Introduction: Why Do Turkey’s Double Taxation Treaties Matter for Foreign Investors?

A foreign investor establishing a company, acquiring shares, lending money, licensing technology or providing services in Turkey can potentially face taxation in more than one country.

A German company may pay tax in Germany while receiving dividends from a Turkish subsidiary.

A Dutch investor may sell shares in a Turkish company and face questions about capital gains taxation in both Turkey and the Netherlands.

A British company may provide management or consultancy services to a Turkish customer and need to determine whether the service income can be taxed in Turkey.

A US investor may lend money to a Turkish company and receive interest payments subject to Turkish withholding tax.

A foreign technology company may license software, trademarks or know-how to a Turkish subsidiary and face Turkish taxation on royalty payments.

Without international tax coordination, the same economic income could potentially be taxed once in Turkey and again in the investor’s country of residence.

This is precisely the problem that Double Taxation Treaties — DTTs or DTAs — are designed to address.

A Double Taxation Agreement does not normally mean:

“Foreign investors do not pay tax in Turkey.”

Instead, a treaty determines:

• which country has the primary taxing right;
• whether both countries may tax the same income;
• how much tax Turkey may impose at source;
• when business income can be taxed in Turkey;
• when a foreign enterprise is considered to have a permanent establishment in Turkey;
• and how the shareholder’s country of residence must eliminate double taxation.

Turkey has an extensive tax treaty network. In April 2026, the Turkish Revenue Administration reported that Turkey had concluded 106 Double Taxation Agreements, 93 of which were already in force.

This makes tax treaty analysis one of the most important components of foreign investment structuring in Turkey.

However, treaty protection is not automatic.

A foreign investor generally needs to establish:

tax residence + treaty entitlement + proper classification of the income + required documentation + compliance with beneficial ownership and anti-abuse rules.

A company that ignores these requirements may pay Turkish tax at domestic rates even though a treaty could have reduced or eliminated the tax.

This guide explains how foreign investors can use Turkey’s Double Taxation Treaties effectively in 2026.

1. What Is a Double Taxation Agreement?

A Double Taxation Agreement is an international agreement between two countries allocating taxing rights over different categories of income.

Typical treaties regulate:

• business profits;
• dividends;
• interest;
• royalties;
• capital gains;
• employment income;
• directors’ fees;
• professional services;
• pensions;
• real estate income;
• international transportation;
• and other categories of income.

They also normally contain provisions concerning:

• tax residence;
• permanent establishments;
• elimination of double taxation;
• exchange of information;
• non-discrimination;
• and the Mutual Agreement Procedure.

Turkey’s Revenue Administration maintains an official international tax section containing Turkey’s treaty texts and comparative tables for dividend, interest and royalty rates, as well as information on permanent-establishment periods and MAP procedures.

The exact treaty must always be reviewed.

There is no universal “Turkish DTA rate.”

2. A Tax Treaty Does Not Replace Turkish Domestic Tax Law

This is one of the most important concepts for foreign investors.

The correct approach is generally:

Step 1: Determine Turkish tax under domestic law.

Then:

Step 2: Determine whether the applicable DTA limits Turkey’s right to impose that tax.

A treaty generally restricts taxing rights rather than creating an additional tax that did not exist under domestic law.

For example, suppose Turkish domestic legislation would impose 20% withholding on a particular royalty payment.

The applicable treaty provides that Turkey may tax the royalty, but the rate cannot exceed 10%.

The treaty can cap Turkey’s tax at 10%.

But suppose Turkish domestic legislation provides a 5% rate in a particular situation while the treaty permits Turkey to tax up to 10%.

Turkey would not normally impose 10% merely because the treaty allows it. Turkish Revenue Administration practice expressly recognises that where domestic legislation provides a lower rate than the treaty ceiling, the lower domestic rate applies.

Therefore, foreign investors should compare:

Domestic Turkish tax vs treaty maximum

and generally apply the legally applicable more favourable result.

3. First Determine Whether the Foreign Investor Is a “Resident” of the Treaty Country

Treaty protection begins with tax residence.

A company incorporated in another country does not automatically qualify for every benefit contained in that country’s treaty with Turkey.

The treaty must first determine whether the company is a resident of the other contracting state.

For a corporate investor, this normally requires considering the treaty definition together with the foreign country’s domestic tax residence rules.

For individuals, residence may depend on matters such as:

• permanent home;
• centre of vital interests;
• habitual abode;
• nationality;
• or competent-authority agreement

where an individual could otherwise be regarded as resident in both countries.

The residence article is therefore fundamental.

A foreign investor should never begin treaty analysis with Article 10 on dividends or Article 12 on royalties without first confirming that the recipient qualifies as a treaty resident.

