Recent tax developments: presidential decree No. 11257 and law No. 7582

A significant package of tax measures has recently taken shape in Türkiye. Presidential Decree No. 11257, published in the Official Gazette on 30 April 2026, introduced changes to the foreign participation exemption and the service export income deduction. Separately, on 5 May 2026, a broader bill amending several laws was submitted to the Grand National Assembly. The bill has been enacted as Law No. 7582 and published in the Official Gazette. Taken together, the two developments reflect a continued policy orientation towards attracting foreign capital, expanding incentives for production, investment, and cross-border activity, and strengthening Türkiye’s positioning as a regional hub for investment and financial services.

At a glance – key measures

The following summaries reflect the Presidential Decree No. 11257, which was enacted on 30 April 2026, and Law No. 7582. This alert focuses on selected measures expected to be most relevant for cross-border investors, manufacturers, agricultural producers, exporters, multinational groups, private clients and Istanbul Financial Center participants, and does not cover every amendment introduced under Law No. 7582. Certain provisions of Law No. 7582 apply from specific effective dates, including 1 January 2026, 1 July 2026 and the 2027 tax year, depending on the relevant measure. A broader analysis follows in the respective sections.

• The presidential decree introduces two significant enhancements: First, the minimum shareholding threshold required to qualify for the foreign participation exemption is reduced from 50% to 20%, broadening the regime to cover a substantially wider range of cross-border structures, including joint ventures and even minority holdings, whilst the corporate income tax exemption rate is increased from 50% to 80%. Second, the service export income deduction (which has been available to corporations and individuals providing certain qualifying services from Türkiye to non-resident clients who benefit from such services abroad) is increased from 80% to 100%, while the domestic minimum corporate income tax impact should be separately considered for corporate taxpayers. Both measures are effective for tax periods commencing on or after 1 January 2026.
• Asset repatriation (Varlık Barışı): Under Law No. 7582, real persons and legal entities will be able to declare undeclared or unrecorded assets until 31 July 2027, subject to a tax rate of between 0% and 5% for declarations before 1 January 2027, rising to a maximum of 5.5% for declarations between 1 January 2027 and 31 July 2027, depending on the declaration date and commitment to hold the assets locally – if the deadline is extended by Presidential authority, the highest applicable rate may reach 6%. The shield from tax audit and assessment is intended to be available only to the extent the statutory conditions are satisfied, and it does not extend to anti-money laundering or other regulatory scrutiny.
• Tax exemption on foreign-sourced income and flat-rate tax on inherited assets for individuals relocating to Türkiye: In principle, residents of Türkiye are taxed on worldwide income. Under Law No. 7582, individuals who become resident in Türkiye without having had a domicile or tax liability therein during the preceding three calendar years may benefit from a full income tax exemption on their foreign-sourced income and gains for 20 years, with the provision applying to individuals deemed resident in Türkiye from 1 January 2026 onwards. For the qualifying individuals, inheritance tax on assets transferred by succession during the exemption period will apply at a flat rate of 1% (one per cent.). The regime is, in our view, one of the most significant measures introduced by Law No. 7582, with particular relevance for high-net-worth individuals, mobile entrepreneurs and internationally mobile investors, especially given the recent abolition of comparable non-domiciled regimes in certain other jurisdictions.
• Reduced corporate income tax rate for manufacturing and agricultural production income: Law No. 7582 does not retain the exporter-specific reduced corporate income tax rates contemplated in the bill as initially submitted. Instead, the Law introduces a 12.5% corporate income tax rate for income derived exclusively from manufacturing activities by companies holding an industrial registry certificate and actually engaged in manufacturing, as well as from agricultural production activities. This rate will apply to income generated in the 2027 tax year and subsequent taxation periods.
• Corporate income tax deductions for transit trade: Law No. 7582 introduces a 95% corporate income tax deduction for income derived from transit trade activities. For Istanbul Financial Center participants and companies operating in certain industrial zones designated based on foreign investment intensity, the deduction rate is 100%. Under the current regime, a 50% transit trade deduction was available only to IFC participants. Law No. 7582 significantly expands the scope of this allowance, while increasing the deduction rate to 100% for IFC participants and qualifying industrial zone companies, with effect from the 2026 fiscal year and for tax returns filed from 1 July 2026.
• Qualified service centres: Law No. 7582 introduces a new framework for capital companies serving related companies active in at least three different countries, provided that at least 80% of their annual revenue is derived from these affiliates. The qualifying activities are broad, covering functions such as financial advisory, strategic management, treasury management, funding, budgeting, reporting, compliance, audit, digital transformation, legal advisory, investment and data analytics, branding, HR, training, procurement, technical support, R&D, and related coordination and management services. Subject to the qualifying income being transferred to Türkiye by the annual corporate income tax return filing deadline, qualifying income will benefit from a 95% corporate income tax deduction, or 100% for centres operating within the Istanbul Financial Center or in certain industrial zones designated based on foreign investment intensity, for 20 accounting periods.
• Income tax exemption on the salaries of qualified service personnel: Salaries payable to the qualified personnel employed in the qualified service centres will be exempt from income tax up to three times the gross minimum wage or five times the gross minimum wage for centres operating within the Istanbul Financial Center or in certain industrial zones designated based on foreign investment intensity, with such salaries also exempt from the stamp tax on payroll.

