Double Tax Treaties

Double Tax Treaties and Taxation of Professional Services Performed by Non-Residents

Turkey is a part to several Double Tax Treaties with other countries in which articles 5, 7 and 14 define and regulate the taxation principles of commercial services, professional services by explaining the business workplace rules.

Communiqué no.4 on Double Tax Treaties has been published on September 26, 2017. This communiqué explains the common principles defined in these several tax treaties and concludes that below factors are effective in determining the taxation of professional services in Turkey;

  • existence of a workplace in Turkey
  • duration of stay in Turkey
  • whether the payment is made from Turkey

All details about determining above factors are explained in the communiqué in detail such as the calculation methodology for “duration of stay in Turkey”, differentiation of treatments for “the legal status (natural or legal person) of the payment receiver”, or the format to be used as “certificate of residence”.

For the documentation of these conditions and requirements, the communiqué brings declaration form layouts to be filled by the service provider and/or receiver in different cases.

  • Annex Form No.1: In case withholding tax is not required in Turkey, this form should be filled by non-resident taxpayers who derive income from independent personal services in Turkey and shall be submitted to tax withholder / tax agent accompanied by a certificate of origin.
  • Annex Form No.2: This form shall be filled by the paying entity and together with the Form No.1, certificate of residence and service contract (if existing) shall be submitted to the tax office prior to completion of the payment.
  • Annex Form No.3: Service providers may apply for a refund of the withholding tax deducted on their collection with submitting this form together with the certificate of residence to tax office, although the income should not be subject to taxation in Turkey.

How we may assist you ?

We are aware that although seems a straight forward work, filling these forms according to the true nature of the transactions and relations between the parties might contain certain risks such as miscommunicating the facts or disclosing unnecessary information. Therefore, our expert team might assist you in these kind of situations by;

  1. Understanding the true nature of the workflow,
  2. Communicating all parties to understand their approach and,
  3. Provide guidance on filling these forms and,
  4. Providing a sustainable view on how to proceed for similar cases in the future

Please feel free to contact us for all you queries.