4. Turkey Requires a Residence Certificate to Apply Treaty Benefits

In practice, one of the most important documents is the certificate of residence — mukimlik belgesi.

Turkish Revenue Administration practice consistently requires a foreign taxpayer seeking treaty treatment to establish that it is a tax resident of the treaty country.

The foreign recipient generally needs to obtain a certificate from the competent tax authority of its country confirming its full tax liability/residence and provide the required Turkish translation and certification.

GİB rulings expressly state that where a foreign company cannot provide the necessary residence certificate, Turkish domestic rules apply rather than the reduced treaty treatment.

Practical Example

A Turkish company owes a royalty to a Danish company.

Domestic Turkish law may require withholding at a higher rate.

The Turkey–Denmark treaty may limit Turkey’s tax to 10%.

The Turkish payer should not simply apply 10% because the invoice contains a Danish address.

The Danish company should provide the required proof of Danish treaty residence.

Without proper residence documentation, the Turkish company risks being held liable for under-withholding.

5. Do Not Wait Until Payment Day to Obtain the Residence Certificate

For major cross-border payments, residence documentation should be organised in advance.

Assume a Turkish subsidiary plans to distribute EUR 8 million of dividends to its foreign parent.

If the treaty potentially reduces Turkish withholding, the company should establish treaty entitlement before the payment is made.

The practical sequence should therefore be:

identify shareholder → check treaty → obtain residence certificate → verify ownership and beneficial ownership → calculate withholding → make payment.

Not:

make payment → ask accountant afterward whether a treaty existed.

For multinational groups making recurring payments, residence certificates should form part of the annual cross-border tax compliance calendar.

6. How Do Treaties Affect Dividends Paid by Turkish Companies?

Dividends are among the most important treaty benefits for foreign investors.

Turkey’s current domestic withholding rate on dividends paid to non-resident corporate shareholders is generally 15%, subject to treaty reduction.

A typical treaty allows:

1. the shareholder’s country of residence to tax the dividend; and
2. Turkey, as the country where the distributing company is resident, also to impose tax—but only up to a specified treaty ceiling.

The ceiling varies between treaties.

Official GİB guidance, for example, confirms that under the Turkey–China treaty Turkey may tax dividends paid to a qualifying Chinese resident but may not exceed 10% of the gross dividend under the relevant treaty provision.

That does not mean all treaties provide a 10% rate.

Another treaty may provide:

• 5%;
• 10%;
• 15%;
• different rates depending on ownership;
• or more complex conditions.

Turkey’s Revenue Administration publishes comparative information concerning source-country dividend rates under its treaty network.

7. Ownership Percentage Can Affect the Treaty Dividend Rate

Many treaties distinguish between:

substantial corporate investors

and

portfolio shareholders.

For example, a treaty may provide a lower Turkish withholding rate where a foreign corporate shareholder directly owns at least:

• 10%;
• 20%;
• 25%;
• or another specified percentage

of the Turkish distributing company.

Therefore:

Foreign Parent owns 80%

may receive a different treaty rate from:

Foreign Fund owns 3%.

Investors should therefore model expected dividend taxation when determining the investment vehicle and shareholding structure.

However, ownership should not be artificially structured solely to secure a treaty rate without considering broader anti-abuse requirements.

8. The “Beneficial Owner” Requirement Is Critical

Modern treaty analysis cannot stop with legal ownership.

Many treaty provisions concerning:

• dividends;
• interest;
• and royalties

require the recipient to be the beneficial owner of the income.

This concept is particularly important where a foreign holding company sits between Turkey and the ultimate parent.

Example

US Parent
↓
Holding Company in State X
↓
Turkish Subsidiary

The State X holding company receives EUR 10 million of Turkish dividends and immediately transfers EUR 9.9 million to the US parent under predetermined arrangements.

The Turkish tax authorities may examine whether the State X company is genuinely the beneficial owner or merely a conduit.

The foreign group should therefore consider:

• decision-making authority;
• economic substance;
• control over income;
• contractual obligations;
• business functions;
• employees and management;
• financial risk;
• and commercial reasons for the holding structure.

The company with the best treaty rate is not automatically the best holding company.

9. Treaties Can Significantly Reduce Tax on Interest

Foreign shareholder loans are another major area where DTAs matter.

Suppose a foreign parent lends money to its Turkish subsidiary.

Under Turkish domestic rules, interest paid to an ordinary foreign corporate shareholder can attract Turkish withholding tax.

The applicable DTA may limit Turkey’s tax on interest.

The treaty normally contains an Interest Article, frequently Article 11.