1. Enacted measure – presidential decree no. 11257

Presidential Decree No. 11257, published in Official Gazette No. 33239 on 30 April 2026, amended the foreign participation exemption and the service export deduction using the presidential authority previously granted by statute. The Decree entered into force immediately, with retroactive effect.

1.1. Foreign participation exemption

Law No. 7491, published on 28 December 2023, introduced two related exemptions: (A) under the Income Tax Law, individuals holding at least 50% of the paid-up capital of a foreign joint stock company or limited liability company could exempt half of the dividends received from that company, provided such dividends were brought to Türkiye by the annual income tax return filing deadline, and (B) under the Corporate Income Tax Law, corporations holding at least 50% of the paid-up capital of the same type of foreign company could exempt 50% of such income, provided the income was transferred to Türkiye by the corporate income tax return filing deadline. The Decree reduces the minimum shareholding threshold required to qualify for both exemptions (for individuals and corporations) from 50% to 20%, and increases the corporate income tax exemption rate from 50% to 80%, both with retroactive effect for income and gains arising in tax periods commencing on or after 1 January 2026, while the 50% income tax exemption rate for individual shareholders remains unchanged. The new 20% threshold brings a substantially wider range of cross-border investment structures within the exemption, including companies holding significant minority stakes in foreign subsidiaries, which is common for joint ventures, co-investment platforms and private equity structures. The increase in the corporate exemption rate from 50% to 80% is also significant. When combined with the existing conditions, the effective tax on qualifying foreign subsidiary income is meaningfully reduced. However, the Pillar Two dimension should be kept in mind for net benefit and incremental tax efficiency: for multinational groups within the scope of the global minimum tax rules, the benefit of a higher domestic exemption may be partially or fully offset by top-up tax charges in other jurisdictions, for example, due to being regarded as undertaxed profits.

1.2. Service export income deduction

Under the Turkish Corporate Income Tax Law, companies providing architecture, engineering, design, software, medical reporting, bookkeeping, call centre, data storage, education and healthcare services from Türkiye to non-resident clients may deduct a portion of the income derived from such services from their taxable income, provided that the services are rendered from Türkiye and utilised abroad, and that the full amount of the relevant income is transferred to Türkiye by the annual corporate income tax return filing deadline. An equivalent deduction is available under the Income Tax Law for individual taxpayers carrying out the same activities, and the President is authorised to determine the applicable deduction rate under both provisions. Presidential Decree No. 11257 increases the service export deduction rate from 80% to 100% under both the Corporate Income Tax Law and the Income Tax Law. This change applies to income and gains arising in tax periods commencing on or after 1 January 2026. For ordinary corporate income tax and income tax purposes, this may fully eliminate the taxable base on qualifying service export income, subject to the statutory conditions. For corporate taxpayers, however, the domestic minimum corporate tax impact should be assessed separately. Note that Law No. 7582’s domestic minimum tax relief is aimed at transit trade income, qualified service centre income and Istanbul Financial Center financial service export income, and it does not appear to extend to the service export income deduction regulated under the Presidential Decree. The requirement to transfer the full amount of the qualifying income to Türkiye by the applicable annual tax return filing deadline remains the central compliance condition and should not be treated as an administrative formality. Further, companies offering services that may fall on the boundary of the qualifying categories should seek advice on whether their specific activities qualify before relying on the deduction. The interaction with the new qualified service centre framework introduced by Law No. 7582, discussed in Section II below, is also relevant. The two regimes differ in structure, scope and conditions, and eligible companies should identify which framework is most advantageous in their particular circumstances.

