Tax treaties in Turkey, also known as double taxation avoidance agreements, are international agreements designed to prevent the same income from being taxed both in the country where it is earned and in the country where the taxpayer is resident. These agreements play a crucial role in encouraging foreign investment, facilitating capital movement, and supporting international trade.
1. How Tax Treaties Work in Turkey
As of 2025, Turkey has signed double taxation avoidance agreements with more than 80 countries. These treaties ensure fair and transparent taxation of both domestic and foreign income for individuals and companies.
Covered income types typically include:
- Salaries and wages
- Interest and dividend income
- Royalties and license fees
- Business profits
- Real estate income and capital gains
- Independent personal services (e.g., consultancy, legal services)
Thanks to these agreements, a Turkish resident individual or company does not need to pay tax on the same income in both Turkey and the treaty partner country. Instead, taxes paid abroad can be credited against the Turkish tax liability, or certain incomes may be exempt altogether.
2. Tax Residency and Source of Income
Tax treaties define which country has the right to tax a specific type of income, based on two fundamental principles:
- Residency principle – Income is taxed in the country where the taxpayer is resident.
- Source principle – Income is taxed in the country where it is generated.
If there is a risk of double taxation, tie-breaker rules included in the treaty determine the country of tax residency.
Double taxation avoidance agreements in Turkey also define the concept of a permanent establishment, which determines when and how the profits of a foreign enterprise may be taxed in Turkey.
3. Methods to Avoid Double Taxation in Turkey
Turkey applies two main methods to eliminate double taxation under its treaty network:
1. Tax Credit Method
Foreign taxes paid on income are deducted from the Turkish tax liability. However, the deduction cannot exceed the amount of tax payable in Turkey on that income.
2. Exemption Method
Certain types of foreign income may be entirely exempt from taxation in Turkey, such as some diplomatic earnings, foreign rental income, or qualified participation income.
Both methods enhance fiscal efficiency and competitiveness for domestic and foreign investors.
4. Dispute Resolution: Mutual Agreement Procedure (MAP)
Disputes regarding the implementation of tax treaties in Turkey can be resolved through the Mutual Agreement Procedure (MAP).
Turkey incorporated this procedure into its domestic law in 2021. The MAP process includes:
- The taxpayer applies to the tax authorities of either country.
- The Turkish Revenue Administration and the counterpart country begin negotiations.
- If a settlement is reached, the agreement is presented to the taxpayer for approval.
This process is especially helpful in resolving complex international tax issues such as transfer pricing disputes, minimizing double taxation risks.
5. Recent Developments in Turkey
- New negotiations launched with El Salvador, Uganda, and several Latin American countries.
- Updates reflecting the OECD’s Multilateral Instrument (MLI) are being incorporated into existing treaties.
- Turkey has strengthened its role in global tax transparency through CRS (Common Reporting Standard) and FATCA.
- Cross-border income from digital platforms, dividends, and interest is now subject to stricter control through automatic information exchange.
The Role of Double Taxation Avoidance Agreements in Turkey
Double taxation avoidance agreements in Turkey not only reduce tax burdens but also create a reliable and predictable tax environment for investors. These treaties:
- Clarify taxing rights between jurisdictions
- Reduce or eliminate withholding tax rates
- Promote international fiscal transparency and compliance
- Strengthen cross-border trade and economic relations
Turkey continues to expand and modernize its tax treaty network in line with international standards.
Expert Guidance on Tax Treaties in Turkey
At ÖzbekCPA, we provide expert guidance on tax treaties and double taxation avoidance in Turkey. Our services ensure compliance with international tax rules, minimize risks, and optimize cross-border taxation.
👉 If you would like professional assistance with tax treaty applications, MAP procedures, or double taxation planning, contact ÖzbekCPA today. Our experienced team is ready to provide tailored solutions for your international tax needs.
RELATED ARTICLES
https://ozbekcpa.com/turkish-taxation-system/
https://ozbekcpa.com/vat-withholding-refund-in-turkey-process-requirements-and-key-considerations/
USEFUL LINKS
https://www.oecd.org/tax/treaties
https://www.irs.gov/businesses/corporations/foreign-account-tax-compliance-act-fatca
