Double Taxation Agreement with Turkey: An Overview
The Double Taxation Agreement (DTA) is an agreement between two countries to prevent the double taxation of income earned by residents of one country in the other. The purpose of a DTA is to eliminate the possibility of paying taxes on the same income in both countries, thus creating an environment for increased economic cooperation and eliminating trade barriers.
Turkey has signed DTAs with several countries all over the world, including the United Kingdom, Germany, Italy, and others. Turkey`s DTA with the United Kingdom came into force in 1986, while the DTA with Germany was signed in 1985.
The DTA between Turkey and the UK applies to the taxes on income, including corporate taxes and personal income tax. The agreement applies to residents of the United Kingdom who earn income in Turkey, as well as residents of Turkey who earn income in the United Kingdom. The DTA stipulates that individuals who are residents of one of the two countries and earn income in the other will be subject to the tax laws of the country in which they reside.
Under the agreement, the taxation of profits of a business is split between the two countries. In general, the country in which the business is located receives most of the tax revenue. However, if the business is a subsidiary of a parent company located in another country, the profits will be taxed in the country where the subsidiary is located.
The DTA also provides for the taxation of dividends and interest income. Dividends paid by a company in one country to residents of the other country will be taxed in the country where the recipient resides. Interest income paid by a resident of one country to a resident of the other country will be taxed in the country where the recipient resides.
Overall, the DTA between Turkey and the UK creates a favorable investment climate for businesses in both countries by preventing the double taxation of income. The agreement also helps to promote economic cooperation and trade between the two countries, making it easier for investors and businesses to operate across borders.
In conclusion, DTAs are crucial for creating a stable investment environment and for facilitating trade between countries. Turkey`s DTA with the UK is an excellent example of such an agreement, which eliminates the possibility of double taxation and promotes economic cooperation. As businesses continue to expand their global reach, these agreements will become increasingly important for maintaining a stable and predictable environment for cross-border investment and trade.