, 2025
What is Double Taxation?
Double taxation is the risk of the same income being taxed twice because two different countries (sometimes different levels within the same country) claim tax rights on the same income/gain.
Example: When a person/company resident in Turkey earns interest/dividend/rental income from abroad, both the source country and Turkey may claim taxation.
Types of Double Taxation
- Legal double taxation: The same income of the same person being taxed in two countries.
- Economic double taxation: The same income being taxed twice at different person levels (e.g., company profit + dividend tax).
When Does It Occur?
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Working abroad and wage income
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Formation of foreign branch/permanent establishment
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Passive income such as dividends, interest, royalties
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Foreign real estate/rental income
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Intra-group transactions and transfer pricing
What Do Double Taxation Avoidance Agreements (DTAA / DTA) Do?
DTAAs are agreements signed between two countries that regulate taxation authority with rules. Two main approaches are used in practice:
- Exemption method: Income is taxed only in one country under certain conditions.
- Credit (tax credit) method: Tax paid in the source country is deducted from the tax calculated in the other country.
Important: Each income type's (dividend, interest, royalty, service, real estate, etc.) article in the agreement works differently; withholding rates may vary by country.
How to Check Turkey's DTAAs?
The most accurate method is to check the list of agreements in force and country-based texts through the Revenue Administration (GIB). Country list and agreement text may be updated over time.
Practical Application (Checklist)
- Tax residency: In Turkey or the other country? Residency certificate is required.
- Type of income: Service, dividend, interest, or real estate?
- Withholding in source country: What is the deduction rate? Can treaty reduction be applied?
- Declaration in Turkey: How will credit/exemption be applied?
- Documentation: Bank receipt, withholding certificate, residency certificate, contracts.
Common Mistakes
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Thinking "no tax if there's an agreement" (most of the time it only reduces the rate or provides credit).
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Trying to apply agreement rate without a residency certificate.
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Overlooking permanent establishment risk (e.g., long-term project, employee presence).
Frequently Asked Questions
Q: Do I not pay any tax if there's a DTAA?
A: No. In most scenarios, tax is not completely eliminated; the rate decreases or the credit mechanism works.
Q: What does credit mean?
A: Being able to deduct the tax you paid abroad from the tax calculated in Turkey (subject to conditions).
Q: Which countries have agreements?
A: Checking the current list from GIB's agreements page is the most accurate.
Resources (official/basic)
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GIB - Double Taxation Avoidance Agreements: https://www.gib.gov.tr/mevzuat/tur/4/anlasma/3
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GIB - List of tax agreements concluded by Turkey (PDF): https://cdn.gib.gov.tr/api/gibportal-file/file/getFileResources?objectKey=arsiv%2Fmevzuat%2Fuluslararasi_mevzuat%2FCifte_Vergilendirme%2FTurkiyenin_Sonuclandirdigi_Vergi_Anlasmalari_Listesi.pdf
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Ministry of Foreign Affairs - DTAA general information: https://www.mfa.gov.tr/cifte-vergilendirmeyi-onleme-anlasmalari-ve-turkiye.tr.mfa
Professional support
For professional support in setup, tax compliance, and bank processes, you can contact the Suits Finance team.