A standard structure may provide that interest can be taxed in the country of residence but can also be taxed in the source country, with the source-country tax restricted to a stated percentage of the gross interest.

The actual rate varies between treaties.

Turkey’s Revenue Administration maintains comparative tables for interest and royalty rates under Turkey’s treaties.

Example

Foreign shareholder loan:

EUR 5 million

Annual interest:

EUR 300,000

Domestic Turkish withholding might be 10%.

If a valid treaty capped Turkey’s tax at 5%, the difference could be significant over a multi-year loan.

Therefore, shareholder loan analysis should include:

FX legality + transfer pricing + thin capitalisation + KKDF + domestic withholding + DTA rate.

10. A Treaty Does Not Override Transfer Pricing or Thin Capitalisation Rules

A foreign investor should not assume that an attractive interest treaty rate protects an excessive shareholder loan.

Suppose the parent charges an interest rate far above arm’s length.

Turkish transfer-pricing rules may recharacterise part of the payment as hidden profit distribution.

Likewise, where shareholder debt exceeds Turkey’s thin-capitalisation limits, part of the financing cost can be treated as a deemed dividend.

Official GİB guidance confirms that where related-party interest exceeds the arm’s-length amount, the excess can be treated as hidden distributed profit and analysed under the treaty’s dividend provisions.

The treaty therefore works together with Turkish anti-avoidance rules.

It does not legalise non-arm’s-length financing.

11. How Do Treaties Affect Royalties?

Foreign investors commonly license:

• trademarks;
• patents;
• software;
• know-how;
• designs;
• copyrights;
• industrial processes;
• or other intellectual property

to Turkish companies.

Payments may fall within the treaty definition of royalties — gayrimaddi hak bedelleri.

Turkey may impose domestic withholding on such payments.

A DTA can limit the maximum rate.

For example, GİB guidance concerning the Turkey–Netherlands treaty describes a 10% treaty ceiling on qualifying royalty payments under that treaty.

Similarly, GİB guidance concerning the Denmark treaty confirms that Turkey may tax qualifying royalties but the treaty limits the tax to 10% of the gross amount where the recipient is the beneficial owner.

Again, these are treaty-specific examples—not a universal Turkish rate.

12. Correctly Classifying Software and Technology Payments Is Essential

Technology transactions illustrate why treaty classification matters.

A Turkish company might pay a foreign company for software.

But that payment could potentially represent:

• purchase of a standard product;
• royalty for copyright use;
• licence fee;
• transfer of IP rights;
• technical service;
• SaaS access;
• or business profits.

Different classifications can produce very different Turkish tax results.

GİB guidance concerning software transactions has distinguished cases where payments fall within business profits from situations involving royalty rights, applying the relevant treaty article accordingly.

Therefore, foreign technology companies should not assume:

“All software payments are royalties.”

Nor should Turkish customers assume:

“All software invoices are business profits with zero Turkish withholding.”

The contract and actual rights transferred must be examined.

13. Business Profits: The Permanent Establishment Rule

For many foreign companies selling goods or providing services to Turkey, the most important treaty provision is the Business Profits Article, typically Article 7.

The basic treaty principle is generally:

A foreign enterprise’s business profits are taxable only in its country of residence unless it conducts business in Turkey through a permanent establishment located in Turkey.

If the foreign company has a Turkish permanent establishment, Turkey can generally tax the profits attributable to that establishment.

This rule can be extremely valuable for foreign companies providing cross-border services to Turkish customers without maintaining a meaningful business presence in Turkey.

Official GİB guidance, for example, has concluded in certain treaty contexts that foreign business income would require a Turkish permanent establishment before Turkey could tax that business profit under the treaty’s Business Profits Article.

14. What Is a Permanent Establishment?

A permanent establishment — PE is generally a fixed place of business through which the business of an enterprise is wholly or partly carried on.

Depending on the treaty, examples may include:

• place of management;
• branch;
• office;
• factory;
• workshop;
• mine;
• construction project exceeding a specified duration;
• or, in some treaties, a dependent agent satisfying specified conditions.

The exact treaty wording matters enormously.

A company may have a Turkish subsidiary without the foreign parent itself automatically having a PE.

Conversely, a foreign company may have no Turkish subsidiary but still create a Turkish PE through its activities.

The analysis is functional rather than purely formal.

15. Construction and Installation Projects Have Special PE Thresholds

Construction projects are particularly treaty-specific.

Many treaties treat a construction site, building project, assembly or installation project as a permanent establishment only if it lasts longer than a specified period.

The threshold may vary between treaties.

Turkey’s Revenue Administration therefore publishes comparative information specifically concerning the periods applicable to construction activities for permanent-establishment purposes.