2. Law No. 7582 — tax incentive package

The measures described in this Section II reflect Law No. 7582. Certain provisions apply from specific effective dates, including 1 January 2026, 1 July 2026 and the 2027 tax year, depending on the relevant measure. The Law is aimed at enabling Türkiye to adapt to current economic developments, achieve the targets of the economic programme, enhance international competitiveness, support growth and improve the trade balance, as well as increasing foreign currency inflows and expanding employment opportunities. It was first announced by the President of Türkiye in late April 2026.

2.1. Foreign and local asset repatriation programme (“Varlık Barışı”)

Real persons and legal entities will be able to declare assets held abroad, including cash, gold, foreign currency, securities and other capital market instruments, to banks or brokerage institutions in Türkiye until 31 July 2027. The regime will also apply to the assets in Türkiye provided they are not recorded in the statutory books of corporate taxpayers and individual taxpayers. Declared foreign assets must be transferred to accounts at Turkish banks or brokerage institutions within two months of the declaration date, while the unrecorded assets in Türkiye must be deposited immediately. Physically imported assets must be evidenced through customs declaration documents. Provided the relevant conditions are met, no tax audit or assessment will be conducted solely on the basis of declared assets. Where an audit is initiated for other reasons and the assessed tax base difference is attributable to declared assets, no assessment will be made to the extent of the declared amount; only any excess will be subject to assessment.

The applicable tax rate varies depending on the declaration date and the commitment to hold declared assets in time deposit accounts, government domestic debt instruments , lease certificates or venture capital investment funds. The default rate is 5%, which may be reduced to 0% for a five-year holding commitment, 1% for four years, 2% for three years, 3% for two years, and 4% for one year. For declarations made between 1 January 2027 and 31 July 2027, all rates increase by 0.5 percentage points, and if the period is extended by the President beyond 31 July 2027, the applicable rates will be increased by a total of one percentage point, resulting in a maximum rate of 6%. The undertakings to be submitted for these holding commitments will be exempt from stamp tax.

For taxpayers subject to bookkeeping obligations under the Turkish Tax Procedural Law (No. 213), declared assets must be recorded in the statutory books as of the declaration date. The taxpayers keeping books on a balance-sheet basis must record such assets in a special fund account under equity; this fund account cannot be withdrawn from the business for two years, except by way of capitalisation, and cannot be used for any purpose other than capital increase during that period – in the event of liquidation, the fund will not be subject to taxation. Once the two-year holding period has elapsed, declared assets may be withdrawn from the business without being taken into account in the calculation of taxable profits.

The protection available under the repatriation regime should be understood as a limited tax shield applicable to declared assets only to the extent the statutory conditions are satisfied. It should not be read as a general immunity from scrutiny under tax, anti-money laundering or other regulatory frameworks. Where the statutory conditions are not satisfied (e.g., declared foreign assets are not transferred to accounts at Turkish banks or brokerage institutions or physically brought into Türkiye within two months of the declaration date, the taxes assessed on declared amounts are not paid on time, the holding period commitments are not honoured), the taxpayer will be excluded from benefiting from the regime. In addition, any taxes that were not assessed in a timely manner as a result of the declaration will be collected together with late-payment interest, without incurring a tax loss penalty. Notifications made after the commencement of a tax audit or a referral to a tax inspection commission will not provide protection in respect of assessments made as a result of such audit or commission process. In addition, no corrections may be made to declarations after the notification period expires.

