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TAXATION AGREEMENT WITH TURKEY
GENERAL EFFECTIVE DATE UNDER ARTICLE 28: 1 JANUARY 1998
TABLE OF ARTICLES
Article 1---------------------------------Personal Scope
Article 2---------------------------------Taxes Covered
Article 3---------------------------------General Definitions
Article 4---------------------------------Resident
Article 5---------------------------------Permanent Establishment
Article 6---------------------------------Income from Immovable Property (Real Property)
Article 7---------------------------------Business Profits
Article 8---------------------------------Shipping and Air Transport
Article 9---------------------------------Associated Enterprises
Article 10-------------------------------Dividends
Article 11-------------------------------Interest
Article 12-------------------------------Royalties
Article 13-------------------------------Gains
Article 14-------------------------------Independent Personal Services
Article 15-------------------------------Dependent Personal Services
Article 16-------------------------------Directors' Fees
Article 17-------------------------------Artistes and Athletes
Article 18-------------------------------Pensions and Annuities
Article 19-------------------------------Government Service
Article 20-------------------------------Students, Apprentices, and Teachers
Article 21-------------------------------Other Income
Article 22-------------------------------Limitation on Benefits
Article 23-------------------------------Relief from Double Taxation
Article 24-------------------------------Non-Discrimination
Article 25-------------------------------Mutual Agreement Procedure
Article 26-------------------------------Exchange of Information
Article 27-------------------------------Members of Diplomatic Missions and Consular Posts
Article 28-------------------------------Entry into Force
Article 29-------------------------------Termination
Protocol---------------------------------of 28 March, 1996
Letter of Submittal--------------------of 30 July, 1996
Letter of Transmittal------------------of 3 September, 1996
The “Saving Clause”------------------Paragraph 3 of Article 1
MESSAGE
FROM
THE PRESIDENT OF THE UNITED STATES
TRANSMITTING
AGREEMENT BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA
AND THE GOVERNMENT OF THE REPUBLIC OF TURKEY, FOR THE AVOIDANCE OF
DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO
TAXES ON INCOME, TOGETHER WITH A RELATED PROTOCOL,
SIGNED AT WASHINGTON ON MARCH 28, 1996
LETTER OF SUBMITTAL
DEPARTMENT OF STATE,
Washington, July 30, 1996.
THE PRESIDENT,
The White House.
THE PRESIDENT: I have the honor to submit to you, with a view to its transmission to the Senate
for advice and consent to ratification, the Agreement Between the Government of the United States of
America and the Government of the Republic of Turkey for the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with Respect to Taxes on Income, together with a related Protocol, signed
at Washington March 28, 1996 ("the Agreement").
This Agreement is the first bilateral income tax convention between the United States and Turkey,
the only OECD partner country with which the United States does not have a tax treaty. It is, thus, an
important extension of the U.S. network of tax treaties. Since the maximum rates of taxation it specifies
are lower than those currently applied to some types of income earned by foreign investors in Turkey,
the Agreement will remove a disincentive to U.S. investment in that nation.
This Agreement is similar to the tax treaties between the United States and other OECD nations. It
provides maximum rates of tax to be applied to various types of income, protection from double
taxation of income, exchange of information to prevent fiscal evasion, and standard rules to limit the
benefits of the Agreement to persons that are not engaged in treaty shopping.
Like other U.S. tax conventions, this Agreement provides rules specifying when income that arises
in one of the countries and is derived by residents of the other country may be taxed by the country in
which the income arises (the "source" country). The Agreement establishes maximum rates of tax that
may be imposed by the source country on specified categories of income, including dividends, interest,
and royalties, to residents of the other country. These rates are somewhat higher than those found in
most U.S. treaties with OECD countries. Dividends may be subject to tax by the source country at a
maximum rate of 20 percent, except when the dividends are paid to a corporation that owns at least 10
percent of the payor, in which case the maximum rate is 15 percent.
The general rate of tax on interest by the source country under the Agreement is 15 percent, but
interest on a loan granted by a financial institution may be taxed at a maximum rate of 10 percent.
Interest received, guaranteed, or insured by the government of either the United States or Turkey or
paid to the central bank of either State is exempt from withholding by the source country.
Royalties are generally subject to tax by the source country at a maximum rate of 10 percent.
Payments for the use of industrial, commercial or scientific equipment are treated as royalties but are
subject to tax at a maximum rate of five percent at source.
Like other U.S. tax treaties and agreements, this Agreement provides the standard anti-abuse rules
for certain classes of investment income. For example, Turkish residents cannot, by investing in a taxfavored
real estate investment trust, obtain tax treatment more favorable than they would have obtained
by investing in the underlying real property directly. Similar rules prevent a Turkish resident's using a
U.S. regulated investment company to reduce artificially the U.S. tax on the income generated by
investments held by that company.
The taxation of capital gains under the Agreement is essentially the same as under most recent U.S.
tax treaties. In general, except for real property and business property, the country of the seller's
residence is given the exclusive right to tax capital gains. A limited exception to this general rule relates
to the alienation of corporate shares. Under the exemption, one Contracting State may, in accordance
with its law, tax a resident of the other State on the gain from the alienation of shares issued by a
corporation that is a resident of the first Contracting State if (i) the shares are not quoted on a stock
exchange in the first Contracting State; (ii) the shares are alienated to a resident of that State; and (iii)
the seller held the securities for one year or less. (Current U.S. law does not impose tax on a foreign
person on the disposal of shares in a U.S. corporation.)