Example

A German contractor works on a Turkish factory project.

Whether the German company creates a Turkish PE can depend partly on:

• the Turkey–Germany treaty;
• project duration;
• activity type;
• connected projects;
• and anti-fragmentation considerations.

The investor should therefore calculate the treaty PE threshold before mobilising personnel and equipment to Turkey.

16. Services Are One of the Most Difficult Treaty Areas

Management, engineering, consultancy, technical and professional services can be treated differently across Turkey’s treaties.

Depending on the particular DTA and the nature of the recipient, the payment might fall under:

• Business Profits;
• Independent Personal Services;
• Royalties;
• Technical Service Fees under newer treaties;
• or another specialised article.

For example, GİB guidance relating to the Turkey–Netherlands treaty has analysed management, finance, marketing, HR, purchasing and strategic planning services under the treaty’s professional-services provisions, while certain IT activities could fall into royalty treatment depending on their nature.

A current GİB ruling concerning services purchased from a UK resident similarly demonstrates that treaty classification remains highly dependent on the precise service and applicable treaty language.

Foreign service providers should therefore not rely on a generic “consulting service” label.

17. Employees Working in Turkey Can Change the Tax Result

A foreign company may initially provide services entirely from abroad.

Later, it sends employees to Istanbul for:

• implementation;
• training;
• negotiations;
• project management;
• or technical support.

That change can materially affect treaty treatment.

Possible issues include:

• permanent establishment;
• service PE where applicable;
• dependent-agent PE;
• employment taxation;
• payroll obligations;
• and work permits.

The treaty should therefore be reviewed together with the actual operating model.

A contract saying:

“Services are performed outside Turkey”

will not protect the company if employees actually spend months performing the work in Turkey.

18. How Do Treaties Apply When a Foreign Investor Sells Shares in a Turkish Company?

Capital gains on share sales are another crucial issue.

Assume a foreign investor purchases 30% of a Turkish company for EUR 5 million and later sells the shares for EUR 15 million.

The EUR 10 million gain may potentially be relevant in:

• Turkey;
• the investor’s residence country;
• or both.

The applicable DTA’s Capital Gains Article, often Article 13, must be reviewed.

Treaties differ significantly.

Some provide broad residence-country taxation for ordinary share disposals.

Others preserve Turkish taxing rights in specified circumstances.

Common issues may include:

• length of shareholding;
• percentage ownership;
• whether the company is real-estate-rich;
• whether the shares are connected with a Turkish PE;
• or specific treaty clauses applicable to substantial shareholdings.

Foreign investors planning a Turkish M&A exit should therefore analyse the DTA before signing the SPA.

19. Real-Estate-Rich Turkish Companies Require Special Attention

Many modern tax treaties give the country where real estate is situated the right to tax gains from shares whose value is derived principally from immovable property located there.

This prevents investors from avoiding property-level taxation merely by placing real estate inside a company and selling the shares.

Example

Foreign Investor
↓
100% Turkish Property Company
↓
Hotel in Antalya

The investor sells the Turkish company’s shares rather than selling the hotel.

The applicable treaty may still permit Turkey to tax the gain if the company’s value is principally derived from Turkish immovable property.

Foreign real estate investors should therefore review both:

direct property exit

and

share exit

before selecting the investment structure.

20. A DTA Can Prevent Taxation in Turkey When No Turkish PE Exists

One of the most useful treaty outcomes occurs where Turkish domestic legislation appears to impose taxation but the treaty allocates exclusive taxing rights to the foreign company’s country of residence because there is no Turkish PE or other treaty threshold.

For example:

UK Company provides qualifying services entirely from London.

Turkish Company pays the fee.

If the applicable treaty classifies the income as business profits and the UK company has no Turkish permanent establishment, Turkey may have no treaty right to tax that business profit.

This is where treaty analysis can create substantial savings.

But the result must be established by:

correct income classification + residence proof + absence of PE + treaty documentation.

21. Treaties Use Two Main Methods to Eliminate Double Taxation

Even where both Turkey and the foreign investor’s residence country are entitled to tax income, the treaty normally provides a mechanism preventing double taxation.

The two principal methods are:

Foreign Tax Credit / Credit Method

The residence country taxes the income but gives credit for Turkish tax, normally subject to a maximum equal to the residence-country tax attributable to that income.

Exemption Method

The residence country exempts qualifying foreign income, sometimes while retaining the right to use that income to determine the tax rate applicable to other income.

The method varies by treaty and income type.

For example, the Turkey–Netherlands treaty contains both exemption and credit mechanisms for different categories of income.

The Turkey–China example in GİB guidance similarly explains that Turkish tax on qualifying income is credited in China under the treaty mechanism.

