In today’s globalized business environment, cross-border transactions and foreign investments are increasingly common. However, such activities can lead to the same income being taxed in both the source and residence countries. To prevent this, countries enter into Double Taxation Avoidance Agreements (DTAAs), which are designed to eliminate or reduce the burden of double taxation.
Turkey has signed numerous DTAAs to promote international investment and trade. In this article, we explain how Turkish residents—both individuals and companies—can benefit from tax treaties, what conditions must be met, and what to be careful about during the application process.
1. What Is Double Taxation?
Double taxation occurs when the same income is subject to tax in two different countries. For example, a Turkish company receiving interest income from Germany might be taxed on that income in both countries unless a tax treaty applies.
DTAAs specify which country has the right to tax certain types of income, and at what rates, thereby reducing or eliminating double taxation.
2. Turkey’s Tax Treaty Network
Turkey currently has over 80 effective DTAAs with countries across Europe, Asia, the Middle East, and the Americas. These treaties often provide reduced withholding tax rates on:
- Dividends,
- Interest,
- Royalties,
and sometimes even full exemptions depending on the nature of the income and the treaty provisions.
In many cases, business profits are only taxed in the residence country unless a permanent establishment exists in the source country.
3. How to Claim Tax Treaty Benefits in Turkey
If you are a Turkish taxpayer making payments to a non-resident, or a non-resident receiving income from Turkey, certain formalities must be completed before applying the reduced tax rates under a treaty.
Key Documents Required:
- Certificate of Residence from the tax authority of the recipient’s country, often apostilled or notarized.
- Form and petition to the Turkish tax office, typically referred to as Article 30 Form for non-resident payments.
- Supporting contracts and documents showing the nature of the income (e.g., loan agreements, license contracts, etc.).
Note: Failure to submit complete and timely documentation may result in denial of treaty benefits.
4. Beneficial Ownership & Anti-Treaty Abuse Rules
An essential condition for applying treaty benefits is proving beneficial ownership. This means the income recipient must have actual control and economic rights over the income.
OECD and Turkish regulations do not allow intermediary or pass-through entities (e.g., shell companies in tax havens) to claim treaty benefits. Turkey has strengthened its anti-treaty shopping rules through Article 29/A of the Corporate Tax Law, in line with global standards like BEPS and the Principal Purpose Test (PPT).
5. Common Withholding Rates Under Key Treaties
| Country | Dividend WHT | Interest WHT | Royalty WHT |
| Germany | 5% / 15% | 0% / 10% | 10% |
| Netherlands | 5% / 10% | 0% / 10% | 10% |
| USA | 15% | 10% | 10% |
| UAE | 0% | 0% | 0% |
These rates are applicable only if proper documentation is submitted and the recipient is the beneficial owner of the income.
6. Practical Considerations
- Treaty benefits are not applied automatically. A formal application is required.
- Some countries apply reciprocity, meaning the treaty benefit depends on mutual treatment.
- A new certificate of residence is required each year for recurring payments.
- Additional scrutiny may apply in transfer pricing or when dealing with related parties.
Double Taxation Treaties offer valuable tax relief for cross-border transactions. However, accessing these benefits requires strict compliance with documentation, deadlines, and substance requirements. It is not enough to rely solely on the existence of a treaty; the taxpayer must prove eligibility.
Working with a professional advisor ensures that the correct procedures are followed and reduces the risk of rejection or future tax penalties.
Contact Us for Expert Guidance:
At Özbek CPA, we assist clients in navigating international tax treaty applications and ensure they receive all eligible benefits with full compliance.