The Agreement generally follows the standard rules for taxation by one country of the business
profits of a resident of the other. The non-residence country's right to tax such profits is limited to cases
in which the profits are attributable to a permanent establishment located in that country. The Agreement
accommodates a provision of the 1986 Tax Reform Act that attributes to a permanent establishment
income that is earned during the life of the permanent establishment but is deferred and not received until
after the permanent establishment no longer exists.
As do all recent U.S. treaties, the Agreement preserves the right of each country to impose its
branch profits tax in addition to the basic corporate tax on the branch's business profits. Additionally,
the United States has also preserved its right to impose its branch-level interest tax.
Consistent with U.S. treaty policy, the Agreement permits only the country of residence to tax
profits from international carriage by ships or airplanes and income from the use or rental of containers.
In a departure from this policy, however, the reciprocal exemption does not extend to income from the
non-incidental rental of ships or aircraft. Such income is treated as royalties and is, therefore, generally
subject to a maximum tax by the source country of five percent.
The taxation of income from the performance of personal services under the Agreement differs in
some respects from the standard U.S. treaty policy. For example, a 183-day test applies in addition to
the standard fixed-base test to determine the host-country's right to tax income from independent
personal services. Thus, even if there is no fixed base, the "host" Contracting State may tax the income
from the services performed in that State by an individual who is present there for more than 183 days
in a twelve-month period. The Agreement provides for host-country exemption of visiting teachers if the
visit does not exceed two years and if the remuneration arises outside the host country.
This Agreement contains standard rules making its benefits unavailable to persons engaged in treaty
shopping. It also contains the standard rules necessary for administering the Agreement, including rules
for the resolution of disputes under the Agreement and for exchange of information.
The Agreement authorizes the General Accounting Office and the Tax-Writing Committees of
Congress to obtain access to certain tax information exchanged under the Agreement for use in their
oversight of the administration of U.S. tax laws and treaties.
This Agreement is subject to ratification. It will enter into force upon the exchange of instruments of
ratification and will have effect with respect to taxes withheld by the source country for payments made
or credited on or after the first day of January following entry into force and in other cases for taxable
years beginning on or after that date.
This Agreement will remain in force indefinitely unless terminated by one of the Contracting States.
Either State may terminate the Agreement after five years from its entry into force by giving at least six
months prior notice through diplomatic channels.
A Protocol accompanies and forms an integral part of the Agreement and provides clarification with
respect to the application of the Agreement in specified cases. For example, the Protocol defines certain
technical tax terms used in the Agreement by reference to particular provisions of the Internal Revenue
Code.
A technical memorandum explaining in detail the provisions of the Agreement will be prepared by
the Department of the Treasury and will be submitted separately to the Senate Committee on Foreign
Relations.
The Department of the Treasury and the Department of State cooperated in the negotiation of the
Agreement. It has the full approval of both Departments.
Respectfully submitted,
WARREN CHRISTOPHER.
LETTER OF TRANSMITTAL
THE WHITE HOUSE, September 3, 1996.
To the Senate of the United States:
I transmit herewith for Senate advice and consent to ratification the Agreement Between the
Government of the United States of America and the Government of the Republic of Turkey for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income,
together with a related Protocol, signed at Washington March 28, 1996. Also transmitted for the
information of the Senate is the report of the Department of State with respect to the Agreement.
This Agreement, which is similar to tax treaties between the United States and other OECD nations,
provides maximum rates of tax to be applied to various types of income, protection from double
taxation of income, exchange of information to prevent fiscal evasion, and standard rules to limit the
benefits of the Agreement to persons that are not engaged in treaty shopping.
I recommend that the Senate give early and favorable consideration to this Agreement and related
Protocol and give its advice and consent to ratification.
WILLIAM J. CLINTON.
AGREEMENT BETWEEN
THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND
THE GOVERNMENT OF THE REPUBLIC OF TURKEY
FOR THE AVOIDANCE OF DOUBLE TAXATION AND
THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES
ON INCOME
The Government of the United States of America and the Government of the Republic of Turkey,
desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal
evasion with respect to taxes on income, have agreed as follows:
ARTICLE 1
Personal Scope
1. This Agreement shall apply to persons who are residents of one or both of the Contracting
States, except as otherwise provided in the Agreement.
2. The Agreement shall not restrict in any manner, any exclusion, exemption, deduction, credit, or
other allowance now or hereafter accorded:
a) by the laws of either Contracting State; or
b) by any other agreement between the Contracting States.
3. Notwithstanding any provision of the Agreement except paragraph 4, a Contracting State may
tax its residents (as determined under Article 4 (Resident)), and, in the case of the United States, by
reason of citizenship may tax its citizens, as if the Agreement had not come into effect. For this purpose,
the term "citizen" shall include a former citizen whose loss of citizenship had as one of its principal
purposes the avoidance of tax, but only for a period of 10 years following such loss.
4. The provisions of paragraph 3 shall not affect:
a) the benefits conferred by a Contracting State under paragraph 2 of Article 9
(Associated Enterprises), under paragraph 2 of Article 18 (Pensions and Annuities), and under
Article 23 (Relief from Double Taxation), 24 (Non-Discrimination), and 25 (Mutual Agreement
Procedure); and
b) the benefits conferred by a Contracting State under Articles 19 (Government
Service), 20 (Students, Apprentices, and Teachers), and 27 (Members of Diplomatic Missions
and Consular Posts), upon individuals who are neither citizens of, nor have immigrant status in,
that State.
5. Notwithstanding the provisions of subparagraph 2(b):
a) Notwithstanding any other agreement to which the Contracting States may be parties,
a dispute concerning whether a measure is within the scope of this Agreement shall be
considered only by the competent authorities of the Contracting States, as defined in
subparagraph 1(h) of Article 3 (General Definitions) of this Agreement, and the procedures
under this Agreement exclusively shall apply to the dispute.
b) Unless the competent authorities determine that a taxation measure is not within the
scope of this Agreement, the nondiscrimination obligations of this Agreement exclusively shall
apply with respect to that measure, except for such national treatment or most-favored-nation
obligations as may apply to trade in goods under the General Agreement on Tariffs and Trade.
No national treatment or most-favored-nation obligation under any other agreement shall apply
with respect to that measure.
c) For the purpose of this paragraph, a "measure" is a law, regulation, rule, procedure,
decision, administrative action, or any other form of measure.
ARTICLE 2
Taxes Covered
1. This Agreement shall apply to taxes on income imposed on behalf of each Contracting State,
irrespective of the manner in which they are levied.
2. The existing taxes to which the Agreement shall apply are, in particular:
a) in the case of Turkey:
i) the income tax (Gelir Vergisi);
ii) the corporation tax (Kurumlar Vergisi);
iii) the levy imposed on the income tax and the corporation tax (hereinafter
referred to as "Turkish Tax");
b) in the case of the United States: the Federal income taxes imposed by the Internal
Revenue Code (but excluding the accumulated earnings tax, the personal holding company tax
and social security taxes), and the excise taxes imposed with respect to private foundations
(hereinafter referred to as "United States Tax").
3. The Agreement shall apply also to any identical or substantially similar taxes which are imposed
after the date of signature of the Agreement in addition to, or in place of, the existing taxes. The
competent authorities of the Contracting States shall notify each other of any significant changes which
have been made in their respective taxation laws.
ARTICLE 3
General Definitions
1. For the purposes of this Agreement, unless the context otherwise requires:
a) (i) the term "Turkey" means the territory of the Republic of Turkey, as well as
the continental shelf over which Turkey has, in accordance with international
law, sovereign rights to explore and exploit its natural resources;
(ii) the term "United States" means the United States of America, but does not
include Puerto Rico, Virgin Islands, Guam or any other United States possession or
territory. When used in a geographic sense it means the states thereof, the District of
Columbia, and the internal waters and territorial sea of the United States, established in
accordance with international law; it also includes the seas, seabed and subsoil adjacent
to the territorial sea in which the United States has or exercises sovereign rights or
jurisdiction in accordance with international law;
b) the terms "a Contracting State" and "the other Contracting State" mean Turkey or the
United States as the context requires;
c) the term "person" includes an individual, a company, and any other body of persons;
d) the term "company" means any body corporate or any entity which is treated as a
body corporate for tax purposes;
e) a company has its "place of incorporation":
(i) in Turkey, if its legal head office is registered in Turkey under the Turkish
Code of Commerce; or
(ii) in the United States, if it is organized, created, or incorporated under the
laws of the United States or any political subdivision thereof;
f) the term "national" means:
(i) in relation to Turkey, any individual possessing Turkish nationality in
accordance with the Turkish Nationality Code; and any legal person, partnership, or
association deriving its status as such from the law in force in Turkey;
(ii) in relation to the United States, any individual who is a citizen of the United
States; and any company, association, or other entity deriving its status as such from the
laws of the United States or any political subdivision thereof;
g) the terms "enterprise of a Contracting State" and "enterprise of the other Contracting
State" mean respectively an enterprise carried on by a resident of a Contracting State and an
enterprise carried on by a resident of the other Contracting State;
h) the term "competent authority" means:
(i) in the case of Turkey, the Minister of Finance or his authorized
representatives;
(ii) in the case of the United States, the Secretary of the Treasury or his
delegate;
i) the term "international traffic" means any transport by a ship or aircraft operated by an
enterprise of a Contracting State, except where such transport is solely between places in the
other Contracting State.
2. As regards the application of this Agreement by a Contracting State any term not defined therein
shall, unless the context otherwise requires, or the competent authorities agree to a common meaning
pursuant to the provisions of Article 25 (Mutual Agreement Procedure), have the meaning which it has
under the laws of that State concerning the taxes to which the Agreement applies.
ARTICLE 4
Resident
1. For the purposes of this Agreement, the term "resident of a Contracting State" means any person
who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of
management, place of incorporation, or any other criterion of a similar nature, provided, however, that
in the case of income derived or paid by a partnership or similar pass-through entity, estate, or trust, this
term applies only to the extent that the income derived by such partnership, similar entity, estate, or trust
is subject to tax in that State as the income of a resident, either in its hands or in the hands of its
partners, beneficiaries, members, or grantors. The term does not include any person who is liable to tax
in that State only on income from sources in that State.
2. Where by reason of the provisions of paragraph 1, an individual is a resident of both Contracting
States, then his status shall be determined as follows:
a) he shall be deemed to be a resident of the State in which he has a permanent home
available to him; if he has a permanent home available to him in both States, he shall be deemed
to be a resident of the State with which his personal and economic relations are closer (centre of
vital interests);
b) if the State in which he has his centre of vital interests cannot be determined, or if he
does not have a permanent home available to him in either State, he shall be deemed to be a
resident of the State in which he has an habitual abode;
c) if he has an habitual abode in both States or in neither of them, he shall be deemed to
be a resident of the State of which he is a national;
d) if he is a national of both States or of neither of them, the competent authorities of the
Contracting States shall settle the question by mutual agreement.
3. Where by reason of the provisions of paragraph 1 a company is a resident of both Contracting
States, it shall be deemed to be a resident of the State in which it has its place of incorporation.
4. Where by reason of the provisions of paragraph 1 a person other than an individual or a
company is a resident of both Contracting States, the competent authorities of the Contracting States
shall settle the question by mutual agreement and determine the mode of application of the Agreement to
such person.
