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(This note is not part of the Order)
The Agreement with the Republic of Turkey is set out in the Schedule to this Order.
Provision is made for business profits not arising through a permanent establishment to be taxed only in the country of the taxpayer’s residence. Profits attributable to a permanent establishment may be taxed in the country in which the permanent establishment is situated (Articles 5 and 7). Profits from international transport are to be taxed only in the country of residence of the enterprise (Article 8). The Agreement includes rules for determining taxable profits when a company in one country is related to a company in the other (Article 9).
Income arising from immovable property and capital gains from the alienation of that property may be taxed in the country in which the property is situated (Articles 6 and 13).
The rate of tax on dividends in the source country is not to exceed 15 per cent of the gross amount of the dividends flowing to the other country, if the beneficial owner controls directly or indirectly at least 25 per cent of the voting power of the paying company, and 20 per cent in all other cases (Article 10). An additional tax at a rate not exceeding 15 per cent may be charged on the profits of a permanent establishment in one country of a company which is a resident of the other.
The rate of tax on interest imposed in the source country is not to exceed 15 per cent of the gross amount of interest flowing to the other country. However, the country of source will exempt from tax interest payable to and beneficially owned by the Government or a local authority of the other country or any agency of the Government or a local authority (Article 11). Interest arising in the United Kingdom and beneficially owned by the Central Bank of Turkey will be exempt in the United Kingdom.
The rate of tax on royalties in the source country is not to exceed 10 per cent of the gross amount flowing to the other country (Article 12).
Income of an enterprise of one country in respect of professional or similar services performed in the other country may be taxed in that other country if the enterprise performs the services through a permanent establishment there or the services are performed for more than 183 days in any 12 months. The enterprise may elect that the income be taxed on a net basis (Article 14).
The earnings of temporary business visitors (Articles 14 and 15) are, subject to certain conditions, to be taxed only in the country of the taxpayer’s residence. Income derived by entertainers and athletes from their personal activities may be taxed in the country in which those activities are exercised. Where, however, the activities performed in one country are supported by public funds of the other country, the income is taxable only in that other country (Article 17). Government service salaries and pensions are normally to be taxed by the paying Government only (Article 19) while other pensions are to be taxed only in the country of the taxpayer’s residence (Article 18). The remuneration of visiting teachers (Article 21) and certain payments made to visiting students, business apprentices and trainees (Article 20) are, subject to certain conditions, to be exempt from tax in the country visited.
Where income continues to be taxable in both countries relief from double taxation is to be given by the country of the taxpayer’s residence. The credit to be given in the United Kingdom for tax payable in Turkey includes credit for tax spared under certain provisions of Turkish law (Article 23).
There are provisions to safeguard nationals and enterprises of one country against discriminatory taxation in the other (Article 24) and for consultation and the exchange of information between the competent authorities of the two countries (Articles 25 and 26).
The Agreement is to enter into force on the date of the later of the notifications by each country of the completion of its procedures for the bringing into force of the Agreement. The Agreement takes effect in Turkey for any fiscal year beginning on or after 1st January and in the United Kingdom for any financial year beginning on or after 1st April for corporation tax, or, for income tax and capital gains tax, any year of assessment beginning on or after 6th April in the calendar year next following that in which the Agreement enters into force (Article 28).
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