22. A Treaty Usually Does Not Guarantee a Full Refund of All Foreign Tax

The foreign tax credit is normally subject to limitations.

Assume Turkey taxes a payment at 10%.

The shareholder’s residence-country tax attributable to that income is only 7%.

The residence country may limit the tax credit to 7%.

The investor may therefore still suffer a net 3% foreign tax cost.

Likewise, domestic exemptions and participation regimes in the shareholder’s country can interact differently with treaty provisions.

A foreign investor should therefore model:

Turkish tax + foreign-country tax + available credit/exemption

rather than focusing exclusively on the Turkish rate.

23. Tax Treaties Should Be Considered When Selecting a Holding Company

International investors often hold Turkish investments through a foreign holding company.

For example:

Global Parent
↓
European Holding Company
↓
Turkish A.Ş.

The holding jurisdiction can influence:

• dividend withholding;
• interest;
• royalties;
• capital gains;
• foreign tax credits;
• participation exemptions;
• and eventual exit taxation.

However, selecting a holding company exclusively for an attractive treaty is increasingly risky.

The structure should have credible commercial substance and business rationale.

Investors should analyse:

1. treaty entitlement;
2. beneficial ownership;
3. domestic anti-abuse rules;
4. residence;
5. management location;
6. substance;
7. onward payments;
8. exit taxation;
9. controlled foreign company rules;
10. anti-treaty-shopping provisions.

The lowest nominal treaty rate is not necessarily the lowest sustainable effective tax rate.

24. Treaty Shopping Can Be Challenged

Treaty shopping generally refers to structuring transactions through an entity in a treaty country primarily to obtain treaty benefits that would not otherwise be available.

Example

Country A has no favourable Turkish treaty.

Investor creates a shell company in Country B solely because Country B has a favourable dividend article.

Country B company:

• has no employees;
• has no office;
• makes no decisions;
• retains almost none of the income;
• and automatically transfers payments to Country A.

Such a structure can face:

• beneficial ownership challenges;
• substance challenges;
• anti-abuse provisions;
• domestic tax rules;
• and treaty-specific limitation provisions.

Foreign investors should therefore distinguish:

legitimate international holding-company planning

from

artificial treaty access.

25. What Is the MLI and Does It Currently Apply to Turkey?

The OECD’s Multilateral Instrument — MLI was developed to modify large numbers of existing tax treaties without renegotiating each treaty individually, including measures addressing treaty abuse and improving dispute-resolution procedures.

Türkiye signed the MLI on 7 June 2017.

However, the OECD’s official MLI status dated 12 January 2026 continued to show Türkiye as a signatory without a deposited instrument of ratification and without an MLI entry-into-force date for Türkiye.

Accordingly, investors should not simply assume that Turkey’s treaties have already been modified by the MLI.

This status can change, however, and should be rechecked for future transactions.

Separately, newer bilateral treaties and protocols may already contain BEPS-inspired anti-abuse provisions even without the MLI becoming effective for Türkiye.

26. Tax Treaties Are Not Static Documents

Another important point is that tax treaties evolve.

Turkey may:

• negotiate new treaties;
• amend existing treaties through protocols;
• replace older treaties;
• or bring already-signed treaties into force.

For example, the Turkish Revenue Administration reported that the Turkey–Zambia DTA was signed on 21 April 2026, bringing the number of concluded Turkish DTAs to 106, while 93 were then in force. The Zambia agreement itself still required completion of ratification procedures before becoming effective.

Therefore:

“Turkey has signed a treaty with Country X”

does not necessarily mean:

“The treaty already applies to today’s transaction.”

Investors must check:

signature date → ratification → entry into force → effective date for the relevant tax.

27. What Happens When Turkey and the Other Country Disagree?

Even carefully drafted treaties can produce disputes.

For example:

Turkey says the foreign company has a Turkish PE.

The foreign country says it does not.

Turkey classifies a payment as royalty.

The foreign company argues it is business profit.

Both countries claim the taxpayer is resident there.

A transfer-pricing adjustment in Turkey creates income taxed in both countries.

In these situations, the treaty’s Mutual Agreement Procedure — MAP / Karşılıklı Anlaşma Usulü can become extremely important.

Turkey’s treaties generally contain MAP provisions, and the Turkish Revenue Administration publishes specific MAP guidance.

28. What Is the Mutual Agreement Procedure?

MAP allows a taxpayer who believes it has been or will be taxed contrary to a DTA to present its case to the competent authority.

Turkey incorporated detailed domestic procedural rules for MAP applications effective for applications from 1 January 2022.