5% upfront rate is higher than the rates applied under certain previous asset repatriation regimes; however, depending on the holder’s willingness to commit assets to specified domestic instruments for a defined period, the effective rate may decrease significantly (or to zero, for a five-year commitment). This structure is designed to encourage not only the repatriation of assets but their longer-term retention within the Turkish financial system. The FATF dimension is particularly relevant in this context. From a legal and compliance standpoint, clients (particularly those with international banking relationships, reporting obligations under automatic exchange of information frameworks, or exposure to MASAK requirements) should take advice on their specific position before participating in the regime. The interaction of declared assets with Common Reporting Standard (CRS) disclosures, treaty exchange obligations and beneficial ownership registers will require careful analysis. A well-designed asset repatriation regime may support capital inflows and encourage formalisation; however, the scope of the protection and the applicable safeguards must be clearly mapped to each client’s individual profile.

2.2. Special tax regime for individuals relocating to Türkiye

Under Article 3 of the Turkish Income Tax Law (No. 193), Türkiye applies a worldwide basis of taxation to its residents: individuals deemed to be resident of Türkiye are subject to income tax on all income and gains derived both within and outside Türkiye. Article 4 of the same Law sets out the circumstances in which an individual is treated as resident in Türkiye for these purposes, including where an individual has a permanent home in Türkiye or spends a continuous period of more than six months in Türkiye in a calendar year. Based on experience with other jurisdictions, we note that a comparative review of international practice reveals a significant number of jurisdictions offering tax advantages to qualifying foreign individuals as a tool for attracting inbound investment and “high-value residency.” Under these regimes, qualifying individuals are taxed only on income and gains derived within the host jurisdiction; income and gains of foreign origin are exempt from domestic taxation. The rationale underlying these preferential regimes is typically to incentivise the repatriation of foreign currency, attract internationally mobile capital and talent, and stimulate broader economic activity. Drawing on international precedents, Law No. 7582 inserts a new provision into the Turkish Income Tax Law: the provision establishes a 20-year income tax exemption for individuals who are deemed to be resident in Türkiye, provided that they did not have a domicile or tax liability in Türkiye during the three calendar years immediately preceding the year in which they are first deemed to have become resident. The exemption applies to all income and gains derived outside Türkiye, with the provision applying to individuals deemed resident in Türkiye from 1 January 2026 onwards. The following additional features and limitations apply under the Law:

Favourably, prior income tax liability in Türkiye arising solely from Türkiye-sourced income on real property, securities or capital gains (where incurred before the qualifying individual became resident) will not constitute a disqualifying circumstance for the purposes of the three-year lookback condition. This is a welcome clarification for individuals who may have held passive Türkiye-sourced investments prior to relocating.

Income and gains falling within the exemption will not be included in the individual’s annual income tax return; even where a return is otherwise required by reason of other income, exempt income will not be included in the declaration.

Costs and expenses attributable to exempt foreign-source income and gains will not be deducted in computing the individual’s taxable Türkiye-sourced income, and foreign taxes paid on exempt income may not be credited against Turkish income tax.

If the conditions for the exemption are subsequently found not to have been satisfied, any income tax that was not collected as a result of the exemption will be treated as unpaid, with the consequent tax loss penalties and late-payment interest or surcharge implications under the general principles. In addition, Law No. 7582 amends Article 16 of the Turkish Inheritance and Gift Tax Law No. 7338: for individuals benefiting from the aforementioned income tax exemption under the new provision, inheritance tax on assets transferred by succession during the exemption period will be assessed at a flat rate of 1%, which is a significant departure from the progressive rates (currently reaching up to 10% for sizeable assets) ordinarily applicable under the Law No. 7338. This is, in our view, one of the most significant measures introduced by Law No. 7582. The regime goes beyond a standard tax incentive and may function as a broader residence and investment attraction tool, particularly relevant for high-net-worth individuals, entrepreneurs and investors considering relocation to Türkiye. The reduced inheritance tax rate of 1% during the exemption period adds a meaningful private client dimension. For individuals with significant cross-border estate planning considerations, the long-term (20-year) nature of the exemption makes legal certainty and the protection of acquired rights especially critical. Any future amendment to the regime could significantly affect individuals who have structured their affairs in reliance on it. In other words, whether acquired rights can be adequately protected will be a key point of due diligence for prospective beneficiaries. In practice, secondary legislation and administrative guidance from the Ministry of Treasury and Finance will be essential in addressing practical questions, such as the distinction between foreign-sourced and Türkiye-sourced income.

