Türkiye and UAE - Dubai Double Taxation Avoidance Agreement

Turkey and UAE - Dubai Double Taxation Agreement
Agreement Between the Republic of Turkey and the United Arab Emirates on the Avoidance of Double Taxation: Basic Framework

Let's take a look at the basic provisions and effects of the bilateral tax agreement that entered into force between Turkey and the United Arab Emirates (UAE) and aims to prevent double taxation in taxes levied on income and wealth. The agreement in question was made to ensure mutual harmonization between the tax systems of both countries and to prevent taxpayers from paying tax twice on the same income. Double taxation constitutes a significant obstacle that increases costs for real and legal persons engaged in international activities. This agreement aims to eliminate such obstacles and contribute to the progress of economic relations on a healthier basis.

In this context, as World Company Setup, we comprehensively evaluate the operation of this agreement in line with the tax legislation of Turkey and the UAE, the tax advantages it offers and the areas of application. When the provisions of the agreement are understood correctly, planning and conducting international activities for investors and commercial enterprises can be carried out much more effectively and in a way that provides cost advantages.

This agreement signed between Turkey and the UAE not only prevents double taxation, but also provides a legal and financial basis that supports the development of direct investments and commercial relations between the two countries. The agreement also plays an important role in terms of providing predictability and tax transparency for investors.

The agreement includes provisions that will ensure that real and legal persons who are residents of both states are taxed in only one country. It has been clearly determined which state will have taxation authority according to the source of income and residence status. In this way, both taxpayers are prevented from being subject to double taxation and it is aimed to reduce disputes that may arise regarding taxation. At the same time, protection is provided with separate provisions for persons with special status such as diplomatic missions and consular officials.

In order for the agreement to enter into force, both states must complete their own domestic legal processes and provide the necessary official approvals. Following the date of entry into force, the provisions of the agreement will start to be applied from the subsequent taxation periods. In addition, the agreement will remain in force until one of the parties requests termination; In case of termination, the previously determined notice period must be observed.

Scope of the Agreement for the Avoidance of Double Taxation between the Republic of Turkey and the United Arab Emirates
This agreement signed between the Republic of Turkey and the United Arab Emirates (UAE) was prepared to ensure harmonization between the tax systems of both countries and to prevent the same income item from being taxed in both countries. The main purpose of the agreement is to eliminate the risk of double taxation and to create a more equitable and predictable taxation environment between taxpayers, thus supporting the development of bilateral economic relations and investments.

The "Agreement for the Avoidance of Double Taxation with Respect to Taxes on Income and Capital" signed between the Republic of Turkey and the United Arab Emirates (UAE) aims to regulate tax relations between the two countries and prevent double taxation. This agreement was signed on January 29, 1993, published in the Official Gazette dated December 27, 1994 and numbered 22154, and entered into force on December 26, 1994. The implementation date is January 1, 1995.

Fundamental Articles of the Agreement
Article 1 – Scope Relating to Persons
This Agreement shall apply to persons who are residents of one or both of the Contracting States.

Article 2 – Taxes Covered
The Agreement shall apply to taxes on income and capital in both Contracting States or their political subdivisions or local authorities. In particular, in Türkiye, income tax, corporate income tax and various funds; in the UAE, income and corporate income tax are covered.

Article 3 – General Definitions
This Article defines the geographical boundaries of the terms "Turkey" and "United Arab Emirates", the meanings of the terms "Contracting State" and "other Contracting State", and the terms "tax", "person", "company", "legal seat", "citizen", "permanent establishment" and "international traffic".

Article 4 – Resident
Where an individual is a resident of both Contracting States, he shall, for the purpose of determining his status, be deemed to be a resident of the State in which he has a permanent home. If he has a permanent home in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer.

Article 5 – Permanent Establishment
A fixed place of business in which the business of an enterprise is wholly or partly carried on is considered a “permanent establishment”. This article details the scope of a permanent establishment and the situations in which it does not constitute a permanent establishment.

Article 6 – Income from Immovable Property
Income derived by a resident of a Contracting State from immovable property situated in the other Contracting State may be taxed in that other State. The term “immovable property” shall be defined in accordance with the laws of the Contracting State in which the property in question is situated.

Article 7 – Business Profits
Profits of an enterprise of a Contracting State shall be taxable only in the first-mentioned State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business through a permanent establishment, the profits may be taxed in the other State only to the extent attributable to the permanent establishment.

Article 8 – International Traffic
Income from transport activities by means of ships, aircraft or road transport operated by an enterprise which is a resident of a Contracting State may be taxed only in the State in which the head office of such enterprise is situated.Tax File

Article 9 – Dependent Enterprises
Where 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 where the same persons participate directly or indirectly in the management, control or capital of both enterprises, and this creates different conditions in commercial and financial relations, the profits which should have been accrued may be included in the profits of that enterprise and taxed.Tax File

Article 10 – Dividends
Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State. However, if the person receiving the dividend is the beneficial owner of the dividend, the tax to be levied in this manner shall not exceed certain rates.Tax File

Article 23 – Methods of Avoiding Double Taxation
For residents of Turkey, double taxation shall be avoided by setting off against the tax paid in Türkiye an amount equal to the tax paid on income or capital derived in the United Arab Emirates. In the case of the United Arab Emirates, double taxation shall be avoided in accordance with general principles.Tax File

Article 25 – Exchange of Information
The competent authorities of the Contracting States shall exchange the information necessary for the implementation of the provisions of this Agreement. The information received shall be kept confidential and shall be used only for the purposes specified.Tax File

Article 26 – Mutual Agreement Procedure
If a resident of a Contracting State considers that the results of the Agreement are not in accordance with the provisions of the Agreement, he may present the matter to the competent authority of the Contracting State of which he is a resident. The competent authorities will endeavor to reach a mutual agreement. Tax