TÜRKİYE DE ÇİFTE VERGİLENDİRMEYİ ÖNLEME ANLAŞMALARI

DOUBLE TAXATION PREVENTION AGREEMENTS IN TURKEY

What is Double Taxation?

Double taxation is the situation where income subject to tax is taxed in more than one country. The same income is taxed both in the country where it was earned and in the country where the earner resides. The aim of double taxation prevention agreements is to eliminate this problem between countries.

Many Turkish citizens live and work in different countries by obtaining residence permits. If these citizens earn income in both the country they reside in and in Turkey, they need to benefit from the provisions of double taxation prevention agreements to avoid paying double taxes. Individuals who establish companies and engage in commercial activities abroad while living in Turkey are also included in this group. Turkey has established this agreement with many countries such as the United States, Germany, Estonia, the United Kingdom, and the Netherlands.

What are the Income Elements in Double Taxation Prevention Agreements?

The income elements subject to double taxation prevention agreements are as follows:

• Commercial gains,
• Dividend incomes,
• Incomes obtained from immovable properties,
• Incomes obtained through international transportation,
• Interest incomes,
• Wage incomes,
• Income from intangible assets,
• Earnings obtained through freelance activities,
• Capital gains,
• Income of artists and sportspeople,
• Income of board members within a company,
• Private sector employees' retirement pensions,
• Public sector employees' wage incomes and retirement pensions,
• Incomes obtained by students and teachers,
• Other incomes.

Double Taxation Prevention Agreements in Turkey

Turkey made the double taxation prevention agreement with Austria for the first time on November 3, 1970. This agreement is still in effect and can be viewed on the official website of the Revenue Administration. So far, Turkey has established double taxation agreements with 89 countries. Although these agreements generally cover income and wealth, some agreements include provisions regarding tax evasion and information exchange.

Double taxation prevention agreements are divided into two models: the OECD model and the UN model. The OECD model generally accepts that the taxation authority belongs to the country where the taxpayer resides. On the other hand, the UN model emphasizes the taxation authority of the source country.

Double taxation prevention agreements made with developed countries in Turkey are arranged according to the United Nations model. However, agreements made with developing countries are arranged according to the OECD model. Some countries that have double taxation prevention agreements with Turkey are as follows:

1. Double Taxation Prevention Agreement with the United States

This agreement with the United States is applicable to individuals who are residents of one or both countries. The taxes that this agreement applies to in Turkey are income tax, corporate tax, and the fund share collected from them. In the United States, it applies to federal income taxes and special taxes related to private foundations. To review the details of this agreement, click here.

2. Double Taxation Prevention Agreement with Germany

The agreement made with Germany is applicable to individuals who are residents in Turkey, Germany, or both countries. The taxes that this agreement applies to in Turkey are income tax and corporate tax. In Germany, it applies to income tax, corporate tax, trade tax, and additional taxes collected from them. To review the details of this agreement, click here.

3. Double Taxation Prevention Agreement with Estonia

The agreement made with Estonia is applicable to the taxes collected on income by the contracting state or the local administrations. All taxes collected on total income or income elements, including gains obtained from the transfer of movable and immovable property, are considered income taxes. The taxes subject to this agreement in Turkey are income tax, corporate tax, and the fund share collected from them. In Estonia, income tax and local income tax are subject to the agreement. To review the details of this agreement, click here.

4. Double Taxation Prevention Agreement with the United Kingdom

The agreement made with the United Kingdom applies to the taxes collected on income and capital gains of each party. The taxes subject to this agreement in Turkey are income tax and corporate tax. In the United Kingdom, it applies to income tax, corporate tax, and capital gains tax. To review the details of this agreement, click here.

5. Double Taxation Prevention Agreement with the Netherlands

Turkey made this agreement with the Netherlands in 1989. Accordingly, this agreement covers income and corporate tax in Turkey and earnings from the Defense Industry Support Fund. In the Netherlands, it covers income tax, corporate tax, wage tax, and dividend tax. To review the details of this agreement, click here.

Conclusion:

In the historical process, the main determinant of international relations has always been the issue of distribution. This subject has resulted in the fact that the States are in interaction with each other by fighting each other in a certain period and by making agreements after a certain period. These interaction processes have been instrumental in the emergence of international law, especially in the Second World War. In the post-World War II period, international relations were shaped within the framework of the phenomenon of Globalization and international agreements formed the basis of the developing relations in this sense. The keystone of the distribution issue for the states is the tax, which is the source of the budget. The claim of tax to be collected on the income of direct and/or indirect investments made by individuals and institutions outside their country of residence has made the implementation of double taxation prevention agreements inevitable. The control of the correct implementation of these agreements has been established by the mechanism of mutual agreement procedure applications. This mechanism, which is the guarantee of Double Taxation Prevention Agreements, means the main application authority for taxpayers. Although what the international taxpayers will do about double taxation has been determined in the aforementioned agreements, since the State of the Republic of Turkey has always adopted the concept of a sovereign state, the mechanism in question has been tried to be expressed within the framework of the domestic legal order primarily by means of the guide published by the Ministry of Treasury and Finance. With the Law No. 7338 on Tax Procedure Law and Amending Certain Laws published in the Official Gazette dated October 26, 2021 and numbered 31640, legal regulations regarding the mutual agreement procedure included in the double taxation agreements were introduced. With these regulations, the application authority, duration, results, alternative ways, statute of limitations, effect on litigation and reconciliation of the applications to be made to the mutual agreement procedure are expressed in the tax legislation, and the controversial issues that need explanation regarding the mechanism have been answered in the domestic legal order. As a matter of fact, the most basic principle of making investments attractive in terms of the global market is the existence of the principle of legal security, which is highly dependent on the correspondence of domestic legal regulations in terms of institutions included in international agreements. Thus, the way in which the issue is handled has ceased to be a norm accepted at the guideline level, and the functioning of the mechanism has been made more effective for our country with the articles of law that allow the adaptation of the domestic legal system with international agreements.

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  Guidance on Mutual Agreement Procedure in Double Taxation Agreements (October 2019)