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Double Taxation Treaties in Turkey

Double Taxation Treaties in Turkey

Updated on Monday 18th April 2016

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Turkish companies with foreign shareholders interested in avoiding the double taxation of their profits may use the provisions of the treaties signed between Turkey and the home country. Turkey has a vast network of treaties on the avoidance of double taxation of foreign companies operating on the Turkish territory; investors interested in receiving more information on the main tax exemptions to which they are entitled to can request for assistance from our team of attorneys in Turkey.

Treaties on the avoidance of double taxation signed by Turkey 

Foreign businessmen who want to open a company in Turkey can benefit of various tax deductions if their company is a tax resident of one of the following states: Albania, Algeria, Australia, Azerbaijan, Austria, Bahrain, Bangladesh, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Canada, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Hungary, India, Indonesia, Iran, Israel, Italy, Japan, Jordan, Kazakhstan, Korea, Kuwait, Kyrgyzstan, Latvia, Lebanon, Lithuania, Luxembourg, Macedonia, Malaysia, Moldova, Mongolia, Montenegro, Morocco, New Zealand, Norway, Oman, the Netherlands, Norway, Pakistan, Poland, Portugal, Qatar, Romania, Russia, Saudi Arabia, Serbia and Montenegro, South Africa, South Korea, Singapore, Slovakia, Slovenia, Spain, Sudan, Syria, Sweden, Tajikistan, Thailand, Tunisia, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, Yemen, United States of America and Uzbekistan.
Other drafts of the double tax treaties with Turkey are waiting to be ratified; our Turkish lawyers can inform you on the agreements which will be signed in a near future by local authorities.


Provisions of the double tax treaties in Turkey 

The treaties signed for the avoidance of double taxation aim to regulate the income incurred by a company registered in a contracting state which has business operations in Turkey. As a general rule, all agreements signed on this basis refer to the taxation of income, where income can be represented by various types of income taxes applicable to corporations in accordance with the local legislation. It is important to know that the contracting states will try to apply the taxation on income to similar taxes available in both countries. 
According to these treaties, the business profits of a company are exempt from taxation in Turkey, as they will be taxed in the country of residency. The regulation is no longer available if the company is operating in Turkey through a permanent establishment, which refers to a fixed place of business in which the company is carrying out its activities.
 In order to beneficiate from these provisions, the applicant must prove that the taxes are paid in the country of origin. 
The withholding taxes for dividends, interests and royalties paid to non-residents are established at 15%, 10% (or a maximum of 15%) and 10% in Turkey. 
Many of the treaties that were signed with Turkey have included provisions related to the avoidance of tax frauds. For instance, the OECD model after which many of the treaties are elaborated is stating that every signatory member may request a list with the taxpayers that perform commercial activities in Turkey or in the foreign country.
The treaties on the avoidance of double taxation are signed in order to promote foreign investments on the Turkish market, by providing a competitive and attractive business environment to international companies.
 If you need further information on the double taxation treaties signed by Turkey, please contact our team of Turkish lawyers for assistance.