United States-Turkmenistan Tax Treaty

Turkmenistan’s International Tax Compliance Rules

Quick Summary.  Located in Central Asia, Turkmenistan borders Afghanistan, Iran, Uzbekistan, Kazakhstan, and the Caspian Sea.  A former constituent republic of the Soviet Union, Turkey achieved independence in 1991 following the fall of the U.S.S.R. Turkey is a presidential republic comprised of five provinces (welayatlar).

Effective in late 2017, Turkey’s Law on Free Economic Zones (FEZs) provides members of FEZs with a number of tax-related benefits.  Turkey’s Ministry of Finance and Economy of Turkmenistan also underwent a restructuring.  Turkey provides for a simplified tax regime for certain legal entities (qualified small and medium enterprises (SMEs)).

U.S.-Turkmenistan Tax Treaty

Resident corporations are subject to tax on worldwide income, whereas non-resident corporations are subject to tax only on Turkmenistan-sourced income. Foreign branches located in Turkey are subject to an increased income tax rate of 20%.

Similarly, resident individuals are subject to tax on worldwide income; non-resident individuals are subject to tax only on Turkmenistan-sourced income.

Turkmenistan Treaty.  Convention between the United States of America and the Union of Soviet Socialist Republics on Matters of Taxation

Currency.  Turkmenistan manat (TMT)

Common Legal Entities.  Joint stock company, business society, sole proprietorship, branch of a foreign corporation, and representative office.

Tax Authorities. Ministry of Finance and Economy of Turkmenistan.

Tax Treaties.  South Africa is party to more than 37 tax treaties.

Corporate Income Tax Rate.  8% (resident nongovernmental entities) / 20% in general (nonresidents and for all entities operating under the Petroleum Law).

Individual Tax Rate. 10% in general.

Corporate Capital Gains Tax Rate.  8% (resident nongovernmental entities) / 20% in general (nonresidents and for all entities operating under the Petroleum Law).

Individual Capital Gains Tax Rate.  0% in general.

Residence.  Individuals are residents of Turkmenistan if they are physically present in Turkmenistan for 183 days or more in a calendar year, unless otherwise provided under an applicable tax treaty.

Withholding Tax

Dividends.  15% (resident company) / 10% (resident individual) / 15% (nonresident company without PE in Turkmenistan) / 10% (nonresident individual)          

Interest.  0% (resident company) / 0% / 10% (resident individual) / 15% (nonresident company without PE in Turkmenistan) / 10% (nonresident individual)          

Royalties.  0% (resident company) / 10% (resident individual) / 15% (nonresident company without PE in Turkmenistan) / 10% (nonresident individual)

Transfer Pricing.  Transactions between related parties; transactions involving the exchange of goods, work, or services; and external trade deals are subject to the transfer pricing rules.  The tax authorities are entitled to correct tax calculations where there is a divergence from the real market price of more than 20%.  For contractors/subcontractors under the Petroleum Law, the divergence may not exceed 10%.

CFC Rules.  No CFC rules.

Hybrid Treatment.  No.

Inheritance/Estate Tax.  No.

Tax Treaty Network – International Tax Attorneys

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