2.3. Reduced corporate income tax rate for manufacturing and agricultural production income

Law No. 7582 introduces a reduced corporate income tax rate for income derived exclusively from manufacturing activities by companies holding an industrial registry certificate and actually engaged in manufacturing, as well as income derived exclusively from agricultural production activities. The reduced rate will apply as 12.5% to such qualifying income.

This is a material change from the bill as initially submitted, which contemplated differentiated reduced rates for manufacturer-exporters and other exporters. The enacted text no longer frames the incentive as an export-specific rate reduction; instead, the benefit is linked to qualifying manufacturing and agricultural production income.

The reduced rate will apply to income generated in the 2027 tax year and subsequent taxation periods. For taxpayers with a special accounting period, it will apply to income generated in special accounting periods starting in the 2027 calendar year and thereafter. In addition, income benefiting from this reduced rate will not also benefit from the separate reduced-rate rule applicable under Article 32/7 of the Corporate Income Tax Law.

The shift from an exporter-focused model to a production-focused model is important from a policy and practical perspective. It broadens the analysis beyond export transactions and requires taxpayers to identify whether the relevant income is derived exclusively from qualifying manufacturing or agricultural production activities. In practice, income allocation, documentation of qualifying activities and the interaction with other reduced-rate provisions will be key.

For large multinational groups within the scope of the Pillar Two global minimum tax rules, the practical value of the reduced rate should still be assessed carefully. Since Pillar Two is designed to ensure a minimum effective tax rate of 15% for in-scope multinational groups, a 12.5% local corporate income tax rate may not always translate into a permanent group-level tax saving. In certain cases, tax not collected in Türkiye may instead be collected as top-up tax in another jurisdiction within the same group structure. Detailed modelling remains advisable before structural or pricing decisions are made based on the expected tax saving.

2.4. Corporate income tax deductions for transit trade

Law No. 7582 introduces a 95% corporate income tax deduction for income derived from the purchase of goods abroad without bringing them into Türkiye, or from intermediary activities relating to the purchase and sale of goods abroad, provided the relevant income is transferred to Türkiye by the annual CIT return filing deadline and neither the buyer nor the seller is located in Türkiye. For Istanbul Financial Center (“IFC”) participants and companies operating in certain industrial zones designated based on foreign investment intensity, the deduction rate is 100%. Under the current regime, a 50% transit trade deduction was available only to IFC participants. Law No. 7582 significantly expands the scope of this allowance to all companies, while increasing the deduction rate to 100% for IFC participants and qualifying industrial zone companies. These changes are effective for the 2026 fiscal year, for tax returns filed from 1 July 2026.

2.5. Qualified service centres

Law No. 7582 introduces a new framework for “qualified service centres” (nitelikli hizmet merkezi) under the Turkish Foreign Direct Investment Law (No. 4875). A qualified service centre is defined as a capital company that serves affiliated companies or a group of companies active in at least three different countries, derives at least 80% of its annual revenues from foreign affiliated companies or groups, and is established to carry out specified qualifying activities. Qualifying activities include financial advisory, strategic management advisory, risk management, treasury management, funding and borrowing, investment and capital structure planning, budgeting, financial reporting and analysis, international accounting and compliance, audit, digital transformation and technology advisory, investment and data analytics, legal advisory, brand management, HR and training services, and sales, after-sales support, technical support, R&D, procurement and laboratory coordination. Legal advisory services relating to domestic activities or Turkish law may only be procured from lawyers or attorney partnerships authorised to provide services under the Attorneyship Law.

