Australia, Turkey Sign DTA

by Mary Swire, Tax-News.com, Hong Kong

03 May 2010

Australia’s Assistant Treasurer, Nick Sherry, has announced that Australia and Turkey have signed a new comprehensive agreement for the avoidance of taxation (DTA), the first between the two countries.

The treaty was signed in Ankara on April 28, by Peter Doyle, the Australian Ambassador to Turkey, and Mehmet Kilci, President of Revenue Administration at the Turkish Ministry of Finance, in the presence of Quentin Bryce, Governor-General of the Commonwealth of Australia, and Abdullah Gül, President of the Republic of Turkey.

"This treaty will promote closer economic cooperation between our countries and is a great step forward for future trade and investment flows," Sherry said. "The new treaty will provide certainty and stability of tax treatment for Australian and Turkish investors in each other's country and reduce tax related barriers."

"Turkey is an increasingly important investment destination, with privatisation programs and a growing Turkish market creating opportunities for Australian businesses," he added. "The treaty will help Australian business be more competitive and simplify their dealings in Turkey."

He confirmed that the DTA “will substantially reduce withholding taxes on certain dividend, interest and royalty payments. These changes reduce tax barriers to cross border transfers by Australian businesses of intellectual property, equity and finance for expansion. The treaty will also maintain the integrity of Australia's tax base by allowing the exchange of taxpayer information between Australian and Turkish tax administrators."

Therefore, in addition to reductions in source-country withholding taxes on certain cross-border payments of dividends, interest and royalties, and rules to determine when an enterprise or an individual of one country may be taxed on its activities abroad, the provisions of the new bilateral DTA also include an agreed basis for determining the allocation of profits within a multinational company to reflect the pricing that would be adopted by independent parties.

Furthermore, it provides rules that ensure that profits derived from the operation of ships and aircraft in international traffic are generally taxed only in the country of residence of the operator. In addition, there are rules for the taxation of income, profits or gains from the alienation of property, and provisions that provide for most pension and retirement annuities to be taxed only in the country of residence of the recipient.

The DTA will enter into force when both countries advise that they have completed their domestic ratification procedures. It was confirmed that legislation for this purpose will be introduced in the Australian parliament as soon as is practicable.

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