First tax treaty between Australia and Turkey
This is a summary of the tax treaty signed between Australia and Turkey on 28 April 2010 – the first between the two countries.
About the treaty
On 28 April 2010, the governments of Australia and Turkey signed a convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. This treaty promotes closer economic co-operation between the two countries by reducing the tax barriers and expanding our economic and investment relationship.
Date of effect
The treaty entered into force on 5 June 2013, when both countries completed their domestic arrangements and exchanged diplomatic notes.
In Australia, the convention applies to:
- withholding taxes from income derived by non-residents on or after 1 January 2014
- other Australian taxes on income, profit or gains derived on or after 1 July 2013.
In Turkey, the convention applies to:
- withholding taxes paid/credited on or after 1 January 2014 and all other taxes assessed on or after 1 January 2014.
- Provides rules to treat dual resident individuals as residents of only one country.
- An enterprise will have a permanent establishment (PE) in Australia or Turkey if:
- it has a building site or installation project and that site or project lasts more than 6 months
- it carries on supervisory activities in that country for more than six months in connection with a building site, construction, installation or assembly project undertaken in that country
- substantial equipment is operated in that country by the enterprise for more than six months in any 12-month period
- it performs professional services through one or more individuals for a period exceeding 183 days in any 12-month period
- it maintains a stock of goods or merchandise for the purpose of regular delivery.
- Source taxation of business profits is limited to those profits derived through a branch or permanent establishment situated in the source country.
- Source taxation of profits from shipping and airline transport operations is limited to income from domestic transport.
- The treaty will reduce withholding taxes on payments of dividends, interest and royalties.
- Dividends on which withholding tax is payable will be taxed at 5% if:
- the dividends are derived by a company which holds at least 10% of the voting power of the Australian company paying the dividends, or
- the dividends are paid by a company that is a resident of Turkey where the company has paid the full rate of company tax in Turkey, and those dividends are derived by a company which holds at least 25% of the capital of the company paying the dividends. A general limit of 15% applies in all other cases where withholding tax is payable.
- an exemption applies for interest derived from the investment of assets by a government, its central bank or a bank performing central banking functions
- a general limit of 10% applies to all other interest.
- the withholding tax rate for royalties under this treaty is 10%.
An Alienation of Property Article is included which taxes capital gains. This is consistent with Australia's capital gains rules for non-residents
- Source taxation of independent personal services is limited to those amounts attributable to a fixed base or where the person is present in that country for at least 183 days in any 12-month period.
- Employment income paid for certain short-term visits is taxable only in the employee's country of the residence where the employer is also in the same country of residence.
- Pension and retirement annuities (other than those relating to government service) are generally taxed only in the country of residence.
- Lump sums (other than those relating to government service), paid after the age of 60 in lieu of a right to receive a pension, are to be taxed only in the country of residence of the recipient. For other lump sum payments, taxing rights are to be shared between the country of residence and the country of source.
- Income from government service will generally be taxed only in the country that pays the remuneration. Pensions, annuities or lump sums paid in respect of government services are taxable in that country unless the individual is a resident and a national of another country.
- There are rules to protect nationals and businesses of one country from tax discrimination in the other country.
- Allowance is made for mutual agreement procedures between the relevant tax authorities to resolve disputes.
- There is a framework to provide for the full exchange of taxpayer information.
Legislation and supporting material
The legislation to bring the treaty into force is contained in International Tax Agreements Amendment Act (No. 1) 2011External Link, which received royal assent on 27 June 2011.
Other supporting material
For more information about this and other Australian treaties, visit the: