If you are a foreign investor earning income in Turkiye—whether through a subsidiary, a property investment, or a licensing agreement—there is a real chance that the same income could be taxed twice: once by Turkiye and once by your home country.
This is not a theoretical risk. It is one of the most common (and most costly) oversights in cross-border investment. The good news is that Turkiye has built one of the widest networks of Double Tax Treaties (DTTs) in the region, covering more than 80 countries. If used correctly, these agreements can significantly reduce—or even eliminate—the extra tax burden.
In this guide, we break down what Double Tax Treaties are, how they work in Turkiye, and what steps you need to take to benefit from them.
1. What Is Double Taxation?
Double taxation occurs when the same income is taxed by two different countries. This typically happens when a person or company earns income in one country (the source country) while being a tax resident of another (the residence country).
Here is a simple example: A British company owns a subsidiary in Turkiye. The Turkish subsidiary distributes dividends to its UK parent. Turkiye imposes a withholding tax on the dividend payment. The UK also taxes the parent company on its worldwide income, including that same dividend. Without a treaty in place, the British company effectively pays tax on the same profit in both countries.
Double Tax Treaties (also called DTTs, or in Turkish, Çifte Vergilendirmeyi Önleme Anlaşmaları — ÇVÖA) are bilateral agreements between two countries designed to prevent exactly this. They establish clear rules on which country has the right to tax specific types of income, and at what rate.
2. Turkiye’s Treaty Network
Turkiye has signed Double Tax Treaties with more than 80 countries, making it one of the most connected economies in the region for cross-border tax planning. The network includes virtually all of Turkiye’s major trade and investment partners, such as the United States, United Kingdom, Germany, France, the Netherlands, Italy, Spain, China, Russia, Japan, South Korea, and the Gulf states.
Turkiye’s first DTT was signed with Austria in 1970, and the network has expanded steadily since then. The treaties generally follow international standards set by the OECD and the United Nations, though the specific terms—particularly withholding tax rates—can vary significantly from one agreement to another.
This is important: not all treaties are the same. A withholding rate that applies under the Netherlands treaty may be very different from what applies under the German or American treaty. Investors should never assume that all DTTs offer identical benefits.
3. What Do Double Tax Treaties Cover?
While DTTs cover a broad range of income types, the three categories that matter most to foreign investors in Turkiye are dividends, interest, and royalties. These are the payments most commonly made across borders, and they are the areas where withholding tax savings can be most significant.
Dividends
When a Turkish company distributes profits to a foreign shareholder, Turkiye imposes a withholding tax at the source. Under domestic law, this rate is currently 15%. However, most DTTs reduce this rate—often to 10%, and in some cases as low as 5% for qualifying corporate shareholders who hold a significant percentage of shares in the Turkish company.
Interest
Interest payments from a Turkish borrower to a foreign lender are also subject to withholding tax. The domestic rate can reach 15% or higher depending on the type of instrument. DTTs typically cap this at 10–15%, and some treaties provide full exemption for government-to-government or central bank transactions.
Royalties
Royalty payments covering intellectual property—such as patents, trademarks, software licenses, and know-how—are subject to withholding tax when paid from Turkiye to a foreign rights holder. Without a treaty, the domestic rate can be as high as 20%. Most DTTs reduce this to 10%, and some bring it down further for specific categories of royalties.
| Income Type | Standard Domestic Rate (No Treaty) | Typical Treaty Rate |
|---|---|---|
| Dividends | 15% | 5% – 10% |
| Interest | Up to 15% | 10% – 15% |
| Royalties | Up to 20% | 10% |
Note: Treaty rates vary by country and are subject to specific conditions such as minimum shareholding requirements. The rates above are general ranges for illustration purposes only.
4. Recent Development: Dividend Withholding Tax Increased to 15%
In December 2024, Turkiye raised the withholding tax rate on dividend distributions from 10% back to 15%. This change, which took effect immediately, applies to dividends paid to both resident and non-resident shareholders.
For foreign investors, this increase makes Double Tax Treaties even more valuable. Since most treaties with major economies provide for withholding rates below 15% on dividends, investors who qualify under a treaty can still benefit from significantly lower rates. Without treaty protection, the full 15% domestic rate applies.
Bottom line: If you are a foreign shareholder receiving dividends from a Turkish company, confirming whether a DTT applies to your situation is now more important than ever.
5. How to Benefit: The Certificate of Residence
Treaty benefits are not applied automatically. This is one of the most commonly misunderstood aspects of DTTs. To benefit from reduced withholding rates under a treaty, the foreign recipient of income must obtain a Certificate of Tax Residence (Mukimlik Belgesi) from the tax authority in their home country and submit it to the relevant Turkish tax office.
The process generally involves three steps:
- First, the investor requests a certificate of tax residence from their home country’s tax authority confirming they are a tax resident of that country.
- Second, this certificate is submitted to the Turkish tax office (or the company making the payment) before or at the time of the payment.
- Third, the Turkish company applies the reduced treaty rate when withholding tax on the payment.
Without this certificate, the paying Turkish company will apply the full domestic withholding rate by default. This means you could end up paying more tax than necessary—and while refunds may be available, they require a separate and often time-consuming process.
Frequently Asked Questions (FAQ)
1. Are Double Tax Treaty (DTT) benefits applied automatically?
No, treaty benefits are not applied automatically. To benefit from reduced withholding rates, the foreign recipient must obtain a Certificate of Tax Residence (Mukimlik Belgesi) from their home country’s tax authority and submit it to the relevant Turkish tax office or the paying entity. Without this certificate, the full domestic rate is applied by default.
2. If I have already overpaid tax in Turkiye, can I get a refund?
Yes, it is possible. If the full domestic rate was withheld because a Certificate of Residence was not submitted on time, you may apply for a refund. However, this is often a separate and time-consuming administrative process.
3. Are the tax reduction rates the same for every country?
No, withholding tax rates vary significantly from one agreement to another. For example, a rate under the Netherlands treaty may differ from those under German or American treaties. Rates are also subject to specific conditions, such as minimum shareholding percentages for dividends.
4. How often do I need to provide a Certificate of Residence?
To ensure compliance, the certificate should generally be submitted before or at the time of each relevant payment. Since tax residency is usually verified on an annual basis, it is best practice to renew and provide a fresh certificate for each fiscal year in which income is earned.
Disclaimer: This article is for general informational purposes only and does not constitute legal or tax advice. The withholding tax rates and treaty provisions mentioned are general references and may vary based on specific conditions, transaction types, and the terms of each bilateral agreement. For advice tailored to your situation, please consult a qualified legal or tax professional.
