United States-Turkey Tax Treaty
Turkey’s International Tax Compliance Rules
Quick Summary. Spanning across Europe and Asia, the Republic of Turkey is a democratic, unitary constitutional republic. Founded by MustafaKemal Atatürk in 1923, the country boasts the 13th largest economy in the world.
Turkey’s Omnibus Bill of 2017 provides for several modifications to its tax laws. Of note, the bill increased the corporate tax rate, provides for certain exemptions from capital gains for qualifying immovable property, and provisions related to Investment Incentive Certificates.
Turkey taxes resident corporations at a rate of 22% on net profits generated worldwide. Non-resident corporations are subject to tax only on income from its activities in Turkey.
Likewise, resident individuals are subject to tax on worldwide income. Non-resident individuals are taxed on Turkish-source income.
U.S.-Turkey Tax Treaty
Turkey is a member of the Council of Europe, North Atlantic Treaty Organization (NATO), Organisation for Economic Co-operation and Development (OECD), Organization for Security and Co-operation in Europe (OSCE), and G-20.
Turkey Tax Treaty. Agreement Between the Government of the United States of America and the Government of the Republic of Turkey for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, together with a related Protocol, signed at Washington March 28, 1996
Currency. Turkish Lira (TRY).
Common Legal Entities. Corporation (Anonim Sirket (AS)), limited liability company (Limited Sirket (Ltd. Sti.)), ordinary partnership, limited partnership, sole proprietorship, and branch of a foreign company
Tax Authorities. Ministry of Treasury and Finance, Turkish Revenue Administration.
Tax Treaties. It is a signatory to the OECD’s MLI.
Corporate Income Tax Rate. 22%
Individual Tax Rate. 40%
Corporate Capital Gains Tax Rate. 22% CIT + 15% WHT (tax treaty provisions should be considered separately).
Individual Capital Gains Tax Rate. Taxed income tax rates.
Residence. Individuals who are in Turkey for a continuous period (including temporary absences) of more than six months in any calendar year are deemed to be resident for tax purposes. However, foreign individuals who are on assignment in Turkey for a specific business project or mission, or those in Turkey for holiday, health care, or educational purposes are not regarded as resident, even if they stay for more than six months.
Dividends. 0% / (resident company) / 15% (resident individual) / 15% (nonresident company or individual).
Interest. 0% / (resident company or individual) / 0% / 10% (nonresident company or individual).
Royalties. 0% / (resident company) / 20% (resident individual) / 20% (nonresident company or individual).
Transfer Pricing. Follow arm’s tenth principles.
CFC Rules. Turkish residents subject to tax on share of net income earned by CFC.
Hybrid Treatment. No.
Inheritance/Estate Tax. Items acquired as gifts or by inheritance are subject to gift tax at rates between 10% and 30%, and inheritance tax between 1% and 10% of the appraised value of the item.
Tax Treaty Network – International Tax Attorneys
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