ARTICLE 5
Permanent Establishment
1. For the purposes of this Agreement, the term "permanent establishment" means a fixed place of
business through which the business of an enterprise is wholly or partly carried on.
2. The term "permanent establishment" includes especially:
a) a place of management;
b) a branch;
c) an office;
d) a factory;
e) a workshop;
f) a mine, an oil or gas well, a quarry or any other place of extraction of natural
resources; and
g) a building site, a construction, assembly or installation project if such site, project, or
activities continue for a period of more than six months.
3. Notwithstanding the preceding provisions of this Article, the term "permanent establishment" shall
be deemed not to include:
a) the use of facilities solely for the purpose of storage, display, or delivery of goods or
merchandise belonging to the enterprise;
b) the maintenance of a stock of goods or merchandise belonging to the enterprise
solely for the purpose of storage, display or delivery;
c) the maintenance of a stock of goods or merchandise belonging to the enterprise
solely for the purpose of processing by another enterprise;
d) the maintenance of a fixed place of business solely for the purpose of purchasing
goods or merchandise or of collecting information, for the enterprise;
e) the maintenance of a fixed place of business solely for the purpose of carrying on, for
the enterprise, any other activity of a preparatory or auxiliary character;
f) the maintenance of a fixed place of business solely for any combination of activities
mentioned in subparagraphs a) through e), provided that the overall activity of the fixed place of
business resulting from this combination is of a preparatory or auxiliary character.
4. Notwithstanding the provisions of paragraphs 1 and 2, where a person (other than an agent of an
independent status to whom paragraph 5 applies) is acting in a Contracting State on behalf of an
enterprise of the other Contracting State, that enterprise shall be deemed to have a permanent
establishment in the first-mentioned State in respect of any activities which that person undertakes for
the enterprise, if such a person:
a) has and habitually exercises in the first-mentioned State an authority to conclude
contracts on behalf of the enterprise, unless the activities of such person are limited to those
mentioned in paragraph 3 which, if exercised through a fixed place of business, would not make
that fixed place of business a permanent establishment under the provisions of that paragraph; or
b) has no such authority, but habitually maintains in the first-mentioned State a stock of
goods or merchandise from which he regularly delivers goods or merchandise on behalf of the
enterprise. The foregoing provisions of this subparagraph shall apply only if it is proved that in
order to avoid taxation in the first-mentioned State, such person undertakes not only the regular
delivery of the goods or merchandise, but also undertakes virtually all the activities connected
with the sale of the goods or merchandise except for the actual conclusion of the sales-contract
itself.
5. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in
the other Contracting State merely because it carries on business in that other State through a broker,
general commission agent, or any other agent of an independent status, provided that such persons are
acting in the ordinary course of their business.
6. The fact that a company which is a resident of a Contracting State controls or is controlled by a
company which is a resident of the other Contracting State, or which carries on business in that other
State (whether through a permanent establishment or otherwise), shall not of itself constitute either
company a permanent establishment of the other.
ARTICLE 6
Income from Immovable Property (Real Property)
1. Income derived by a resident of a Contracting State from immovable property (real property)
(including income from agriculture or forestry) situated in the other Contracting State may be taxed in
that other State.
2. The term "immovable property" shall have the meaning which it has under the law of the
Contracting State in which the property in question is situated. The term shall in any case include
property accessory to immovable property, livestock and equipment used in agriculture and forestry,
fishing places of every kind, rights to which the provisions of general law respecting landed property
apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the
working of, or the right to work, mineral deposits, sources and other natural resources; ships, boats and
aircraft shall not be regarded as immovable property.
3. The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use in
any other form of immovable property.
4. The provisions of paragraphs 1 and 3 shall also apply to the income from immovable property of
an enterprise and to income from immovable property used for the performance of independent
personal services.
ARTICLE 7
Business Profits
1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the
enterprise carries on business in the other Contracting State through a permanent establishment situated
therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in
the other State but only so much of them as is attributable to that permanent establishment.
2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on
business in the other Contracting State through a permanent establishment situated therein, there shall in
each Contracting State be attributed to that permanent establishment the business profits which it might
be expected to make if it were a distinct and independent enterprise engaged in the same or similar
activities under the same or similar conditions.
3. In determining the profits of a permanent establishment, there shall be allowed as deductions
expenses which are incurred for the purposes of the permanent establishment, including executive and
general administrative expenses so incurred, whether in the State in which the permanent establishment
is situated or elsewhere.
4. No profits shall be attributed to a permanent establishment by reason of the mere purchase by
that permanent establishment of goods or merchandise for the enterprise.
5. For the purposes of this Agreement, the profits to be attributed to the permanent establishment
shall include only the profits derived from the assets or activities of the permanent establishment.
6. Where profits include items of income which are dealt with separately in other Articles of this
Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article.
ARTICLE 8
Shipping and Air Transport
1. Profits of an enterprise of a Contracting State from the operation of ships or aircraft in
international traffic shall be taxable only in that State.
2. For purposes of this Article, profits from the operation of ships or aircraft in international traffic
include profits derived from the rental of ships or aircraft if such rental profits are incidental to other
profits described in paragraph 1.
3. Profits of an enterprise of a Contracting State from the use, maintenance, or rental of containers
(including trailers, barges, and related equipment for the transport of containers) used in international
traffic shall be taxable only in that State.
4. The provisions of paragraphs 1 and 3 shall also apply to profits from participation in a pool, a
joint business, or an international operating agency.
ARTICLE 9
Associated Enterprises
1. Where:
a) an enterprise of a Contracting State participates directly or indirectly in the
management, control, or capital of an enterprise of the other Contracting State, or
b) the same persons participate directly or indirectly in the management, control, or
capital of an enterprise of a Contracting State and an enterprise of the other Contracting State,
and in either case conditions are made or imposed between the two enterprises in their commercial or
financial relations which differ from those which would be made between independent enterprises, then
any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason
of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed
accordingly.
