Germany Gives Notice On Double Tax Treaty With Turkey

by Ulrika Lomas, Tax-News.com, Brussels

18 August 2009

The German government has given notice to terminate its double taxation avoidance agreement of 1985 with Turkey. According to the German finance ministry, the notice takes effect as of January 1, 2011, in order that there can be sufficient time for negotiating a new agreement without disturbing commercial investments unduly between the two countries.

German tax consultant Dr. Christian Rödl stated: "We have to wait and see whether the negotiation of a new treaty can succeed in the timeframe… The termination notice represents an abrupt loss of planning security for German companies wanting to expand in Turkey and considerable uncertainty for existing investments."

The reason for terminating the agreement with Turkey was not given, but the finance ministry declared itself unequivocally "willing to take part in constructive negotiations for a new, modern and balanced agreement"; on face value, this would imply that negotiations to amend the old treaty were getting nowhere and the termination was considered necessary to bring matters to a head.

The termination has focused attention on the "crisis" in the Turkish press; commentators are decrying the effects it may have on German investment in Turkey. The Turkish authorities have been moved to state that officials will meet their German counterparts in the following month and that they are optimistic that agreement will be reached quickly, at the very least to postpone the termination date.

In 2005, the German finance ministry terminated its agreement with Brazil, citing that the treaty had been in force since the 1970s and Brazil no longer needed the assistance of a developing economy. However, it is clear that there had also been disagreements in the way the agreement was operated which motivated the termination. The treaty also had spared tax provisions which were considered too generous.

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