Turkey: Council Of Ministers Approves Agreement Between Turkey And Kosovo To Prevent Tax Evasion And Double Taxation

The Council of Ministers has approved an agreement between the Republic of Turkey and Republic of Kosovo (“State” or collectively “States”) to prevent tax evasion and double income taxation for residents of the two countries (“Agreement”).

On 19 August 2015, the Council of Ministers approved the Agreement and its annexed Protocol, which were originally signed on 10 September 2012 in Pristina, Kosovo. The Agreement and Protocol were approved in Turkey by Law number 6606 on 10 February 2015. The Council of Ministers’ approval decision was published in the Official Gazette on 28 August 2015.

Each State must notify to the other when local legal procedures are completed to bring the Agreement into force. The Agreement will enter into force completely on the later of these notification dates (Article 27 of the Agreement).

The Agreement applies to (Article 27 of the Agreement):

• Taxes withheld at source for amounts paid or credited on or after the first of January in the calendar year after the Agreement enters into force.
• Other taxes for taxable years which begin on or after the first of January in the calendar year after the Agreement enters into force.

Avoidance of Double Taxation

If a resident of one State receives income which can be taxed in the other State (under the Agreement), the first State must allow a deduction from the resident’s income tax which is equal to the income tax which was paid to the other State (Article 22 of the Agreement).

Such deduction must not exceed the income tax calculated before the deduction was given, which is attributable to the taxable income in the other State.

Where income received by a resident of one State is exempt from tax in that State, the State may nevertheless take into account the exempted income when calculating the tax payable on the resident’s remaining income.

Non-Discrimination

Nationals of one State must not be subject to any taxation or any related requirement in the other State, which is different or more burdensome than the requirements applicable to local nationals or residents of that other State in the same circumstances (Article 23 of the Agreement).

Privilege For Taxation of Dividends for Turkish Residents

Dividends paid by a company which is resident of Kosovo to a resident of Turkey will be subject to zero percent taxation at source (Article 3 of the annexed Protocol).

Please see this link for full text of the Agreement.