2. Where a Contracting State includes in the profits of an enterprise of that State, and taxes
accordingly, profits on which an enterprise of the other Contracting State has been charged to tax in that
other State, and the profits so included are claimed by the first-mentioned State to be profits which
would have accrued to the enterprise of the first-mentioned State if the conditions made between the
two enterprises had been those which would have been made between independent enterprises, then
that other State shall make an appropriate adjustment to the amount of the tax charged therein on those
profits, where that other State considers the adjustment justified. In determining such adjustment, due
regard shall be paid to the other provisions of this Agreement and the competent authorities of the
Contracting States shall if necessary consult each other.
ARTICLE 10
Dividends
1. Dividends paid by a resident of a Contracting State to a resident of the other Contracting State
may be taxed in that other State.
2. However, such dividends may also be taxed in the Contracting State of which the payor is
resident, and according to the laws of that State, but if the beneficial owner of the dividends is a resident
of the other Contracting State, the tax so charged shall not exceed:
a) 15 percent of the gross amount of the dividends if the beneficial owner is a company
which owns at least 10 percent of the voting stock of the company paying the dividends;
b) 20 percent of the gross amount of the dividends in all other cases. Subparagraph b)
and not subparagraph a) shall apply in the case of dividends paid by a United States person that
is a Regulated Investment Company or by a Turkish person that is a Securities Investment
Corporation or a Securities Investment Fund. Subparagraph a) shall not apply to dividends paid
by a United States person that is a Real Estate Investment Trust or a Turkish person that is a
Real Estate Investment Corporation or a Real Estate Investment Fund, and subparagraph b)
shall apply only if the dividend is beneficially owned by an individual holding a less than 10
percent interest in the Real Estate Investment Trust, Real Estate Investment Corporation, or
Real Estate Investment Fund; otherwise, the rate of tax applicable under domestic law shall
apply.
3. The term "dividend" as used in this Article means income from shares, "jouissance" shares or
"jouissance" rights, founders shares or other rights (not being debt-claims) participating in profits,
income from other corporate rights that are subjected to the same taxation treatment as income from
shares by the taxation laws of the State of which the company making the distribution is resident; and
income from arrangements, including instruments denominated as debt-claims, that carry the right to
participate in, or are determined by reference to, profits, to the extent so characterized under the laws of
the Contracting State in which the income arises.
4. a) Profits attributable to a permanent establishment located in Turkey, through which a
company that is a resident of the United States carries on business, after having been taxed
under other provisions of this Agreement, may be taxed on the remaining amount in Turkey in
accordance with its law.
b) A corporation which is a resident of Turkey and which has a permanent
establishment in the United States or which is subject to tax in the United States on a net basis
on its income that may be taxed in the United States under Article 6 (Income from Immovable
Property (Real Property)) or under paragraph 1 of Article 13 (Gains) may be subject in the
United States to a tax in addition to the tax allowable under the other provisions of this
Agreement. Such tax, however, may be imposed only on the portion of the business profits of
the corporation attributable to the permanent establishment, and the portion of the income of the
corporation referred to in the preceding sentence that is subject to tax under Article 6 or under
paragraph 1 of Article 13 that represents the dividend equivalent amount of such profits and
income. The taxes referred to in this paragraph shall not be imposed at a rate exceeding the rate
specified in subparagraph a) of paragraph 2 of this Article.
5. The provisions of paragraphs 1 and 2 shall not apply if the recipient of the dividends, being a
resident of one of the Contracting States, carries on business in the other Contracting State of which the
company paying the dividends is a resident, through a permanent establishment situated therein, or, in
the case of a resident of Turkey, performs in the United States independent personal services from a
fixed base situated in the United States, and the dividends are attributable to such permanent
establishment or fixed base. In such case the provisions of Article 7 ( Business Profits) or Article 14
(Independent Personal Services), as the case may be, shall apply.
6. Where a company which is a resident of a Contracting State derives profits or income from the
other Contracting State, that other State may not impose any tax on the dividends paid by the company,
except insofar as such dividends are paid to a resident of that other State or insofar as the holding in
respect of which the dividends are paid is effectively connected with a permanent establishment or a
fixed base situated in that other State.
ARTICLE 11
Interest
1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may
be taxed in that other State.
2. However, such interest may also be taxed in the Contracting State in which it arises, and
according to the laws of that State, but if the beneficial owner of the interest is a resident of the other
Contracting State, the tax so charged shall not exceed 15 percent of the gross amount of the interest,
except that, if the interest is derived from a loan of whatever kind granted by a financial institution, such
as a bank, savings institution, or insurance company, the interest shall not be taxed at an amount in
excess of 10 percent of the gross amount of such interest.
3. Notwithstanding the provisions of paragraph 2, interest arising in:
a) the United States and paid to the Government of Turkey or to the Central Bank of
Turkey (Turkiye Cumhuriyet Merkez Bankasi) shall be exempt from United States tax;
b) Turkey and paid to the Government of the United States or any Federal Reserve
Bank shall be exempt from Turkish tax;
c) a Contracting State in connection with a loan or credit guaranteed or insured by the
Government of the other Contracting State shall be exempt from taxation in the first-mentioned
State.
The competent authorities shall by mutual agreement determine the scope of subparagraph c) of this
paragraph.