Under the current Tax Procedure Law framework, a taxpayer who claims taxation is contrary to a DTA—or sees strong indications that such taxation will occur—can apply to the Turkish Revenue Administration under the treaty’s MAP provision. Depending on the treaty, application through the other contracting state’s competent authority may also be possible.

Applications must respect the time limit and procedure specified in the relevant treaty.

This point is critical.

A taxpayer should not assume it can start MAP at any time.

29. MAP Is Especially Important for Transfer Pricing Disputes

Consider:

Turkish subsidiary purchases services from foreign parent.

Turkey argues the payment is excessive and increases the Turkish company’s taxable profit by EUR 3 million.

The foreign parent’s country has already taxed the EUR 3 million as income.

Without a corresponding adjustment, the same amount is taxed twice.

MAP may allow the competent authorities of the two states to negotiate a solution.

This makes MAP particularly relevant for:

• transfer pricing;
• permanent establishment attribution;
• residence;
• related-party financing;
• and income-classification disputes.

For multinational groups, MAP should therefore be considered alongside ordinary:

• tax litigation;
• settlement;
• administrative objections;
• and other domestic remedies.

30. MAP Can Affect Turkish Limitation Periods

Turkey’s domestic MAP rules also contain specific procedural consequences.

The Tax Procedure Law provides that a MAP application to the Turkish Revenue Administration suspends limitation periods relating to the taxes and penalties covered by the application from the application date under the statutory framework.

The legislation also provides mechanisms for implementing an agreed MAP outcome even where ordinary limitation issues might otherwise arise, subject to treaty-specific time requirements.

This makes MAP a substantive procedural tool rather than simply an informal discussion between tax authorities.

31. DTA Example: Foreign Parent Receiving Dividends

Assume:

Foreign Parent Co. owns 100% of Turkish Subsidiary A.Ş.

Turkish subsidiary declares:

EUR 5 million equivalent gross dividend.

Step 1:

Domestic Turkish dividend withholding is identified.

Step 2:

The treaty between Turkey and the parent’s country is reviewed.

Step 3:

The ownership threshold under the dividend article is checked.

Step 4:

The parent establishes treaty residence.

Step 5:

Beneficial ownership is confirmed.

Step 6:

The Turkish subsidiary applies the legally appropriate rate.

Step 7:

Turkey’s tax is considered under the foreign country’s tax credit or exemption rules.

This process can produce a materially different investor return than automatically applying Turkish domestic withholding.

32. DTA Example: Foreign Shareholder Loan

Foreign Parent lends:

EUR 10 million

to:

Turkish Subsidiary.

Interest:

6%

Annual interest:

EUR 600,000.

The analysis should not stop with the loan agreement.

The company must examine:

• Turkish FX borrowing rules;
• arm’s-length interest;
• thin capitalisation;
• financing expense limitation;
• KKDF;
• domestic interest withholding;
• treaty interest ceiling;
• residence certificate;
• beneficial ownership;
• and foreign tax credit.

If the treaty reduces withholding by several percentage points, the benefit can be substantial over a five-year loan.

But the treaty cannot rescue excessive interest that violates transfer-pricing rules.

33. DTA Example: Foreign Technology Company Licensing Software

US or European technology company licenses proprietary software to Turkish customer.

Annual licence fee:

EUR 2 million.

Questions include:

Is the payment a royalty?

Or merely payment for standard software?

Does the Turkish customer receive copyright exploitation rights?

Does know-how transfer occur?

What does the applicable DTA define as royalties?

What is Turkey’s domestic withholding?

What treaty maximum applies?

Does the foreign company have a Turkish PE?

Could another treaty article apply?

Software tax treatment is therefore contract-sensitive.

The licence agreement should be reviewed before the Turkish withholding position is determined.

34. DTA Example: Foreign Consultancy Firm Serving Turkey

British consultancy firm advises a Turkish company.

All employees work from London.

Fee:

GBP 1 million.

The investor should examine:

• Turkey–UK treaty;
• applicable income article;
• whether the service creates a PE or another taxable presence;
• where the activity is performed;
• employee days in Turkey;
• and residence documentation.

A result under Turkish domestic withholding law may be significantly modified by the treaty where the conditions are satisfied.

35. DTA Example: Foreign Investor Sells Turkish Company Shares

Foreign corporate shareholder invested:

EUR 4 million.

Five years later sells its Turkish shares for:

EUR 20 million.

Gain:

EUR 16 million.

Before signing the SPA, the seller should analyse:

• Turkish domestic capital gains taxation;
• the DTA Capital Gains Article;
• shareholder residence;
• holding period;
• whether the target’s value derives from Turkish real estate;
• whether the shares are connected with a Turkish PE;
• and tax treatment in the seller’s residence state.

