Türkiye’s 2026 Omnibus Law: Targeted Changes to VAT Exemptions

Türkiye’s 2026 Omnibus Law: Targeted Changes to VAT Exemptions

Summary

• VAT exemptions narrowed for certain entities, reflecting a more restrictive approach to institutional tax relief.
• New VAT exemption introduced for transfers of immovable property to public authorities within expropriation procedures.
• Greater scrutiny expected for VAT exemption eligibility, increasing compliance and documentation requirements.

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Article

1. Legislative context

On 17 April 2026, Türkiye published Law No. 7577 in the Official Gazette (Resmî Gazete No. 33227), introducing amendments across multiple tax laws, including targeted changes to the VAT regime. [turkishtra…awyers.com]

While the Omnibus Law does not overhaul the Turkish VAT system, it makes focused adjustments to exemption rules, signalling a policy shift toward narrower application of VAT reliefs.

2. Narrowing of existing VAT exemptions

One of the key VAT‑related elements of Law No. 7577 is the restriction of certain VAT exemptions, particularly those previously applicable to foundations and educational institutions.

According to professional legal analysis:

• Some VAT exemptions benefiting foundations and education‑related entities have been limited or clarified, reducing the scope for broad exemption claims and aligning VAT treatment more closely with strict statutory interpretation. [turkishtra…awyers.com]

Although the law does not abolish these exemptions entirely, the changes are expected to:

• Increase audit sensitivity around exempt supplies
• Require more precise qualification of transactions
• Reduce the practical reach of exemption regimes that were historically applied generously

For taxpayers operating in education, non‑profit, or foundation‑related structures, this represents a shift toward greater VAT exposure.

3. New VAT exemption for expropriation‑related transfers

Balancing the restrictive measures, the Omnibus Law introduces a new VAT exemption aimed at facilitating public‑sector projects.

Specifically:

• Transfers of immovable property to public authorities within the scope of expropriation procedures are now expressly exempt from VAT. [turkishtra…awyers.com]

This amendment is designed to:

• Prevent VAT from becoming a cost in compulsory acquisition scenarios
• Simplify transactions arising from state‑driven infrastructure and urban development projects
• Reduce disputes related to VAT treatment of expropriation compensation

The exemption is transaction‑specific and does not apply to voluntary transfers outside formal expropriation procedures, making correct legal qualification essential.

4. Practical VAT implications

From a VAT compliance perspective, the Omnibus Law reinforces several trends:

• Exemptions are becoming more targeted
  Broad or entity‑based VAT exemptions are increasingly replaced by narrowly defined, transaction‑based reliefs.
• Documentation and classification matter
  Taxpayers must clearly evidence that transactions fall within the exact scope of a VAT exemption, particularly in real‑estate and public‑sector dealings.
• Higher compliance risk for exempt supplies
  Narrowed exemptions typically lead to increased scrutiny by tax authorities, especially where mixed taxable and exempt activities exist.

5. Conclusion

Law No. 7577 does not redefine Turkish VAT, but it refines it. By narrowing certain exemptions while introducing a precise new exemption for expropriation‑related transactions, Türkiye is continuing its gradual shift toward a more controlled and compliance‑driven VAT framework.

For businesses, foundations, and real‑estate stakeholders, the message is clear: VAT exemption positions should be reassessed, and reliance on historical practice may no longer be sufficient.

Sources

• Official Gazette of the Republic of Türkiye, 17 April 2026 – Law No. 7577 [turkishtra…awyers.com]
• Turkish Trade Lawyers – Legal Update on Law No. 7577 [turkishtra…awyers.com]

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