Cross-border income — a service provided to a client abroad, a dividend from a foreign company or a licence fee paid overseas — can fall within the taxing reach of two countries at once. The country where the income arises wants to tax it because of its source, while the country where the recipient is resident wants to tax it because of residence. The result: the same income taxed twice.
Double tax treaties (DTTs; in Turkish ÇVÖA) are international agreements signed between two countries to resolve this conflict. In this article we explain how treaties work, how they decide which country may tax which income, what is needed to benefit from a treaty, and the mutual agreement procedure available when tax is levied contrary to a treaty. The final section looks at the Turkey–Russia treaty as an example.
This article is for general information only; the provisions of each treaty must be reviewed separately.
What is a double tax treaty?
A DTT is a road map setting out which income may be taxed in which of the two countries, and within what limits. Treaties determine where a person is resident, whether a permanent establishment arises abroad, and how business profits, independent personal services, dividends, interest and royalties are taxed.
Treaties have three main aims:
- To prevent the same income being taxed in two countries, or to eliminate the effect of double taxation
- To facilitate cross-border trade and investment by capping withholding taxes in the source country
- To provide cooperation tools between tax administrations, such as exchange of information and the mutual agreement procedure
Turkey’s treaties are largely based on the OECD Model Tax Convention, so article numbers and structure are broadly similar from one treaty to another.
Relationship with domestic law
Under Article 90 of the Turkish Constitution, international agreements duly put into effect have the force of law. In practice, treaty provisions take precedence as special rules over the Income Tax and Corporate Tax Laws. A treaty does not create a new tax, however; it only limits the taxing right granted by domestic law. If the domestic rate is lower than the treaty rate, the lower rate applies.
Turkey’s treaty network
Turkey has concluded 108 double tax treaties, 93 of which are in force (Alomaliye, October 2026). The most recent treaty, signed with El Salvador on 25 September 2026, will enter into force once both countries complete ratification.
The network covers most EU member states, Russia and the Central Asian countries, the Gulf states and Turkey’s main trading partners. A signed treaty is not necessarily applicable: it starts to apply only after both countries complete ratification and it enters into force. The current list and treaty texts are published on the website of the Turkish Revenue Administration (Gelir İdaresi Başkanlığı).
How do treaties allocate taxing rights?
For each type of income, a treaty either gives the taxing right exclusively to the country of residence or grants the source country a limited right capped at a set rate. This allocation rests on two key concepts: residence and permanent establishment.
Residence
To benefit from a treaty, a person must be resident in one of the contracting states. If a person is resident in both, the tie-breaker criteria in Article 4 are applied in order:
- Individuals: permanent home, centre of vital interests, habitual abode and nationality. If these do not resolve the case, the competent authorities decide by mutual agreement.
- Companies: depending on the treaty, the place of effective management, registered office or place of incorporation is decisive, or the decision is left to the competent authorities.
Permanent establishment
A company’s business profits in the other country may be taxed there only if a permanent establishment exists (such as a branch, office, factory, or a construction or installation project lasting longer than the period set in the treaty), and only to the extent attributable to that establishment. Without a permanent establishment, business profits are taxed only in the country of residence.
Overview by type of income
| Type of income | Model convention article | Taxing right |
|---|---|---|
| Business profits | 7 | Country of residence; if there is a permanent establishment in the other country, the profit attributable to it is also taxed there |
| Dividends | 10 | Country of residence; the source country may tax up to the treaty rate |
| Interest | 11 | Country of residence; the source country may tax up to the treaty rate |
| Royalties | 12 | Country of residence; the source country may tax up to the treaty rate |
| Independent personal services | 14 | Country of residence; also taxable in the other country if there is a fixed base there or the treaty period is exceeded |
| Employment income | 15 | Country where the work is performed; for short assignments not exceeding 183 days, under certain conditions, only the country of residence |
If dividends, interest or royalties are connected with a permanent establishment, they are taxed under the business profits rules instead. Depending on the treaty, the 183-day period for employment income is counted by calendar year, fiscal year or any 12-month period.
Eliminating double taxation: credit and exemption
Any double taxation remaining after tax is paid in the source country is eliminated by the country of residence using one of two methods; the method is set out in the treaty’s article on elimination of double taxation (usually Article 23).
- Credit method: foreign income is also declared in the country of residence, and the tax paid abroad is deducted from the domestic tax attributable to that income. The credit is limited to the domestic tax calculated on the same income. Most of Turkey’s treaties apply this method for Turkish residents.
- Exemption method: income that may be taxed in the source country is exempt in the country of residence. Under some treaties, the exempt income is taken into account when determining the progressive rate applied to other income (“exemption with progression”).
Under Turkish domestic law, the credit for foreign taxes is governed by Article 33 of the Corporate Tax Law for companies and Article 123 of the Income Tax Law for individuals. To claim the credit, documents proving payment of the foreign tax must be obtained, certified by the competent authority of the other country; if they are not obtained in time, the right to the credit may be lost.
The condition for treaty benefits: certificate of tax residence
Reduced treaty rates do not apply automatically: the recipient of the income must prove that it is resident in the other country. The proof is a certificate of tax residence issued by the competent authority of the country of residence (in Turkish, mukimlik belgesi).