The difference between treaty structures can materially affect the net exit price.

Tax analysis should therefore precede transaction pricing—not follow closing.

36. The Most Important Practical Treaty Checklist

Before a foreign investor relies on a Turkish Double Taxation Agreement, it should work through the following sequence:

Frequently Asked Questions About Turkey’s Double Taxation Treaties

How many Double Taxation Agreements does Turkey have?

In April 2026, the Turkish Revenue Administration reported that Turkey had concluded 106 DTAs and that 93 were in force.

Does having a DTA mean no Turkish tax is payable?

No. A treaty generally allocates or limits taxation. Turkey may still retain taxing rights.

Can a treaty reduce Turkish dividend withholding?

Yes. The domestic Turkish dividend withholding rate may be reduced where the applicable treaty provides a lower ceiling and the shareholder satisfies the treaty conditions.

Can a treaty reduce interest withholding?

Yes. Interest articles frequently limit the tax the source state may impose, subject to treaty-specific conditions.

Can a treaty reduce royalty withholding?

Yes. Many Turkish treaties cap Turkish taxation of qualifying royalties. Turkey’s official treaty database publishes comparative information for interest and royalties.

Is a residence certificate necessary?

Yes in practice where the taxpayer wants to rely on treaty provisions that modify Turkish domestic taxation. GİB requires foreign treaty residents to document their residence through the appropriate certificate and certified translation process.

What happens if no residence certificate is provided?

Turkish domestic tax rules may be applied instead of the treaty benefit.

What is beneficial ownership?

It is the principle that the person relying on certain treaty benefits should genuinely enjoy and control the income rather than acting merely as a conduit for another person.

Can a foreign company earn business income from Turkey without paying Turkish corporate tax?

Potentially, depending on Turkish domestic law and the applicable treaty. Under many treaties, business profits are taxable in Turkey only where the foreign enterprise operates through a Turkish permanent establishment.

Does having a Turkish customer create a permanent establishment?

Not automatically.

Does having employees in Turkey create a PE?

Potentially, depending on the duration, activities, authority of employees and the applicable treaty.

Can Turkey tax a foreign investor’s sale of Turkish company shares?

Potentially. The answer depends on Turkish domestic law and the relevant treaty’s Capital Gains Article.

Are real-estate-rich companies treated differently?

They can be. Many treaties preserve source-country taxing rights over gains from shares whose value is principally derived from local real estate.

Does a treaty override transfer pricing?

No. Related-party transactions must still satisfy Turkish transfer-pricing rules.

Can excessive shareholder-loan interest be treated as a dividend?

Yes. GİB guidance confirms that amounts treated as hidden profit distributions can be analysed under treaty dividend provisions.

What is MAP?

MAP is the Mutual Agreement Procedure allowing taxpayers to seek competent-authority assistance where they believe they are being taxed contrary to a DTA.

Has the OECD MLI entered into force for Türkiye?

As of the OECD’s official status dated 12 January 2026, Türkiye had signed the MLI but had not deposited its ratification instrument, so no MLI entry-into-force date for Türkiye was recorded.

Conclusion: How Should Foreign Investors Use Turkey’s Double Taxation Treaties?

Turkey’s Double Taxation Agreements can materially reduce the tax cost of investing, financing, operating and exiting a Turkish business.

But they should not be viewed as simple “tax discount agreements.”

Their function is much broader.

A DTA determines:

where income is taxed + how much the source state can tax + when a foreign business creates taxable presence + how double taxation is eliminated + how tax disputes between countries can be resolved.

The first step is always to identify whether Turkey has an applicable treaty with the investor’s jurisdiction and whether that treaty is actually in force.

This distinction matters because Turkey continues to expand its treaty network.

In April 2026, GİB reported 106 concluded agreements but only 93 then in force.

Therefore:

signed does not necessarily mean effective.

The second step is residence.

Treaty benefits generally require the foreign investor to qualify as a resident of the treaty country.

Turkish Revenue Administration practice requires foreign taxpayers seeking treaty treatment to establish their residence with the appropriate certificate.

For a foreign investor, obtaining the mukimlik belgesi should therefore be a routine annual tax-compliance task.

The third step is income classification.

A EUR 1 million payment from Turkey may be:

dividend, interest, royalty, management fee, business profit, capital gain or another category.

That classification determines which treaty article applies.

Incorrect classification can entirely change the Turkish tax result.

The fourth step is source-state taxation.

For dividends, interest and royalties, treaties commonly allow Turkey to retain some taxing right while restricting the maximum rate.

Turkey’s official treaty database therefore publishes separate comparative tables covering dividend, interest and royalty rates.