4. The term "interest" as used in this Article:
a) means income from debt-claims of every kind, whether or not secured by mortgage,
and whether or not carrying a right to participate in the debtor's profits, and all other income that
is characterized as income from money lent by the laws of the Contracting State in which the
income arises, and in particular, income from government securities, and income from bonds or
debentures, including premiums or prizes attaching to such securities, bonds or debentures; and
b) includes, in the case of the United States the excess, if any, of the amount of interest
borne by a permanent establishment, fixed base, or trade or business subject to tax on a net
basis in the United States under Article 6 (Income from Immovable Property (Real Property))
or paragraph 1 of Article 13 (Gains) over the interest paid by that permanent establishment,
fixed base, or trade or business in the United States.
However, the term interest does not include income dealt within Article 10 (Dividends).
5. The provisions of paragraphs 1, 2 and 3 shall not apply if the recipient of the interest, being a
resident of a Contracting State, carries on business in the other Contracting State in which the interest
arises through a permanent establishment situated therein, or, in the case of a resident of Turkey,
performs in the United States independent personal services from a fixed base situated in the United
States, and the interest is attributable to that permanent establishment or fixed base. In such case, the
provisions of Article 7 (Business Profits) or Article 14 (Independent Personal Services), as the case
may be, shall apply.
6. Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a
political subdivision, local authority or resident of that State. Where, however, the person paying the
interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent
establishment or a fixed base or a trade or business subject to tax in that State on a net basis under
Article 6 (Income from Immovable Property (Real Property)) or Article 13 (Gains), and such interest is
borne by such permanent establishment, fixed base, or trade or business, then such interest shall be
deemed to arise in the State in which the permanent establishment, fixed base, or trade or business is
situated. Interest described in subparagraph b) of paragraph 4 shall be deemed to arise in the United
States.
7. Where, by reason of a special relationship between the payer and the beneficial owner or
between both of them and some other person, the amount of the interest, having regard to the debtclaim
for which it is paid, exceeds the amount which would have been agreed upon by the payer and the
beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the
last mentioned amount. In that case, the excess part of the payments shall remain taxable according to
the laws of each Contracting State, due regard being had to the other provisions of this Agreement.
8. The provisions of paragraphs 2 and 3 shall not apply to:
a) an excess inclusion with respect to a residual interest in a United States real estate
mortgage investment conduit; or
b) interest that is contingent interest of a type that does not qualify as portfolio interest
under United States law, and to equivalent amounts under Turkish law.
Income described in subparagraph a) may be taxed in accordance with the domestic law of the
Contracting State in which the interest arises, and income described in subparagraph b) will be taxed in
accordance with the provisions of Article 10 (Dividends), as if it were a dividend.
ARTICLE 12
Royalties
1. Royalties arising in a Contracting State and paid to a resident of the other Contracting State may
be taxed in that other State.
2. However, such royalties may also be taxed by the Contracting State in which they arise, and
according to the laws of that State, but if the beneficial owner of the royalties is a resident of the other
Contracting State, the tax so charged shall not exceed 10 percent of the gross amount of royalties
described in subparagraph a) of paragraph 3 and shall not exceed 5 percent of the gross amount of
royalties described in subparagraph b) of paragraph 3.
3. The term "royalties" as used in this Article means payment of any kind received as a
consideration:
a) for the use of, the right to use, or the sale (which is contingent on the productivity,
use, or disposition) of any copyright of literary, artistic, or scientific work including royalties in
respect of motion pictures and works on film, tape, or other means of reproduction for use in
connection with radio or television broadcasting, any patent, trademark, design or model, plan,
secret formula or process, or for information concerning, industrial, commercial or scientific
experience;
b) for the use of, or the right to use industrial, commercial, or scientific equipment.
4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties, being
a resident of a Contracting State carries on business in the other Contracting State in which the royalties
arise, through a permanent establishment situated therein, or, in the case of a resident of Turkey,
performs in the United States independent personal services from a fixed base situated in the United
States, and the royalties are attributable to such permanent establishment or fixed base. In such case the
provisions of Article 7 (Business Profits) or Article 14 (Independent Personal Services), as the case
may be, shall apply.
5. Royalties shall be deemed to arise in a Contracting State when the payer is that State itself, a
political subdivision, a local authority or a resident of that State. Where, however, the person paying the
royalties, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent
establishment or fixed base in connection with which the liability to pay the royalties was incurred, and
such royalties are borne by the permanent establishment or fixed base, then such royalties shall be
deemed to be derived from sources within the Contracting State in which the permanent establishment
or fixed base is situated. Where neither of the previous two sentences operates to deem royalties as
arising in one of the Contracting States, and where the royalties are paid for the use of or the right to use
a right or property within a Contracting State, the royalties shall be deemed to arise in that State.
6. Where, by reason of a special relationship between the payer and the beneficial owner or
between both of them and some other person, the amount of the royalties, having regard to the use, right
or information for which they are paid, exceeds the amount which would have been agreed upon by the
payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall
apply only to the last-mentioned amount. In such case, the excess part of the payment shall remain
taxable according to the laws of each Contracting State, due regard being had to the other provisions of
the Agreement.
ARTICLE 13
Gains
1. Gains derived by a resident of a Contracting State from the alienation of:
a) real property situated in the other Contracting State or
b) an interest in a partnership, trust or estate to the extent attributable to real property
situated in the other Contracting State may be taxed in that other State.
2. For purposes of this Article, the term "real property situated in the other Contracting State"
includes a United States real property interest or an equivalent interest in Turkish real property, real
property referred to in Article 6 (Income from Immovable Property (Real Property)) which is situated in
the other Contracting State and an interest in a partnership, trust or estate referred to in paragraph 1 b).
