Tax decision from the Council of State for those who rent their house for tourism purposes

You wanted to rent your residence for vacation purposes and obtained the "Permit Certificate for Housing Rented for Tourism Purposes". The Ministry of Finance demanded income tax, VAT, provisional tax, and accommodation tax from you. But you are not providing any additional services in this residence and only earning rent. The Council of State ruled that you do not have to pay income tax, VAT, provisional tax, and accommodation tax. Under these conditions, only the income obtained will be taxed as Real Estate Capital Income.

The Council of State ruled that income earned from short-term housing rentals for tourism purposes should be considered under real estate capital income, not commercial income.

The decision created an important precedent regarding applications of income tax, VAT, provisional tax, and accommodation tax affecting thousands of homeowners.

The High Court decided that renting housing alone cannot be considered a commercial organization and suspended the enforcement of the tax application established by the Revenue Administration (GİB) in this context.

TAX DECISION FOR THOSE WHO RENT THEIR HOMES FOR TOURISM PURPOSES

The High Court concluded that the income earned by these methods will be taxed as Real Estate Capital Income, cannot be regarded as commercial income, and that income tax will not be subject to provisional tax, VAT, and accommodation tax, and suspended the enforcement.

The Ministry of Finance imposed retroactive tax obligations on thousands renting their homes, issuing tax assessments for income tax, provisional tax, and VAT with tax loss penalties.

This issue, which had long been examined by the Council of State, has now been finally decided.

CONCERNS HOMEOWNERS UNDER REVIEW

The decision sets a precedent for thousands of homeowners facing retroactive tax assessments.

"RENTALS ARE NOT A COMMERCIAL ORGANIZATION"

According to the news conveyed by NTV, the High Court ruled "Renting immovables daily, weekly, or monthly does not change the character of the income as real estate capital income, since it is not conducted in a commercial organization, it cannot be considered a lodging facility, and it is not subject to accommodation tax."

The Council of State suspended the enforcement of the Revenue Administration's tax-generating decision.

"EARNINGS DO NOT FALL UNDER COMMERCIAL INCOME"

Certified Public Accountant Abdullah Tolu explained the matter as follows:

"The issue relates to whether the income earned from housing rentals, conducted by obtaining a 'Permit Certificate for Housing Rented for Tourism Purposes,' will be subject to income tax and VAT as commercial income or only income tax as real estate capital income."

Additionally, the Ministry of Finance stated that services provided in properties holding the 'Permit Certificate for Housing Rented for Tourism Purposes' issued by the Ministry of Culture and Tourism are subject to VAT as a commercial activity and that standard VAT of 20% must be calculated.

Based on this general letter, the Ministry imposed retroactive tax obligations with tax loss penalties for income tax, provisional tax, and VAT on thousands who rented their properties by obtaining the permit but did not open commercial income tax liabilities or submit and pay income tax, provisional tax, and VAT declarations.

3RD AND 7TH CHAMBERS OF THE COUNCIL OF STATE ISSUED A JOINT DECISION DEMANDED BY THE VDDK OF THE COUNCIL OF STATE

Acceptance that the activity of renting real estate for tourism purposes is commercial in nature, that the income obtained from this activity can be considered commercial earnings, and that tax liability can be established for related parties within this scope requires that the rental be conducted as a commercial organization such as hotel, apartment, or hostel management and includes services like breakfast, meals, ironing, daily cleaning, and so forth.

"NOT CONSIDERED A LODGING FACILITY"

When these points are evaluated together, it is understood that renting immovables daily, weekly, or monthly just to earn more income without being part of a commercial organization does not change the nature of the earnings as real estate capital income, is not conducted within a commercial organization, cannot be considered a lodging facility, and is not subject to accommodation tax. Thus, the general letter under dispute lacks legal compliance, and if implemented, may cause irreparable or difficult-to-compensate damages.

Therefore, the plaintiff's request to suspend enforcement was accepted, and the enforcement of the Revenue Administration's General Letter No. 7877 dated January 24, 2025, was suspended."