Turkey has a broad double tax treaty network that allows for the avoidance of double taxation. Individuals and companies that produce income both in Turkey and in the other signatory country benefit from reduced tax rates and withholding taxes.
The usual corporate tax on profits is 20% in Turkey. A Turkish company with non-resident shareholders (corporate bodies or individuals) must pay taxes in Turkey and in the country of residence of the shareholders.
Double tax treaties signed by Turkey
To prevent double taxation, and in order to attract foreign investment,Turkey has concluded many treaties for the avoidance of double taxation with: Albania, Algeria, Australia, Azerbaijan, Austria, Bahrain, Bangladesh, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Canada, China, Croatia, Czech Republic, Denmark, Egypt, Estonia, Ethiopia, Finland, France, Germany, Greece, Hungary, India, Indonesia, Iran, Israel, Italy, Japan, Jordan, Kazakhstan, Korea, Kuwait, Kyrgyzstan, Latvia, Lebanon, Lithuania, Luxembourg, Macedonia, Malaysia, Moldova, Mongolia, Montenegro, Morocco, the Netherlands, New Zealand, Northern Cyprus, Norway, Oman, Pakistan, Poland, Portugal, Qatar, Romania, Russia, Saudi Arabia, Serbia, South Africa, Singapore, Slovakia, Slovenia, Spain, Sudan, Syria, Sweden, Tajikistan, Thailand, Tunisia, Turkmenistan, Ukraine, the United Arab Emirates, the United Kingdom, the United States of America, Uzbekistan and Yemen.
Draft agreements are in still in pending and are waiting to be ratified by the Turkish government. Our company registration agents in Turkey can give you detailed information about the existing treaties and the ones that will be included in the tax treaty network.
You can also watch the video below for information on Turkey's double taxation agreements:
The provisions of the double tax treaties
According to these double tax treaties, the income and the capital are exempt from taxation if the company is paying the same taxes in the treaty country. If the regulations of the double tax treaties are not followed, the company may claim the refund of the paid taxes. This is possible only after providing evidence that the taxes were already paid in the treaty country.
The double tax avoidance treaties also allow for reduced withholding taxes on dividends, interest and royalties for the signatory states. The usual dividend tax in Turkey is 15% but under an applicable treaty, is can be 10% or 5%. An eligibility criterion applies: the 5% rate applies when the dividend payment is made to a company that owns at least 25% of the company making the payment. If this is not the case, then the usual 15% rate applies.
The taxes for which the double tax treaties apply in Turkey include the income tax, the capital tax and any other taxes that may be levied in place of or in addition to these two after the double tax treaty was signed. These bilateral agreements apply to residents of one or both contracting states.
More recent treaties, elaborated after the OECD model, also stipulate that the treaty countries must provide lists of taxpayers or any information that could lead to the avoidance of tax fraud.
Special protocols are concluded every year with offshore jurisdiction with the same purpose of avoiding tax evasion.
Investors interested in setting up companies in Turkey and in other European countries, such as Spain, Sweden or Ukraine, may contact our local agents and lawyers.