Income derived exclusively from qualifying foreign-sourced activities will benefit from a 95% corporate income tax deduction or 100% for qualified service centres operating within the Istanbul Financial Center or in certain industrial zones designated based on foreign investment intensity, available for 20 accounting periods from the period in which the centre commences operations. The deduction is conditional on the relevant income being transferred to Türkiye by the deadline for filing the annual corporate income tax return for the relevant period. These changes are effective for the 2026 fiscal year, for tax returns filed from 1 July 2026. Also, salaries paid to qualified personnel employed in qualified service centres will be exempt from income tax up to three times the gross minimum wage or five times for centres operating within the Istanbul Financial Center or in certain industrial zones designated based on foreign investment intensity, with such amounts also exempt from the stamp tax on payroll. Under Law No. 7582, personnel of qualified service centres who benefit from the existing Istanbul Financial Center employee income tax exemption will not also benefit from the new qualified service personnel exemption under the tax law.

Although this should not be treated as a reinstatement of the former Turkish regional management centre regime, which was structured around liaison offices and therefore remained constrained by the prohibition on conducting commercial activities, it is functionally aimed at a similar multinational group use case: locating in Türkiye the regional management, treasury, shared service, centre-of-excellence and coordination functions serving foreign group companies. In that sense, the qualified service centre regime may provide a more commercially workable route for Türkiye to realise the regional headquarters potential that the earlier regional management centre framework had sought, but only partially managed, to capture. The income transfer condition will be of particular practical importance for multinational groups operating with centralised treasury, invoicing or cash-pooling arrangements, where intercompany payment flows may not naturally align with Turkish corporate tax filing deadlines. Compliance with this condition will require advance planning at both the operating company and group treasury levels. Lastly, when combined with the general minimum wage income tax exemption available to all employees, the amount of tax-exempt income for qualified service personnel would, according to the legislative rationale, amount to four times the gross minimum wage or six times for personnel employed by qualified service centres operating within the Istanbul Financial Center or qualifying industrial zones.

2.6. Treatment of certain deductions for domestic minimum tax purposes

Deductions available for transit trade income, qualified service centre income and financial service exports within the Istanbul Financial Center will also be deductible when calculating the domestic minimum corporate income tax base. These changes are effective for the 2026 tax year, for corporate tax returns filed from 1 July 2026. This means that the relevant deductions should preserve their practical value for domestic minimum corporate income tax purposes, although the separate Pillar Two analysis should still be conducted for in-scope multinational groups.

2.7. Expansion and extension of tax incentives for Istanbul Financial Center participants

The income tax incentives currently available for employees with overseas experience employed by financial institutions operating within the Istanbul Financial Center (exempting up to 80% of monthly salary, subject to the condition that the personnel had not worked in Türkiye during the three years prior to joining the IFC) are extended to all IFC participants, not only financial institutions holding a participant certificate. Further, the corporate income tax incentive applicable to financial institutions operating within the Istanbul Financial Center (currently providing a 100% deduction on financial service export income through 2031) is extended until 2047, and the exemption period for financial activity fees is extended from 5 years to 20 years.

Looking ahead

Law No. 7582 has been published in the Official Gazette. Certain provisions entered into force on the publication date, while others apply from specific effective dates, including 1 January 2026, 1 July 2026 and the 2027 tax year, depending on the relevant measure. We will continue to monitor any secondary legislation and administrative guidance issued by the relevant authorities, particularly regarding implementation procedures, qualifying conditions, documentation requirements, and the interaction of the new regimes with domestic minimum tax and Pillar Two rules. We are advising clients across all areas covered by this alert and would be glad to assist you in assessing the implications for your specific circumstances, whether in relation to structuring decisions, compliance with the qualifying conditions, interactions with international tax frameworks, or private client planning considerations.

This alert is prepared for general information purposes and does not constitute legal advice on any specific matter. Paksoy provides tax, fiscal services and private client advice through its specialised practice groups.