Double tax treaties and the certificate of residence
How Türkiye's double tax treaties work, the role of the certificate of residence, withholding on payments abroad, obtaining a certificate of residence from Türkiye, credit for tax paid abroad, the permanent establishment concept and practical steps.
When a Turkish company pays fees to a German consultant, or someone living in Türkiye receives dividends from their company in the UK, both countries may claim tax on the same income. Double tax treaties (DTTs) determine which country can take how much tax in such cases.
How do treaties work?
Türkiye has treaties in force with many countries. Treaties are usually based on the OECD model convention and set rules by type of income:
| Type of income | General approach in treaties |
|---|---|
| Business profits | Taxed only in the country where the company is resident; if there is a permanent establishment in the other country, profits attributable to it can be taxed there |
| Dividends | The source country can also tax, but the rate is limited by the treaty |
| Interest | The source country's tax is limited to the treaty rate |
| Royalties | The source country's tax is limited to the treaty rate |
| Independent personal services | Usually in the country where the person is resident; also in the other country if there is a fixed base or a stay of a certain length |
| Employment income | The country where the work is done can tax; there are exceptions such as the 183-day rule |
| Income from real estate | Can be taxed in the country where the property is located |
Treaty provisions apply before provisions of Turkish legislation; however, a treaty does not create a tax burden, it only limits it.
When making payments abroad
When a company in Türkiye pays fees, licence fees, interest or dividends to a person abroad, it makes withholding under Turkish legislation. To apply the lower treaty rate or not withhold at all:
- The original or a certified copy of the certificate of residence the recipient obtained from the competent authority of their own country, with a Turkish translation, is obtained.
- The certificate must be valid for the calendar year in which the payment is made; it must be renewed each year.
- The certificate is kept in the Turkish company's file and produced in the event of an audit.
If there is no certificate, the rate in Turkish legislation applies; if a certificate is obtained later, an application can be made for a refund of the excess tax withheld.
For special cases such as advertising fees paid to platforms abroad: Foreign advertising invoices · Foreign advertising withholding
In addition, if the service is used in Türkiye, reverse-charge VAT must be declared; this is independent of the DTT.
Obtaining a certificate of residence from Türkiye
A company or person resident in Türkiye can obtain a certificate of residence from the Turkish tax administration to reduce the other country's withholding on income earned abroad. The application is made through the Revenue Administration's online services or the tax office the taxpayer is registered with. The other country may also require its own form to be certified by the Turkish tax administration.
Credit for tax paid abroad
Full taxpayers can credit taxes paid abroad on income earned abroad and declared in Türkiye, under certain conditions and limited to the Turkish tax attributable to that income. The tax paid abroad must be documented.
Permanent establishment risk
If a foreign company has a permanent place, representative or long-term project in Türkiye, a permanent establishment may be deemed to arise in Türkiye. In that case the profits attributable to it are taxed in Türkiye. The same risk applies to Turkish companies' activities abroad: Sending an employee abroad
Practical steps
- Is there a treaty with the other country, and is it in force?
- What type of income is it under the treaty?
- Has a certificate of residence been obtained, and is it valid for the year?
- Was the withholding rate applied correctly and declared on the withholding return? Withholding calculator
- Is reverse-charge VAT required?
Our service on international tax matters: Double taxation
Legal basis: Income Tax Law No. 193 arts. 94 and 123; Corporate Tax Law No. 5520 arts. 30 and 33; bilateral double tax treaties; Constitution art. 90.