Turkey Plans Tax Holiday

Turkey has proposed one of the most aggressive tax incentives for new residents among major emerging markets: a 20-year exemption from Turkish tax on foreign-source income and capital gains. President Recep Tayyip Erdogan’s plan is not yet law, but it has already shifted the debate over Turkey’s role as a base for wealthy foreigners, entrepreneurs, investors and companies operating between Europe, the Middle East and Asia.

Erdogan proposes 20 years without tax on foreign income

Turkish President Recep Tayyip Erdogan announced a new investment and tax package on April 24, 2026, at the “Century of Türkiye Strong Hub for Investment” event at the Dolmabahce office in Istanbul. Turkey’s Directorate of Communications quoted him as saying the government would strengthen the investment environment and make the country a “global center of attraction.”

The central measure for individuals is a 20-year exemption from Turkish tax on foreign-source income and capital gains for people relocating to Turkey who have not been Turkish tax residents during the previous three years. IMI Daily reported that the proposal still requires parliamentary approval and that Erdogan did not specify a submission date for the legislative package when he made the announcement.

If approved as described, Turkey would effectively offer new tax residents a regime close to territorial taxation: Turkish-source income would remain taxable, while foreign dividends, interest, rental income, overseas business income and capital gains on foreign assets could be kept outside the Turkish tax base for two decades.

What changes for Turkish tax residents

Turkey currently taxes residents on worldwide income, while non-residents are taxed only on Turkish-source income. An individual is generally treated as tax resident if they stay in Turkey for more than six months in a calendar year or show an intention to settle there; personal income tax rates are progressive and reach 40% in 2026.

That is why Erdogan’s proposal matters for wealthy foreigners and international business owners. Under current rules, moving to Turkey can create a tax exposure: the right to live in the country may come with the obligation to report and tax global income in Turkey. The new regime is designed to remove that barrier for qualifying newcomers.

In this context, “foreign-source income” generally means income arising outside Turkey. It may include dividends from foreign companies, interest on overseas accounts, rental income from property abroad, proceeds from selling foreign securities, company shares or other assets. The exact scope, however, will depend on the final law rather than on the political announcement.

The law has not yet passed

The main caveat is that the measure remains a proposal. It must go through the parliamentary process, receive final wording, tax definitions, eligibility rules, transitional provisions and compliance procedures. Until then, investors cannot treat the 20-year holiday as an active regime.

This matters for anyone considering a change of tax residence, asset sales, family relocation, property purchases or restructuring of business ownership. A mistake in residence timing, income sourcing or continuing links with the previous country of residence could reduce or eliminate the value of the incentive.

The package goes beyond personal tax

The personal tax holiday is part of a broader investment package. Treasury and Finance Minister Mehmet Simsek said the new framework aims to increase goods and services exports, encourage asset repatriation and position the Istanbul Finance Center as a regional hub. Anadolu Agency reported that companies based in the Istanbul Finance Center would receive a full corporate income tax exemption on transit trade, while companies outside designated financial sectors would receive a 95% exemption on such income.

Under the same package, manufacturing exporters would pay a 9% corporate tax rate instead of the standard 25%, while the exemption for service exports would be expanded to 100%. Turkish officials identified software, video games, medical tourism, education, engineering, design and architecture as high-value service-export sectors.

That shows Ankara is selling the reform not only as a perk for wealthy foreigners, but as an attempt to reposition the country in global capital, services, trade and regional management flows.

Turkey takes aim at European regimes

If the 20-year exemption is enacted without a fixed annual charge, Turkey would gain a visible advantage over several European regimes for new residents. IMI Daily compared the proposal with Italy’s lump-sum foreign-income regime, which runs for up to 15 years, Greece’s non-dom regime of similar duration and Portugal’s tax incentive for scientific research and innovation, which lasts 10 years.

For mobile entrepreneurs, the duration matters as much as the rate. Twenty years is a horizon that can cover a career cycle, children’s education and long-term asset ownership. If enacted, the measure could influence not just temporary relocation, but also decisions on home purchases, family-office structures, management functions and company registration.

The link with citizenship by investment

Turkey already has a citizenship-by-investment program, with real estate among the best-known routes for foreigners. But citizenship and tax residence are different. A person may obtain a Turkish passport without becoming Turkish tax resident if they do not actually live in the country. Conversely, a foreigner without Turkish citizenship may become tax resident through long-term presence.

The proposed regime matters most for those who want not only a second passport or residence right, but also actual relocation. If foreign income is shielded from Turkish taxation for 20 years, Turkish property, schools, private healthcare, transport links and geography become part of a broader tax-and-mobility strategy.

For real estate, the measure may support demand in Istanbul, Izmir, Antalya, Bodrum and other locations with established international buyer bases. But the effect will not be automatic: foreign housing demand in Turkey already weakened in 2025–2026 because of price inflation, residence-permit changes, weaker rental yields and competition from other jurisdictions.

Investor risks remain high

The first risk is legal uncertainty. Until the bill is published, it is unclear whether the exemption will apply to all foreigners or only specific categories, how “foreign-source” income will be defined, whether minimum investment thresholds will apply, whether returning Turkish citizens will qualify and how anti-abuse rules will work.

The second risk is interaction with the taxpayer’s previous country of residence. Turkey may choose not to tax foreign income, but that does not automatically eliminate obligations in the country of citizenship, former residence or income source. U.S. citizens, for example, often retain tax obligations regardless of where they live. For European residents, the key tests include the center of vital interests, property, family, business ties and days of presence.

The third risk is the durability of a 20-year promise. A long period makes the regime attractive, but it also raises the importance of protection against future changes. Investors need to know whether rights will be secured through individual status, certificates, grandfathering provisions or only through ordinary legislation that a future parliament could amend.

What it means for Turkey

For Turkey, the proposal is a way to attract capital without directly raising interest rates or adding public debt. The country wants to strengthen its balance of payments, increase foreign-currency inflows, expand service exports and lift Istanbul’s role as a financial and management center.

But tax competition is not a substitute for institutional predictability. Wealthy residents assess not only tax rates, but also judicial independence, currency risk, banking compliance, capital mobility, schools, healthcare, safety, visa rules for family members and the jurisdiction’s reputation with banks in Europe, the U.S. and the Gulf.

As reported by experts at International Investment, Turkey’s proposal could become a strong signal to globally mobile capital, but it should not be treated as a functioning tax regime before parliamentary approval. The critical issue is not the headline “20 years” but the legal protection behind the promise: if the rules are clear, stable and compatible with international tax treaties, Turkey has a rare chance to turn capital migration into a long-term growth source; if the details remain vague, the measure risks becoming a real-estate marketing slogan rather than a serious tax-planning instrument.