees in determining student fees at foundation universities is preserved, but the principles regarding the updating of fees will be determined according to the principles of the Council of Higher Education, taking into account the annual producer price index increase for June of the current year and the average annual consumer price index increase for June of the current year.

The regulation will remove the current tax exemption for the sale/transfer of notarized second-hand vehicles. The regulation aims to exempt sales of real estate owned by investment monitoring and coordination directorates from VAT.

The regulation provides for temporary exemptions from VAT, income tax, and corporate tax for deliveries and services related to UEFA and international participants for the 2026 Europa League Final, the 2027 Conference League Final, and the 2032 European Championship. VAT incurred under the exemption will be eligible for deduction and refund.

The President will be given the authority to determine the state contribution rate in the Private Pension System (BES) in line with financial targets and to increase this rate by up to fifty percent and reduce it to zero.

With the temporary article added to the Law on Public Finance and Debt Management, the net debt usage amount determined by the budget law will be increased in order to maintain the Treasury cash reserves at a certain level with the additional financing need arising from the 2023 Kahramanmaraş-centered earthquake expenditures and the 2025 revenue-oriented budget developments.

With the regulation, the borrowing amounts will be increased, the revival premium rate for the suspended periods will be kept higher in the case of self-employed workers who do not pay their premiums on time and revive them by making a lump sum payment later, and the borrowing premium rates, including those within the scope of Law No. 5434, will be increased to 45 percent.

Premium rates for long-term insurance branches covered by Article 81 of Law No. 5510 will be increased. The regulation will also eliminate the annual premium support provided to young entrepreneurs.

With the regulation, the upper limit of premium-based earnings will be increased from 7.5 times to 9 times the minimum wage.

Those who receive income or monthly payments from the Social Security Institution (SGK) and who have premium and late payment penalties due to their own or their beneficiaries' insurance will be able to collect these debts by deducting an amount not exceeding 25 percent from the income/monthly payments.

In the regulation, instead of offsetting the accrued amounts that are below the 2025 contract amount within the scope of lump sum contracts from the receivables of university hospitals in 2026, these cancelled amounts will be covered from the budget of the Ministry of Labor and Social Security.

The implementation period of the regulation regarding not being considered as an economic enterprise due to the rental, securities, interest income taxed by deduction obtained by associations and foundations and the revolving fund income in the implementation units affiliated to the Ministry of National Education, as stated in the temporary article 2 of the Corporate Tax Law, will be extended until December 31, 2035.

By providing its assets and real estate as collateral to the Urban Transformation Directorate, it will be able to borrow more than half of its capital from public banks.

(ANKA)