3. Gains from the alienation of movable property forming part of the business property of a
permanent establishment which an enterprise of a Contracting State has in the other Contracting State,
or of movable property pertaining to a fixed base available to a resident of a Contracting State in the
other Contracting State for the purpose of performing independent personal services, including such
gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or such
a fixed base, may be taxed in that other State.
4. Gains from the alienation of ships, aircraft, or containers operated in international traffic, or
movable property pertaining to the operation of ships, aircraft, or containers shall be taxable only in the
Contracting State of which the alienator is a resident.
5. Gains from the alienation of any property other than that referred to in the foregoing paragraphs
shall be taxable only in the State of which the alienator is resident. However, the provisions of the
foregoing sentence shall not affect the right of one of the States to levy according to its own law a tax on
gains derived by a resident of the other State from the alienation of shares or bonds issued by a
company which is a resident of the first-mentioned State (other than shares and bonds quoted on a
stock exchange of that State) if the alienation takes place to a resident of the first-mentioned State and if
the period between acquisition and alienation does not exceed one year.
ARTICLE 14
Independent Personal Services
1. Income derived by a resident of one of the Contracting States in respect of professional services
or other activities of an independent character shall be taxable only in that State. However, such income
may also be taxed in the other Contracting State if such services or activities are performed in that other
State and if:
a) the resident has a fixed base regularly available to him in that other State for the
purpose of performing those services or activities; or
b) the resident is present in that other State for the purpose of performing those services
or activities for a period or periods exceeding in the aggregate 183 days in any continuous
period of 12 months. In such circumstances, only so much of the income as is attributable to that
fixed base or is derived from the services or activities performed during his presence in that
other State, as the case may be, may be taxed in that other State.
2. Income derived by an enterprise of one of the Contracting States in respect of professional
services or other activities of a similar character shall be taxable only in that State. However, such
income may also be taxed in the other Contracting State if such services or activities are performed in
that other State and if:
a) the enterprise has a permanent establishment in that other State through which the
services or activities are performed; or
b) the period or periods during which the services or activities are performed exceed in
the aggregate 183 days in any continuous period of 12 months. In such circumstances only so
much of the income as is attributable to that permanent establishment or to the services or
activities performed in that other State, as the case may be, may be taxed in that other State. In
either case the Republic of Turkey may levy a withholding tax on such income. However, the
recipient of such income, having been subjected to such a tax, may elect to be taxed on a net
basis in respect of such income in accordance with the provisions of Article 7 (Business Profits)
of this Agreement as if the income were attributable to a permanent establishment of the
enterprise situated in that other State.
ARTICLE 15
Dependent Personal Services
1. Subject to the provisions of Articles 16 (Directors’ Fees), 18 (Pensions and Annuities), 19
(Government Service), and 20 (Students, Apprentices, and Teachers), salaries, wages, and other similar
remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable
only in that State unless the employment is exercised in the other Contracting State. If the employment is
so exercised, such remuneration as is derived therefrom may be taxed in that other State.
2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a
Contracting State in respect of an employment exercised in the other Contracting State shall be taxable
only in the first-mentioned State if:
a) the recipient is present in the other State for a period or periods not exceeding in the
aggregate 183 days in any continuous period of 12 months;
b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the
other State; and
c) the remuneration is not borne by a permanent establishment or a fixed base which the
employer has in the other State.
3. Notwithstanding the preceding provisions of this Article, remuneration derived by a resident of a
Contracting State in respect of an employment as a member of the regular complement of a ship or
aircraft operated in international traffic by an enterprise of the other Contracting State may be taxed in
that other Contracting State.
ARTICLE 16
Directors' Fees
Directors' fees and other similar payments derived by a resident of a Contracting State for services
rendered in the other Contracting State in his capacity as a member of the board of directors of a
company which is a resident of the other State may be taxed in that other State.
ARTICLE 17
Artistes and Athletes
1. Notwithstanding the limitations of Articles 14 (Independent Personal Services) and 15
(Dependent Personal Services), income derived by a resident of a Contracting State as an entertainer,
such as a theatre, motion picture, radio, or television artiste, or a musician, or as an athlete, from his
personal activities as such exercised in the other Contracting State, may be taxed in that other State,
except where the amount of the gross receipts derived by such entertainer or athlete from such activities
does not exceed 3,000 United States dollars or its equivalent in Turkish lira for the taxable year
concerned.
2. Where income in respect of activities exercised by an entertainer or an athlete in his capacity as
such accrues not to that entertainer or athlete himself but to another person, that income may,
notwithstanding the provisions of Articles 7 (Business Profits) and 14 (Independent Personal Services),
be taxed in the Contracting State in which the activities of the entertainer or athlete are exercised, unless
the entertainer or athlete establishes that neither he nor any person related to him participated directly or
indirectly in the profits of that other person in any manner, including the receipt of deferred
remuneration, bonuses, fees, dividends, partnership distributions, or other distributions.
3. The provisions of paragraphs 1 and 2 shall not apply to income derived from activities performed
in a Contracting State by entertainers or athletes if such activities are substantially supported by a nonprofit
organization of the other Contracting State or by public funds of the other Contracting State or a
political subdivision or a local authority thereof.
ARTICLE 18
Pensions and Annuities
1. Subject to the provisions of paragraph 2 of Article 19 (Government Service), pensions and other
similar remuneration paid to a resident of a Contracting State in consideration of past employment,
whether paid periodically or in a lump-sum, shall be taxable only in that State.
2. Notwithstanding the provisions of paragraph 1, payments made by a Contracting State under the
provisions of the social security or similar legislation of that State to a resident of the other Contracting
State or to a citizen of the United States shall be taxable only in the first-entioned State.