The fifth step is permanent establishment.

Foreign businesses providing goods or services to Turkey should determine whether their activities create a Turkish PE.

Where the relevant income qualifies as ordinary business profits, the absence of a PE can in many treaty situations prevent Turkey from taxing those business profits.

But PE analysis must consider actual operations.

A foreign company cannot safely rely on having no Turkish subsidiary if it has:

a permanent office + employees + project site + dependent agent + long-term operational presence

that satisfies the applicable treaty definition.

The sixth step is financing.

Foreign shareholder loans should be reviewed under both domestic Turkish tax law and the treaty.

A DTA may reduce interest withholding.

But it does not eliminate:

transfer pricing + thin capitalisation + FX restrictions + KKDF + financing expense limitations.

Where shareholder interest is excessive or debt becomes thin capital, Turkish legislation can recharacterise payments as hidden or deemed dividends. Official GİB guidance confirms that treaty dividend provisions can then become relevant.

The seventh step is intellectual property.

Foreign companies licensing trademarks, patents, software or know-how to Turkish companies should identify whether the payment genuinely constitutes a treaty royalty.

The distinction between:

software purchase

and

copyright licence

can produce materially different Turkish withholding consequences.

The eighth step is exit planning.

A foreign investor selling Turkish shares should analyse the Capital Gains Article before agreeing the transaction price.

The treaty may allocate taxation differently depending on:

holding period + shareholding percentage + Turkish PE + real estate value + target structure.

For foreign real-estate investors in particular, selling company shares should not automatically be assumed to eliminate Turkish taxation.

The ninth step is eliminating double taxation in the investor’s home country.

A DTA can use:

credit

or

exemption

mechanisms.

Turkey’s tax is therefore only one component of the investor’s real global effective tax rate.

A structure producing 5% Turkish withholding may not be optimal if the foreign jurisdiction taxes the entire dividend at a high rate without an effective participation exemption.

Conversely, a slightly higher Turkish withholding rate may produce a better final outcome where the foreign shareholder receives full credit.

The tenth step is anti-abuse.

Foreign investors should avoid selecting an intermediate holding company exclusively by comparing treaty withholding rates.

The modern international tax environment increasingly focuses on:

beneficial ownership + economic substance + treaty purpose + genuine business rationale.

Turkey signed the OECD MLI in 2017, although the OECD’s January 2026 status still showed that the Turkish ratification instrument had not been deposited and therefore the MLI was not yet in force for Türkiye.

Nevertheless, anti-abuse analysis remains essential because individual Turkish treaties and domestic legislation may themselves contain relevant restrictions.

The eleventh step is dispute resolution.

If Turkey and the other treaty country both tax the same income contrary to the DTA, investors should not assume domestic court litigation is the only available route.

Turkey’s treaty network contains MAP mechanisms, and Turkish domestic tax legislation has contained specific MAP procedures for applications made since 1 January 2022.

For international groups, MAP can be particularly valuable in:

• transfer-pricing disputes;
• PE disputes;
• residence disputes;
• and conflicting income classifications.

The most effective foreign-investment treaty strategy can therefore be summarised as:

identify investor residence → confirm treaty is in force → classify income → calculate Turkish domestic tax → identify applicable treaty article → establish beneficial ownership → obtain residence certificate → test PE → calculate treaty limitation → apply foreign tax credit/exemption → document transaction → consider MAP if inconsistent taxation arises.

Foreign investors should therefore not ask only:

“Does Turkey have a tax treaty with my country?”

They should ask:

“Which article applies to my actual income, what Turkish tax does the treaty limit, what documents do I need to claim that benefit, and what happens to the Turkish tax in my home country?”

That is the difference between merely having a DTA and actually using it effectively.

For international investors planning a Turkish structure, treaty analysis should ideally be conducted at three separate stages:

before investment, during annual profit repatriation and before exit.

Before investment, it can influence the holding and financing structure.

During the investment, it can reduce unnecessary withholding on dividends, interest and royalties.

At exit, it can materially affect capital gains taxation.

Used correctly, Turkey’s Double Taxation Treaties can therefore be one of the most important legal tools available to foreign investors seeking to manage the overall tax burden of a Turkish investment while remaining fully compliant with Turkish and international tax law.

This article reflects Turkish tax rules, Turkey’s international tax treaty framework and publicly available official guidance as of August 2026. It is intended for general informational purposes only and does not constitute transaction-specific legal, tax or accounting advice. Treaty treatment varies materially according to the investor’s country of residence, legal form, ownership percentage, income type, beneficial ownership, permanent-establishment status, transaction structure and the specific wording and effective date of the applicable Double Taxation Agreement.