Germany Turkey Double Taxation Agreement

• Ali Rıza Deniz

Germany Turkey Double Taxation Agreement

Taxation of Income of German Citizens from Turkey in Germany

A person who is fully liable to tax in Germany is required to declare all worldwide income in Germany. This also applies to interest income, share sale profits, rental income, or pension payments obtained in Turkey. Below, each type of income is examined separately from both the Turkish and German perspectives.

1. Interest Income from Turkey – Taxation for German Citizens

In Turkey, interest income is taxed through withholding tax (Stopaj) under the Income Tax Law.

- The Germany–Turkey Double Taxation Agreement (Article 11) allows Turkey to levy a tax of no more than 10% on interest.

- The tax withheld in Turkey is generally final and does not need to be declared again there.

In Germany:

The German taxpayer must declare the interest income in Germany. The tax withheld in Turkey is credited against the tax payable in Germany.

2. Share Sale Profits from Turkey – Taxation for German Citizens

In Turkey:

- Profits from the sale of shares traded on Borsa Istanbul are tax-exempt after a holding period of two years (Art. 80 ITL).

- According to Article 13 of the DTA, capital gains from the sale of shares are generally taxable only in the state of residence.

- However, Article 22/A-a allows Turkey to tax share gains if the holding period is less than one year.

In Germany:

- Share sale profits are subject to capital gains tax (25% plus surcharges).

- Taxes paid in Turkey are credited in Germany, if applicable.

3. Rental Income from Turkey – Taxation for German Citizens

In Turkey:

- Income from real estate located in Turkey is subject to income tax there and must be declared in the annual tax return.

- Tax exemptions and deductible expenses may apply.

In Germany:

- Under Article 6 of the DTA, rental income is taxed in the country where the property is located.

- Germany applies the progression proviso to such income.

4. Pension Payments from Turkey – Taxation for German Citizens

In Turkey:

- Private pensions are taxable only in the country of residence (Germany) (Article 18).

- Public pensions (Article 19) are generally taxable in the source country, unless the recipient is a citizen and resident of the other country.

In Germany:

- Private pensions are fully taxable in Germany.

- Public pensions may also be taxed in Germany, depending on the DTA rules.

Conclusion and Recommendation

The Double Taxation Agreement between Germany and Turkey contains specific rules for each type of income. It is essential for German citizens to correctly assess their income from Turkey in accordance with both German and Turkish tax laws. Professional tax advice helps avoid misreporting and unnecessary tax burdens.