With globalization, it has become increasingly common for individuals and businesses to earn income in more than one country. This reality presents both the risk of double taxation and opportunities for strategic tax planning. International tax planning aims to legally establish the most efficient tax structure within the boundaries of different jurisdictions.
1. What is International Tax Planning?
International tax planning refers to the strategic steps taken by businesses and individuals operating in multiple countries to:
- Avoid double taxation
- Legally reduce tax burdens
- Ensure compliance with tax laws
- Manage tax-related risks
Key instruments used in this process include:
- Double Taxation Avoidance Agreements (DTAAs)
- OECD’s BEPS Project & Multilateral Instrument (MLI)
- Global Minimum Tax (Pillar Two)
- Transfer pricing regulations
- Utilization of tax incentives
2. How Is It Practiced in Turkey?
Turkey, as an active member of the OECD and a party to numerous tax treaties, offers a well-developed framework for international tax planning.
Highlights of Turkey’s Approach:
- Over 87 DTAAs signed with other countries
- Adoption of OECD BEPS standards
- Mandatory transfer pricing documentation (Master file, local file, country-by-country reporting)
- Tax incentives through Free Zones, Technoparks, and R&D centers
- MAP (Mutual Agreement Procedure) is available to resolve tax disputes internationally
3. Objectives of International Tax Planning
1. Avoidance of double taxation
Correct application of treaties prevents the same income from being taxed in two jurisdictions.
2. Efficient withholding tax management
Treaty planning can reduce withholding tax rates on dividends, interest, and royalties.
3. Compliance with transfer pricing
Correct pricing of intra-group transactions avoids penalties and enables efficient planning.
4. Maximizing incentives
Tax planning enables businesses to optimize operations based on the availability of legal incentives.
4. Who Needs International Tax Planning?
This strategy is essential for:
- Multinational enterprises
- Foreign companies with branches in Turkey
- Turkish residents earning foreign-sourced income
- Holding structures
- Digital platforms with cross-border income
5. Ethical and Legal Boundaries
International tax planning must not be confused with tax evasion. It involves lawful, transparent, and sustainable structuring. Turkey emphasizes tax compliance and anti-abuse measures. Tools such as the Principal Purpose Test (PPT) and Limitation on Benefits (LOB) are adopted in line with OECD recommendations.
International tax planning is a strategic, lawful, and competitive tool in the global economy. Turkey’s tax regulations and treaty network provide efficient opportunities for both foreign and domestic investors. With proper structuring and expert advice, businesses can legally minimize tax costs and manage risks effectively.
OzbekCPA provides professional consultancy in international tax planning processes, both locally and globally, offering the most suitable strategic solutions for your company.
For detailed information and consultancy on international tax planning and double taxation, feel free to contact us.
