AGREEMENT BETWEEN THE REPUBLIC OF TURKEY AND THE REPUBLIC OF ITALY
FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME, AND THE PREVENTION OF FISCAL EVASION

The Government of the Republic of Turkey and the Government of the Republic of Italy, desiring to conclude an Agreement for the avoidance of double taxation with respect to taxes on income and the prevention of fiscal evasion, have agreed upon the following measures:

Chapter I – Scope of the Agreement

Article 1 – Personal scope

• This Agreement shall apply to persons who are residents of one or both of the Contracting States.

Article 2 – Taxes covered

1. This Agreement shall apply to taxes on income imposed on behalf of each Contracting State or of its political or administrative subdivisions or local authorities, irrespective of the manner in which they are levied.
2. There shall be regarded as taxes on income all taxes imposed on total income, or on elements of income, including taxes on gains from the alienation of movable or immovable property, taxes on the total amounts of wages or salaries paid by enterprises, as well as taxes on capital appreciation.
3. The existing taxes to which the Agreement shall apply are, in particular:
   • (a) In the case of Turkey:
     • (i) the income tax (gelir vergisi);
     • (ii) the corporation tax (kurumlar vergisi);
     • (iii) the levy on behalf of the fund for the support of the defense industry (savunma sanayii destekleme fonu);
     • (iv) the levy on behalf of the fund for the encouragement of social charity and solidarity (sosyal yardimlasma ve dayanismayi tesvik fonu); and
     • (v) the levy on behalf of the fund for business apprentices and for the improvement and enlargement of the vocational and technical training (‡iraklik, mesleki ve teknik egitimi gelistirme ve yayginlastirma fonu) (hereinafter referred to as “Turkish tax”).
   • (b) In the case of Italy:
     • (i) the personal income tax (l’imposta sul reddito delle persone fisiche);
     • (ii) the corporate income tax (l’imposta sul reddito delle persone giuridiche);
     • (iii) the local income tax (l’imposta locale sul redditi) (hereinafter referred to as “Italian tax”).
4. This Agreement shall also apply to any identical or substantially similar taxes which are imposed after the date of signature of the Agreement in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of any significant changes which have been made in their respective taxation laws.

Chapter II – Definitions

Article 3 – General definitions

1. For the purposes of this Agreement, unless the context otherwise requires:
   • (a) (i) “Turkey” means the territory of the Republic of Turkey, including any area in which the laws of Turkey are in force, as well as the continental shelf over which Turkey has, in accordance with international law, sovereign rights to explore and exploit its natural resources; (ii) “Italy” means the Republic of Italy and includes any area beyond the territorial waters of Italy which, in accordance with customary international law and the laws of Italy concerning the exploration and the exploitation of natural resources, may be designated as an area within which the rights of Italy with respect to the seabed and subsoil and natural resources may be exercised;
   • (b) the terms “a Contracting State” and “the other Contracting State” mean Turkey or Italy as the context requires;
   • (c) “tax” means any tax covered by Article 2 of this Agreement;
   • (d) “person” includes an individual, a company, and any other body of persons;
   • (e) “company” means any body corporate or any entity which is treated as a body corporate for tax purposes;
   • (f) “national” means,
     • (i) in relation to Turkey, all individuals possessing Turkish nationality in accordance with the Turkish Nationality Code, and all legal persons, partnerships, or associations deriving their status as such from the laws in force in Turkey;
     • (ii) in relation to Italy, all individuals possessing the nationality of Italy; all legal persons, partnerships, and associations deriving their status as such from the laws in force in Italy;
   • (g) the terms “enterprise of a Contracting State” and “enterprise of the other Contracting State” mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;
   • (h) “competent authority” means:
     • (i) in Turkey, the Ministry of Finance and Customs;
     • (ii) in Italy, the Ministry of Finance;
   • (i) “international traffic” means any transport by a ship, an aircraft, or a road vehicle operated by an enterprise of a Contracting State, except when the ship, aircraft, or road vehicle is operated solely between places situated in the other Contracting State.
2. As regards the application of this Agreement by a Contracting State any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the laws of that State concerning the taxes to which the Agreement applies.

