SIGNATURE OF DOUBLE TAXATION CONVENTION

BETWEEN IRELAND AND TURKEY

Mr Brian Lenihan T.D., Minister for Finance and Mr Kemal Unakitan, Turkish Minister for Finance, signed in Dublin today, 24 October 2008, a Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains. 

The Convention is expected to have a positive impact on trade and investment between Ireland and Turkey.Commenting on the signing, Minister Lenihan said:
 

“The signing of this Convention completes Ireland’s network of bilateral tax agreements with all OECD countries. The Convention represents a significant addition to Ireland’s existing network of double taxation treaties”.

Turkish economic growth has been among the highest in the OECD and there has been substantial growth in both exports and foreign direct investment. The certainty which the Convention brings in relation to taxation of cross-border business and investment activities will greatly assist in stimulating growth in trade and investment between the two countries.

The Convention covers taxes on the income and gains of individuals and companies. It operates by either granting exclusive taxation rights to one or other country, or where the income or gain remains taxable in both, by providing that the country of residence of the taxpayer will relieve double taxation by allowing a credit for the tax paid in the other country. The reduced rates of withholding taxes on dividend, interest and royalty payments will be important in facilitating business and investment flows between both countries. The non-discrimination article, which protects nationals of each country from discriminatory tax provisions in the other, and the exchange of information article, which is necessary to counter tax evasion, are also important aspects of the Convention.If, as expected, the Dáil and the Turkish Parliament complete the procedures to ratify the Convention during next year, it will enter into force at the beginning of 2010.

The text of the Agreement can be viewed on the website of the Revenue Commissioners – http://www.revenue.ie

BACKGROUND NOTE - IRISH DOUBLE TAXATION CONVENTIONS

Double taxation conventions cover direct taxes on income and capital, which in Ireland’s case are Income Tax, Corporation Tax and Capital Gains Tax.

The purpose of a double taxation convention is to avoid double taxation and prevent fiscal evasion. Double taxation arises when the same income or capital gain is taxed by two jurisdictions and normally occurs where income arises in one country and is paid to a resident of another country.

Double taxation conventions seek to allocate taxing rights to one or other country, or where the income or gain remains taxable in both, to provide that the country of residence of the taxpayer will either exempt the foreign income from tax or will grant credit against its own tax for tax paid on the same income or gain in the other country. They also normally reduce or eliminate source taxes on passive income flows such as dividends, interest and royalties which arise in one country and are paid to a resident of the other.

Double taxation conventions also include non-discrimination provisions, which protect nationals of each country from discriminatory tax provisions in the other. They also provide for the exchange of information between the tax authorities of both countries for the purposes of counteracting tax evasion. Ireland currently has Double Taxation Conventions in force with 45 countries, including a new tax treaty with Chile, which will come into effect in January 2009. New agreements with Macedonia, Vietnam and a Tax Information Exchange Agreement (TIEA) with the Isle of Man have recently been signed and are in the process of being ratified by national parliaments. New treaties with Azerbaijan, Bosnia & Herzegovina, Georgia, Malta, Moldova and Thailand, and a Protocol to the existing tax treaty with South Africa, are expected to be signed shortly. There are a number of other negotiations for new conventions and re-negotiations of existing conventions on-going.