UK–Turkey Double Taxation Treaty: Key Rules for Residents and Companies

The agreement was signed on 19 February 1986, entered into force on 26 October 1988 and has applied in Türkiye since 1 January 1989. In the United Kingdom, it became effective from 1 April 1989 for corporation tax and 6 April 1989 for income tax and capital gains tax.

The treaty remains a bilateral agreement between Türkiye and the United Kingdom. The United Kingdom’s withdrawal from the European Union did not terminate it.

What Does the UK–Turkey Tax Treaty Cover?

The treaty applies to residents of one or both countries and principally covers:

• Turkish income tax and corporation tax;
• UK income tax, corporation tax and capital gains tax;
• tax residence and dual-residence conflicts;
• business profits and permanent establishments;
• employment and independent professional income;
• dividends, interest and royalties;
• income and gains from real estate;
• pensions, directors’ fees and certain other income;
• foreign tax credits and mutual agreement procedures.

Treaty Residence Is Not Based on Citizenship

Treaty protection generally depends on tax residence rather than passport or citizenship. A British citizen living in Türkiye is not automatically a UK treaty resident, and a Turkish citizen living in the United Kingdom is not automatically a Turkish treaty resident.

A person must first be liable to tax as a resident under the domestic law of the relevant country. If an individual qualifies as resident in both countries, Article 4 applies the following tie-breaker tests in order:

1. where a permanent home is available;
2. where personal and economic relations are closer—the centre of vital interests;
3. where the individual has a habitual abode;
4. the individual’s nationality;
5. agreement between the competent authorities if the earlier tests do not resolve the position.

For a company or another non-individual person that is resident in both countries, the treaty considers the place of effective management. Where the effective management and registered office are in different countries, the competent authorities may need to determine treaty residence by mutual agreement.

Key Treaty Rules by Income Type

Business Profits and Permanent Establishments

Under Article 7, profits of a UK enterprise are generally taxable only in the United Kingdom unless it operates in Türkiye through a Turkish permanent establishment. The same principle applies in reverse to a Turkish enterprise operating in the United Kingdom.

The treaty defines a permanent establishment as a fixed place through which the enterprise’s business is wholly or partly conducted. Examples include:

• a place of management;
• a branch or office;
• a factory or workshop;
• a mine, oil or gas well, quarry or similar extraction site;
• a construction, assembly or installation project lasting more than six months;
• certain dependent-agent arrangements involving contracting authority or regular stock deliveries.

The existence of a Turkish subsidiary does not, by itself, make that subsidiary a permanent establishment of its UK parent. The actual premises, personnel, authority, activities and contractual arrangements must be reviewed.

Where a permanent establishment exists, the source country may tax the profit attributable to it. Appropriate accounting records and an arm’s-length attribution analysis are therefore required.

Dividends Between the UK and Türkiye

Article 10 allows dividend income to be taxed in the recipient’s residence country while preserving limited taxing rights for the country in which the paying company is resident.

Where the recipient is the beneficial owner, the treaty ceiling is:

• 15% of the gross dividend where the beneficial owner is a company controlling, directly or indirectly, at least 25% of the voting power in the payer; or
• 20% of the gross dividend in other cases.

These are maximum treaty rates rather than automatic charges. For example, the United Kingdom generally does not withhold tax from ordinary company dividends, while the applicable Turkish domestic dividend withholding rate must be compared with the treaty ceiling on the payment date.

The reduced treaty treatment can be unavailable where the shareholding is effectively connected with a permanent establishment or fixed base in the source country.

Interest and Royalties

Interest may be taxed in the recipient’s residence country and in the source country. Where the recipient is the beneficial owner, source-country tax is generally capped at 15% of the gross interest.

Certain government and central-bank interest may qualify for an exemption under the treaty. Related-party interest must also be commercially supportable because the treaty ceiling applies only to the arm’s-length amount.

For royalties, the source-country ceiling is generally 10% of the gross amount. The treaty’s royalty definition includes payments for the use, right to use or sale of certain:

• copyrights and recordings;
• patents, trademarks, designs and models;
• plans, secret formulas and processes;
• industrial, commercial or scientific experience;
• industrial, commercial or scientific equipment.

A software, consulting or technology payment should not be classified solely by its invoice description. The contract, intellectual-property rights, deliverables and actual use must be examined to distinguish royalties, services and business profits.

Independent Professional Services

Income earned by an individual from independent professional services is generally taxable only in the individual’s treaty residence country. The other country may also tax income attributable to services performed there where:

• the individual has a fixed base regularly available in that country; or
• the individual is present there for 183 days or more in any continuous 12-month period for the purpose of performing the services.

