Important Council of State Decision: Short-Term Rentals Do Not Necessarily Constitute a Commercial Activity

The short-term rental of residential properties for tourism purposes has become increasingly widespread in Türkiye in recent years. In response to this trend, the legislative authority introduced regulations governing short-term rentals and established a legal framework for such activities.

Subsequently, the tax treatment of such activities became a subject of debate. In this context, the Revenue Administration (“RA”) issued its General Letter No. 7877 dated 24 January 2025 (“General Letter”).

In the General Letter, the RA took the position that the short-term rental of residential properties for tourism purposes constitutes a “commercial activity” on the grounds that it involves an intention to carry on the activity continuously and the existence of an organizational structure. Accordingly, the RA stated that income derived from such activities should be taxed under the provisions applicable to “commercial income”.

Following the issuance of the General Letter, the RA retrospectively registered individuals who had obtained a “Certificate of Permit for Residential Properties Rented for Tourism Purposes” and rented out their properties as taxpayers deriving business income and assessed income tax and VAT, together with tax loss penalties on that basis.

A taxpayer against whom such penalized tax assessments were made subsequently filed an action before the Council of State seeking a stay of execution of the General Letter. By its decision dated 27 October 2025 (File No. 2025/2792 E.), the 3rd Chamber of the Council of State ordered the stay of execution of the relevant provisions of the General Letter. According to the Court:

• For a rental activity to be regarded as commercial in nature, the rental must be carried out within the framework of a commercial organization and must also include certain ancillary services, such as catering and cleaning; and
• Since the income derived by individuals from short-term rentals of residential properties carried out pursuant to a permit certificate constitutes income from immovable property (real estate capital income), such income should not be subject to income tax and VAT under the rules applicable to business income.

The RA appealed this decision.

Upon the appeal, the 3rd Chamber of the Council of State, by its decision dated 8 April 2026, granted the request for a stay of execution, holding that the General Letter lacked legal basis and that its implementation could give rise to damages that would be difficult or impossible to remedy. The Court’s reasoning was as follows:

Income derived from the rental of residential properties constitutes income from immovable property. The applicable legislation contains no specific provision regarding the taxation of tourism-oriented rentals for periods of 100 days or less, the establishment of tax liability in relation thereto or the characterization of such activities.

For the activity of renting residential properties for tourism purposes to be regarded as commercial in nature; and for the income derived therefrom to be treated as business income; and for tax liability to be established accordingly, the rental activity must be carried out within the framework of a commercial organization, such as a hotel, apart-hotel or pension business and must include certain ancillary services such as breakfast, meals, ironing and daily cleaning.

Accordingly, the fact that immovable properties are rented on a daily, weekly or monthly basis solely for the purpose of generating higher income, without being carried out within the framework of a commercial organization, does not alter the character of the income derived therefrom as income from immovable property. Since the activity is not conducted within the framework of a commercial organization, it is not subject to accommodation tax.

While discussions on this issue continue, it is expected that the RA will also appeal this latest decision in the coming period.

(For further details, please see our client alert on “Law No. 7464 on the Rental of Residential Properties for Tourism Purposes and Amendments to Certain Laws” here, and our client alert on the “Regulation on the Rental of Residential Propertiesfor Tourism Purposes” here.)