For payments from Turkey abroad: the Turkish company making the payment withholds tax as the withholding agent. To apply the treaty rate, the foreign recipient’s residence certificate must be on file at the time of payment. In practice, the original or a certified copy with a notarised Turkish translation is required, and foreign documents need an apostille or consular legalisation. If the certificate is not available at the time of payment, tax is withheld at the domestic rate; if it is provided later, a refund of the excess tax can be claimed.
For foreign income of Turkish residents: to obtain the reduced rate in the other country, the Turkish company or individual obtains a residence certificate from the Turkish Revenue Administration and passes it to the foreign payer. For taxpayers registered with the Large Taxpayers Office, the certificate is issued by that office.
A residence certificate is issued for a specific period. Requesting an updated certificate every year from regular counterparties prevents the gap most often found in tax audits.
Taxation contrary to a treaty: the mutual agreement procedure
If a country levies tax contrary to a treaty, the taxpayer can ask the tax administrations of the two countries to resolve the issue between themselves. This route is called the mutual agreement procedure (MAP; in Turkish KAU) and is usually set out in Article 24 of the treaty (KPMG).
Typical examples:
- A Turkish company is subjected to corporate tax in the other country although no permanent establishment arose there
- Tax is withheld in the other country on a payment for which the treaty provides no withholding, or above the treaty rate
- The same person is treated as resident by both countries
Application and process
- Application to the competent authority: the taxpayer applies in writing to the competent authority of its country of residence. For Turkish residents, the competent authority is the Turkish Revenue Administration.
- Time limit: if the treaty sets a time limit, it applies. If the treaty is silent, the application should be made within 3 years of the date on which the taxpayer became aware of the taxation contrary to the treaty.
- File: the application must present strong indications of taxation contrary to the treaty. The administration expects a detailed file covering the nature and duration of the work, contracts, and details such as the entry and exit dates of personnel.
- Negotiation between the two administrations: if the competent authority finds the application justified and cannot resolve it on its own, it opens discussions with the competent authority of the other country.
Legal basis
The mutual agreement procedure was incorporated into Turkish law by Law No. 7338, which added Additional Articles 14–18 to the Tax Procedure Law; applications made on or after 1 January 2022 are subject to these provisions. The MAP Guide published by the Revenue Administration remains a useful reference for definitions and basic principles.
The mutual agreement procedure is also used where the same profit is assessed differently in two countries, such as transfer pricing adjustments. As the process can take a long time, it is important to start collecting documents as soon as the taxation contrary to the treaty is noticed and not to miss the deadlines.
Example: the Turkey–Russia double tax treaty
The treaty between Turkey and Russia was signed in 1997 and has applied since 2000. It caps the tax Turkey may withhold on dividends, interest and royalties paid to a Russian company below the domestic rates:
| Type of income | Turkish domestic withholding (payments abroad) | Turkey–Russia DTT cap |
|---|---|---|
| Dividends | 15% | 10% |
| Interest | 0–15% (depending on the type of interest) | 10% |
| Royalties (including know-how) | 20% | 10% |
Example: a Turkish company pays TRY 100,000 in royalties to a licensor resident in Russia. If the residence certificate is on file at the time of payment, withholding tax is TRY 10,000 (10%); without it, TRY 20,000 is withheld at the domestic 20% rate and a separate refund claim is needed for the difference.
Two points to watch:
- The treaty does not cover VAT. For services and licences purchased from abroad, the Turkish company continues to declare VAT under the reverse-charge mechanism regardless of the treaty.
- The payment must be characterised correctly. Whether a payment is a royalty, a technical service fee or business profit directly changes the applicable article and rate. Consistency between the wording of contracts and invoices and the treaty definitions is the most frequently disputed issue in tax audits.
Practical points
- Check the treaty text: rates, time limits and definitions vary from treaty to treaty; do not generalise from the model convention.
- Obtain the residence certificate before payment: the reduced rate applies only when the certificate is on file; a later refund takes time and documentation.
- Monitor permanent establishment risk: long projects abroad, staff assignments and representatives with authority to sign contracts in the other country can unintentionally create a permanent establishment.
- Document tax paid abroad: for the credit, certified payment documents from the foreign tax office must be obtained in time.
- Do not miss deadlines: the mutual agreement procedure and refund claims are subject to time limits.
Conclusion
Double tax treaties directly affect the tax burden of companies operating across borders, but their benefits can be used only with the right documents and the right characterisation. Determining the nature of the payment, obtaining the residence certificate in time and documenting tax paid abroad are the basic conditions for benefiting from a treaty.
At Yeşil SMMM we advise foreign-owned companies and Turkish companies dealing with foreign counterparties on international tax matters, in Turkish, English and Russian. For questions, you can reach us via our contact page.
Author: Ümit Çelik, SMMM (Certified Public Accountant)
Sources
- KPMG Vergi — Double tax treaties and the mutual agreement procedure (in Turkish)
- Alomaliye — Turkey’s tax treaty with El Salvador (October 2026, in Turkish)
- Muhasebenews — Taxation principles under double tax treaties (in Turkish)
- Clearstream — Dividend rates under Turkey’s double tax treaties in force
