In a recent and highly important development in Turkey, the Council of State (Danıştay) has issued a joint decision regarding the taxation of Airbnb-style short-term rentals.
What was the issue?
The dispute was about how income from short-term rental properties (such as Airbnb) should be taxed in Turkey:
- Should it be treated as business income (subject to income tax + VAT + accommodation tax)?
- Or should it be treated as rental income from property (only subject to income tax)?
What did the tax authority do?
The Turkish Revenue Administration (GİB) previously issued an official guideline stating that:
- Short-term rentals under a tourism rental permit should be considered a commercial activity
- Therefore, they should be subject to:
- Income tax
- VAT (20%)
- And taxpayers should be registered as business owners
Based on this interpretation:
- Thousands of property owners were taxed retroactively
- Penalties and additional tax assessments were issued
What happened in court?
A taxpayer challenged this regulation, and the case went to the Council of State.
First decision (3rd Chamber)
The 3rd Chamber of the Council of State ruled that:
- Short-term rentals are NOT automatically a commercial business
- They are only considered a business if:
- They operate like a hotel, apart hotel, or pension
- They include services such as breakfast, cleaning, ironing, etc.
Based on this:
- The court suspended the implementation of the tax authority’s guideline
Appeal by the tax authority
The Revenue Administration appealed this decision.
Council of State Board (VDDK) decision
The higher administrative board agreed that:
- The case involves different legal responsibilities between chambers
- Therefore, the decision should be made jointly by the 3rd and 7th Chambers
- The previous ruling procedure was not legally appropriate
So the suspension decision was reviewed again jointly.
Final joint decision (key outcome)
The 3rd and 7th Chambers of the Council of State concluded:
- Simply renting out a property for short stays (daily, weekly, monthly)
does NOT automatically make it a commercial business - For it to be considered a commercial activity, there must be:
- A structured business organization (like a hotel or pension)
- Additional services (food, cleaning, hospitality services, etc.)
- If these do not exist:
- The income is considered rental income (property income)
- Not business income
- Therefore:
- The tax authority’s general guideline was suspended
What does this mean now?
- The tax authority may try to appeal again
- The legal process may continue
- The taxation of Airbnb-type rentals remains a sensitive and evolving issue in Turkey
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