Law No. 7464 on the Leasing of Residential Properties for Tourism Purposes and Amendments to Certain Laws (“Law”) was adopted by the Grand National Assembly of Turkey on October 25, 2023.It was published in the Official Gazette on July 2, 2023, numbered 32357. This Law, set to come into force on 01.01.2024, introduces several regulations concerning the conditions and obligations for lessees and lessors engaging in rentals through Airbnb or similar platforms for up to 100 days at a time. It also outlines administrative fines for non-compliance with these obligations.
- Obligation to Obtain a Permission Certificate
The Law’s primary regulation is the mandate to acquire a permission certificate from the Ministry of Culture and Tourism before entering into a lease agreement for tourism purposes. This certificate is necessary to rent residential units for tourism for a maximum period of 100 days. The Ministry requires the unanimous decision of all condominium owners for the building’s relevant independent section to deem it suitable for tourism leasing activities.
For buildings with multiple independent sections, these provisions apply only to the building where housing is leased for tourism purposes. A copy of the permission certificate must be provided to the site management. Restrictions have been set for buildings with more than three independent units registered to the same person to prevent their conversion into hotels without meeting legal requirements.
In these cases, the number of sections for which a permit can be issued should not exceed 25 percent of the independent sections. Additionally, a workplace operating license must be submitted if the number of independent sections exceeds five based on this ratio. If the building is part of a residential complex with multiple independent sections, a unanimous decision by all condominium owners is required.
An exception to the permit requirement is introduced for high-quality residences with various amenities. These residences can be granted a permission certificate without complying with specific conditions mentioned in the law.
To protect peace and prevent disputes among condominium owners, the Ministry will not issue a permit without the condominium owners’ approval. Individuals engaged in tourism leasing activities upon the Law’s enactment must apply to the Ministry for a permit within one month. The Ministry will finalize permit certificate procedures within three months from the application date. Those whose applications are rejected cannot continue leasing activities, but the rights of existing house users will persist until the contract ends.
- Prohibition of Leasing to Third Parties
Under the Law, to ensure effective supervision over properties rented for tourism, it is prohibited:
- for users (tenants) to rent residential properties to third parties on their own behalf and account.
- for users (tenants) to rent residential properties to third parties for tourism purposes on their own behalf and account.
The exception to the sublease prohibition is allowing legal entities to lease residencies to their personnel.
- Mandatory Hanging of Plaques
A mandatory requirement introduced by the Law is the display of a plaque provided by the Ministry at the entrance of properties rented for tourism. Failure to display this plaque incurs administrative fines of TRY 100,000, with an additional fine of TRY 500,000 if the plaque remains absent despite a 15-day period.
- Compliance with the Identity Reporting Obligation
The Law specifies that residences granted tourism rental permits fall under the provisions of Law No. 1774 on Identity Notification. The holder of the permission certificate is responsible for complying with the notification obligation, requiring the recording of identity, arrival, and departure information for accommodation purposes.
- Administrative Penalties
Law No. 7464 delineates the obligations for lessors and the corresponding administrative sanctions for non-compliance. Unauthorized leasing activities result in administrative fines as detailed in Article 4 of the Law.
- Fines for conducting tourism rentals without a permit range from TRY 100,000 to TRY 1,000,000.
- Subleasing without permission incurs a fine of TRY 100,000 per contract.
- Those mediating rental activities without a permit face a fine of TRY 100,000 per contract.
- Using a residence more than four times within a year without a permit incurs a fine of TRY 1,000,000.
- Violating public order, security, or morality leads to permit cancellation upon notification by authorized institutions.
- Tax Liability for Renting Houses for Tourism Purposes
Article 37 of Income Tax Law No. 193 states that “Earnings arising from all types of commercial and industrial activities are considered commercial earnings.” Article 70 of the same Law governs the income obtained from renting buildings by their owners, possessors, easement or usufruct rights holders, or tenants, which is classified as real estate capital income. However, it’s evident that to generate more income than that from long-term real estate rentals, there’s a need to organize properties for use by different individuals on a daily or weekly basis continuously. This involves delivering the residence to guests, receiving it back at the end of their stay, and preparing it for future use. Since this activity doesn’t align with a conventional lease agreement for a specific price due to its daily or weekly nature, it should be regarded as a commercial activity.
In line with this, the income acquired by each co-owner from houses rented for short periods (daily, weekly, monthly) within an organization is subject to taxation under commercial income provisions. Typically, income received by individuals from short-term accommodation services in Turkey is subject to progressive income tax based on tax brackets. The income tax rates for 2023 are as follows:
- up to TRY 70,000 – 15%
- over TRY 70,000 up to 150,000 – 20%
- over TRY 150,000 up to 550,000 – 27%
- over TRY 550,000 up to 1,900,000 – 35%
- over TRY 1,900,000 – 40%
As per the first article of the VAT Law, services and supplies within commercial, industrial, agricultural, and self-employment activities in Turkey, including leasing goods and rights specified in Article 70 of the Income Tax Law under Article 1/3-f, are subject to VAT.
An implementation general communiqué on Accommodation Tax was published in the Official Gazette on December 14, 2022. According to this communiqué, all facilities providing accommodation services, regardless of their type, class, or whether they possess tourism business certificates or business opening/operation certificates as per relevant legislation, are subject to a 2% accommodation tax. There are no limitations concerning accommodation facilities, and all services provided in such facilities fall under this tax.
Author: Talha Fahri İzgeren