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2017/2 Double Tax Treaty Communiqué Nr.4 Which Includes Notable Regulations Regarding the 183 Days Rule Has Been Published

The Communiqué Nr. 4 on Double Tax Treaties ("DTT"), being published on the Official Gazette dated September 26, 2017 and numbered 30192, takes effect. The aforementioned Communiqué includes explanations regarding taxation rules for the individuals' or enterprises', who are residents of the contracting country, income from professional services or other activities of an independent character in Turkey.


Taxation rights of the contracting states for the income derived from professional service income derived by individuals and enterprises are regulated in Article 14 "Independent Professional Services" of the DTTs along with Article 5 "Permanent Establishment" and Article 7 "Business Income". In some treaties, provisions regarding these articles might take place in additional protocols. The abovementioned Communiqué clarifies particularities that require attention when determining the taxation right of Turkey over the professional service income of non-residents, taxation of such income in accordance with the provisions of domestic legislations, required documentation and refund mechanism for unduly collected taxes.

Main subjects addressed in the Communiqué are listed as below:​

  • The professional service income/ income from self-employment activities is defined in Article 14 of treaties. Where there is not a detailed definition in treaty, the definitions in domestic legislation shall be considered.

  • In DTTs of Turkey, instead of a single standard text, different type of texts have been developed for taxation of professional service income, considering the balance of economical and commercial relations between the contracting states. These texts can be mainly classified into five groups listed as below and this difference is required to be taken into consideration while determining the taxation rights (in accordance with the numerous examples provided in the Communique). 

  1. Agreements in which professional servicesof enterprises have been regulated both in Article 5 (based on a service permanent establishment ("PE") criteria) and Article 14 (e.g. China, Indonesia, Croatia, Israel and Singapore Agreements)

  2. Agreements in which professional services of enterprises have been regulated in Article 5 (based on a "service PE" criteria) and individuals' professional services have been regulated in Article 14th (e.g. Germany, Australia and Switzerland Agreements)

  3. Agreements in which the professional services of individuals are regulated in Article 14 by the wording "a resident real person" and professional services of enterprises are subject to the general provisions of the aforementioned article, without a special provision for service PE in Article 5 (e.g. South Africa Republic and Georgia Agreements).

  4. Agreements in which the professional services are regulated with the wording of "resident" in Article 14 for both individuals and enterprises (e.g. Albania, Azerbaijan, United Arab Emirates, Bahrain, Brazil, Ethiopia and Ukraine Agreements)

  5. Agreements in which professional services are regulated in Article 14 albeit separately for individuals and enterprises (e.g. USA, Austria, Belgium, Denmark, Finland, France, the Netherlands and Poland Agreements)

  • ​In DTTs of Turkey, there is not a single criteria for determining Turkey's taxation right over the professional service income. Instead, there are different criteria on each treaty and in order for the taxation right to belong to Turkey, the presence of one of these elements or more than one element is required. 

Looking at the detailed explanations in the Communiqué, it is evident that the tax administration has brought clarity to the below subjects and opted for certain amendments in current application. Through the mentioned Communiqué it has been adjudged that:  

  • Provisions of Article 5 will be taken into consideration for determining whether a "fixed place of business" as mentioned in Article 14 of DTTs is created in the other country, 

  • In terms of enterprises, the duration of services in Turkey (whether the duration has exceeded 6 months or 183 days or not) will be calculated by considering the total operation period of the enterprise in Turkey (contrary to the current application where the number of employees are multiplied with days spent in Turkey by each employee).

  • In terms of individuals, all the days including holidays and breaks a person has been physically present in Turkey with the purpose of conducting independent business activities will be taken into consideration and days shorter than 24 hours will be evaluated as a full day.

  • For the agreements in which professional services of enterprises are solely included in Article 5 (2nd group agreements), to determine Turkey's taxation right, it is sufficient to check whether there is a permanent establishment in Turkey, hence it is not necessary to calculate the duration of services.

  • In calculation of duration of services as per Article 5, the activities conducted within the scope of the same or contingent projects should be considered.

  • For agreements in which professional services are regulated separately for individuals and enterprises in Article 14, this article should be taken into consideration even if Article 5 includes the service PE condition.

  • In order to benefit from the provisions of DTTs, the tax residency certificate will be required and, a certificate regarding a calendar year will be valid until the fourth month of the following year.

  • The assignment of taxation right to Turkey by a DTT is not sufficient, there should also be a regulation in domestic law to that end.

  • Income qualified as a certain type in DTTs might be qualified differently in domestic law application and final taxation will be conducted in accordance with the domestic law. 

  • For cases in which withholding taxation in Turkey is applied unduly, other country's residents are required to fill the form No.1 (attached in the appendix of the Communiqué) and submit it to tax authorities within 30 days from the start of service procurement. 

  • Before the payment of the service fee to non-residents, the form No.2 (attached in the appendix of the Communiqué) is required to be filled by the service recipient Turkish entities and submitted to the affiliated tax office along with the copy of  written contract (if available). 

  • In the event of a partial payment by tax responsible Turkish parties, it is sufficient to submit the forms No.1 and No.2 to the tax office prior to the first payment. 

  • In the event of existence of more than one service procurement subject to withholding taxes in the same period, the form No.2 will be filled by tax responsible Turkish parties along with the attachment of the name list of the service providers (who filled the form No.1).

  • In the event that taxation right passes to Turkey due to subsequent changes such as extension of service or activity duration or establishment of a PE/fixed place and attribution of service income to that PE/fixed place, tax responsible should fulfill their withholding tax obligations including the former periods.
  • If it is not clearly known whether the duration of professional services in Turkey will be in excess of the periods foreseen in DTTs, or it is not clearly determined whether the taxation right belongs to Turkey or not, it is compulsory to apply withholding tax over professional service payments.

  • ​In the absence of a special regulation in the DTTs, the residents who think they should have not been subjected to taxation in Turkey, can appeal to the tax administration for a tax refund within the statute of limitations. Refund applications that should be made through submitting certificate of residence and the form No.3 (attached in the appendix of the Communiqué) will be concluded in accordance with the provisions of the domestic law. 

Double Tax Treaty Communiqué Nr.4 entered into force on the date of its publication. Following this Communiqué, the Double Tax Treaty Communiqué Nr.3 as published on the Official Gazette dated July 15, 2015 and numbered 29417 was abolished. 

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