TAX NEWS - 2010

Turkey Tax: Turkey, Switzerland sign double taxation agreement

An agreement preventing double taxation has been signed between Turkey and Switzerland that will also enable the exchange of tax information between the two countries.

The tax deal was signed by Finance Minister Mehmet Şimşek and his Swiss counterpart, Hans-Rudolf Merz, in Bern on Friday.

The agreement with Switzerland will enable the Finance Ministry to access information from the past five years on Turkish citizens' accounts in Swiss banks in a bid to combat tax evasion. As a center for secret accounts, Switzerland's information exchange with Turkey will enable the ministry to identity Turkish citizens who have previously transferred their money from Swiss banks to other tax havens.

The deal will also prevent double taxation of operations carried out by contractors and consultants in one of the two countries in a period less than or equal to six months. According to the agreement, revenue earned through real estate will not only be taxed in the home country of the owner of the property, but also in the country where the real estate is located. Taxation rights on dividends, interest and other fees will be shared by both countries. Interest paid to the central banks of both of the countries will be exempted from taxes. The country of residence will have the right to levy a tax on the wages of pensioners.

Determined to curb tax evasion, the Finance Ministry has been carrying out negotiations with six independent or autonomous island nations -- the British Virgin Islands, the Bahamas, the Cayman Islands, Jersey, Bermuda and the Isle of Man -- to sign tax information exchange agreements or double taxation agreements. These countries are known as "tax havens" due to the minimal or nonexistent taxation that they offer. Information exchange agreements are expected to be signed by the end of the year, ministry officials are reported as saying by the Anatolia news agency.

Turkey signed a double taxation agreement with Luxembourg in October of last year, enabling the Finance Ministry to access information on Turkish citizens' accounts in the country's banks.