For services provided by an enterprise, source-country taxation can arise where there is a permanent establishment through which the services are performed or the services exceed 183 days in any continuous 12-month period.

The treaty expressly includes scientific, literary, artistic, educational, medical, legal, engineering, architectural, dental, accounting and other activities requiring specific professional skill.

Employment Income and the 183-Day Exemption

Employment income is generally taxable where the employee physically performs the work. A UK resident working in Türkiye can therefore become taxable in Türkiye even if the salary is paid into a UK bank account.

Income from short-term employment in the other country remains taxable only in the residence country if all three conditions are satisfied:

1. the employee is present in the other country for no more than 183 days in the fiscal year concerned;
2. the remuneration is paid by or on behalf of an employer that is not resident in that other country;
3. the remuneration is not borne by a permanent establishment or fixed base of the employer in that other country.

Failing any one of these conditions can allow the work country to tax the relevant remuneration. Payroll withholding, shadow payroll and social security obligations must be tested separately.

Real Estate Income and Capital Gains

Rental and other income from immovable property may be taxed in the country where the property is situated. A UK resident receiving rent from Turkish property can therefore have a Turkish declaration obligation, while the United Kingdom may also require the income to be reported under its domestic rules.

Gains from selling real estate may similarly be taxed in the country where the property is situated. Gains connected with a permanent establishment or fixed base may be taxed in the country where that establishment or base exists.

Other capital gains are generally taxable only in the seller’s residence country. However, the UK–Turkey treaty contains an important exception: a gain arising in the other country from property sold within one year of acquisition may also be taxed in that source country.

Pensions and Directors’ Fees

Private pensions, similar remuneration for past employment, social security payments and qualifying annuities are generally taxable only in the recipient’s residence country under Article 18.

Government-service remuneration and pensions are governed by separate provisions and may depend on the payer, place of service, residence and nationality.

Directors’ fees received by a resident of one country for membership of the board of a company resident in the other country may be taxed in the company’s country of residence.

How Double Taxation Is Relieved

The agreement principally uses the foreign tax credit method. This means income may still need to be reported in both countries, but qualifying tax paid in the source country is credited against tax charged by the residence country on the same income.

• A UK resident may generally claim credit for Turkish tax properly paid under Turkish law and the treaty against UK tax calculated on the same income or gain.
• A Turkish resident may generally deduct qualifying UK tax from Turkish tax attributable to the same UK-source income.
• The credit is normally limited to the residence country’s tax attributable to that income.
• Tax charged contrary to the treaty may need to be reclaimed from the source country rather than claimed as an unrestricted foreign tax credit.

Residence Certificates and Treaty Claims

Treaty residence normally needs to be documented before a payer or tax authority applies reduced withholding or an exemption.

A UK resident claiming treaty treatment in Türkiye may need:

• an HMRC Certificate of Residence covering the relevant period;
• the original or an accepted official version of the certificate;
• a certified Turkish translation where required;
• documents establishing beneficial ownership;
• contracts, invoices and payment records;
• travel and service-performance records;
• evidence that no Turkish permanent establishment or fixed base exists, where relevant.

A Turkish resident seeking UK treaty relief may likewise need a Turkish tax residence certificate and the applicable HMRC relief or repayment procedure.

Certificates should cover the income period being claimed. A company, individual and partnership may have different residence-document procedures; a UK branch is not automatically entitled to a certificate in its own name.

When the Mutual Agreement Procedure May Be Needed

If a taxpayer considers that one or both countries have imposed tax contrary to the treaty, Article 25 permits the case to be presented to the competent authority of the taxpayer’s residence country.

The Mutual Agreement Procedure may be relevant to:

• unresolved dual residence;
• permanent-establishment profit attribution;
• transfer pricing adjustments;
• inconsistent characterisation of services and royalties;
• tax imposed above the treaty limit;
• denial of a corresponding foreign tax credit.

A MAP request does not automatically suspend domestic filing, payment, objection or litigation deadlines. Both countries’ procedural time limits should be reviewed immediately.

Common UK–Turkey Treaty Mistakes

Our Turkish Tax Advisory Services support UK residents and businesses with treaty classification, residence documentation, withholding analysis and Turkish filing requirements.

Official Sources

• HMRC: UK–Turkey Double Taxation Agreement in Force
• UK Legislation: Double Taxation Relief Order 1988
• HMRC: Applying for a Certificate of Residence
• HMRC: Foreign Income and Double Tax Relief
• Turkish Revenue Administration: Double Taxation Treaty General Communiqué No. 4
• Turkish Revenue Administration: UK Service Income Ruling

Reviewed on 13 August 2026. This article provides general information and does not constitute tax or legal advice. The result depends on residence, beneficial ownership, income classification, source, permanent-establishment exposure, documentation and current domestic law.