3. Annuities derived and beneficially owned by an individual resident of a Contracting State shall be
taxable only in that State. The term "annuities" as used in this paragraph means a stated sum paid
periodically at stated times during a specified number of years, under an obligation to make the
payments in return for adequate and full consideration (other than services rendered) in money or
money's worth.
ARTICLE 19
Government Service
1. a) Remuneration, other than a pension, paid by a Contracting State or a political
subdivision or a local authority thereof, to an individual in respect of services rendered to that
State or subdivision or authority shall be taxable only in that State.
b) However, such remuneration shall be taxable only in the other Contracting State if the
services are rendered in that State and the individual is a resident of that State who:
(i) is a national of that State; or
(ii) did not become a resident of that State solely for the purpose of rendering
the services.
2. a) Any pension paid by, or out of funds created by, a Contracting State or a political
subdivision or a local authority thereof, to an individual in respect of services rendered to that
State or subdivision or authority shall be taxable only in that State.
b) However, such pension shall be taxable only in the other Contracting State if the
individual is a resident of, and a national of, that State.
3. The provisions of Articles 15 (Dependent Personal Services), 16 (Directors' Fees), and 18
(Pensions and Annuities) shall apply to remuneration and pensions in respect of services rendered in
connection with a business carried on by a Contracting State or a political subdivision or a local
authority thereof.
ARTICLE 20
Students, Apprentices, and Teachers
1. Payments received for the purpose of maintenance, education, or training by a student,
apprentice, or business trainee who is, or was immediately before visiting a Contracting State, a resident
of the other Contracting State and who is present in the first-mentioned State for the purpose of his fulltime
education or training shall not be taxed in that State, provided that such payments arise outside that
State.
2. Likewise, remuneration received by a teacher or by an instructor who is, or was immediately
before visiting a Contracting State, a resident of the other Contracting State and who is present in the
first-mentioned State for a period or periods not exceeding two years for the purpose of teaching or
engaging in scientific research shall be exempt from tax in that State on his remuneration from personal
services for teaching or research, provided that such payments arise outside that State.
ARTICLE 21
Other Income
1. Items of income of a resident of a Contracting State, wherever arising, not dealt within the
foregoing Articles of this Agreement shall be taxable only in that State.
2. The provisions of paragraph 1 shall not apply to income, other than income from immovable
property as defined in paragraph 2 of Article 6 (Income from Immovable Property (Real Property)), if
the beneficial owner of such income, being a resident of a Contracting State, carries on business in the
other Contracting State through a permanent establishment situated therein, or performs in that other
State independent personal services from a fixed base situated therein, and the income is attributable to
such permanent establishment or fixed base. In such case the provisions of Article 7 (Business Profits)
or Article 14 (Independent Personal Services), as the case may be, shall apply.
ARTICLE 22
Limitation on Benefits
1. A person (other than an individual) which is a resident of a Contracting State and derives income
from the other Contracting State shall not be entitled under this Agreement to relief from taxation in that
other Contracting State unless:
a) more than 50 percent of the beneficial interest in such person (or in the case of a
company, more than 50 percent of the number of shares of each class of the company’s shares)
is owned, directly or indirectly, by one or more individual residents of one of the Contracting
States or citizens of the United States, or by persons entitled to the benefits of this Agreement
under the provisions of paragraphs 3, 4 or 5; and
b) the income of such person is not used in substantial part, directly or indirectly, to
meet liabilities (including liabilities for interest or royalties) to persons who are neither residents
of one of the Contracting States or citizens of the United States, nor persons entitled to the
benefits of this Agreement under the provisions of paragraphs 3, 4 or 5.
2. The provisions of paragraph 1 shall not apply if the income derived from the other Contracting
State is derived in connection with, or is incidental to, the active conduct by such person of a trade or
business in the first-mentioned Contracting State (other than the business of making or managing
financial investments, unless these activities are banking or insurance activities carried on by a bank or
an insurance company), and, in the case of income derived in connection with the active trade or
business, the trade or business is substantial in relation to the activity carried on in the other Contracting
State giving rise to the income in respect of which treaty benefits are being claimed in that other
Contracting State.
3. The provisions of paragraph 1 shall not apply if the person deriving the income is:
a) a company which is a resident of a Contracting State in whose principal class of
shares there is a substantial and regular trading on a recognized stock exchange; or
b) a company that is wholly owned, directly or indirectly, by a company referred to in
subparagraph a) provided that each company in the chain of ownership used to satisfy the
control requirement of this subparagraph is a resident of a Contracting State.
For purposes of this paragraph, the term "recognized stock exchange" means:
a) the NASDAQ System owned by the National Association of Securities Dealers, Inc.
and any stock exchange registered with the Securities and Exchange Commission as a national
securities exchange for purposes of the Securities Exchange Act of 1934;
b) The Istanbul Stock Exchange; and
c) any other stock exchange agreed upon by the competent authorities of the
Contracting States.
4. The provisions of paragraph 1 shall not apply to a Contracting State or a political subdivision or
local authority thereof.
5. The provisions of paragraph 1 shall not apply if the income derived from the other Contracting
State is derived by a not-for-profit organization that, by virtue of that status, is generally exempt from
income taxation in its Contracting State of residence, provided that
a) more than half of its annual support is expended for the benefit of qualified persons;
or
b) more than half of its annual support is derived from qualified persons.
The term "qualified person" means:
a) a person (including an individual) that is entitled, under paragraph 1, 3, 4 or 5 of this
Article, to the benefits of this Agreement, or
b) a citizen of the United States.
6. A person that is not otherwise entitled to the benefits of this Agreement by reasons of the other
provisions of this Article may, nevertheless, be granted the benefits of this Agreement if the competent
authority of the State in which the income in question arises so determines.
ARTICLE 23


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