Article 4 – Resident

1. For the purposes of this Agreement, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, legal head office, place of management or any other criterion of a similar nature. But this term does not include any person who is liable to tax in that state in respect only of income from sources situated in that State.
2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows:
   • (a) he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (centre of vital interests);
   • (b) if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode;
   • (c) if he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the State of which he is a national;
   • (d) if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.
3. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the Contracting State in which its place of effective management is situated. However, where such person has its place of effective management in one of the States and its legal head office in the other State, then the competent authorities of the Contracting State shall consult to determine by mutual agreement whether the legal head office of such a person has to be considered as the actual place of effective management or not.

Article 5 – Permanent establishment

1. For the purposes of this Agreement, the term “permanent establishment” means a fixed place of business in which the business of the enterprise is wholly or partly carried on.
2. The term “permanent establishment” shall include especially:
   • (a) a place of management;
   • (b) a branch;
   • (c) an office;
   • (d) a factory;
   • (e) a workshop;
   • (f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources;
   • (g) (i) a building site, a construction or assembly project or supervisory activities in connection therewith, but only if such site, project, or activities continue for a period of more than six months; (ii) the furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only where activities of that nature continue (for the same or a connected project) within the country for a period or periods aggregating more than six months within any 12-month period.
3. The term “permanent establishment” shall not be deemed to include:
   • (a) the use of facilities solely for the purpose of storage, display, or delivery of goods or merchandise belonging to the enterprise;
   • (b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display, or delivery;
   • (c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;
   • (d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information for the enterprise;
   • (e) the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research, or for similar activities which have a preparatory or auxiliary character for the enterprise.
4. A person – other than an agent of independent status to whom paragraph 5 applies – acting in a Contracting State on behalf of an enterprise of the other Contracting State shall be deemed to be a permanent establishment in the first-mentioned Contracting State if such a person:
   • (a) has and habitually exercises in that State an authority to conclude contracts in the name of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise; or
   • (b) has no such authority, but habitually maintains in the first-mentioned Contracting State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise.
5. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent, or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business.
6. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.

Chapter III – Taxation of Income

Article 6 – Income from immovable property

1. Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.
2. The term “immovable property” shall be defined in accordance with the law of the Contracting State in which the property in question is situated. The term shall in any case include property accessory to immovable property, livestock and equipment used in agriculture and forestry, as well as rights to which the provisions of general law respecting landed property apply. Usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources, and other natural resources shall also be considered as “immovable property”. Ships, boats, and aircraft shall not be regarded as immovable property.
3. The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use in any other form of immovable property.
4. The provisions of paragraphs 1 and 3 shall also apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of independent personal services.

Article 7 – Business profits

1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment.

2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment.

3. In determining the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the permanent establishment, including executive and general administrative expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere.

4. No profits shall be attributed to a permanent establishment by reason of the mere purchase of that permanent establishment of goods or merchandise for the enterprise.

5. Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article.

Article 8 – International transport

1. Profits derived by an enterprise of a Contracting State from the operation of ships, aircraft or road vehicles in international traffic shall be taxable only in that State.

2. The provisions of paragraph 1 of this Article shall also apply to profits derived from the participation in a pool, a joint business or an international operating agency.

Article 9 – Associated enterprises

1. Where

   • (a) 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
   • (b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State, and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

2. Where a Contracting State includes in the profits of an enterprise of that State – and taxes accordingly – profits on which an enterprise of the other Contracting State has been charged to tax in that other State and the profits so included are by the first-mentioned State claimed to be profits which would have accrued to the enterprise of the first-mentioned State if the conditions made between the two enterprises had been those which would have been made between independent enterprises, then that other State shall make an appropriate adjustment to the amount of the tax charged therein on those profits, where that other State considers the adjustment justified. In determining such adjustment, due regard shall be had to the other provisions of this Agreement and the competent authorities of the Contracting States shall if necessary consult each other.

Article 10 – Dividends

1. 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.

2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the laws of that State, but if the recipient is the beneficial owner of the dividends the tax so charged shall not exceed 15% of the gross amount of the dividends.

3. The term “dividends” as used in this Article means income from shares, “jouissance” shares or “jouissance” rights, founders’ shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident.

4. Profits of a company of a Contracting State carrying on business in the other Contracting State through a permanent establishment situated therein may, after having been taxed under Article 7, be taxed on the remaining amount in the Contracting State in which the permanent establishment is situated and in accordance with paragraph 2.

5. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein or performs in that other State independent personal services from a fixed base situated therein and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such a case the dividends are taxable in that other Contracting State according to its own law.

6. Subject to the provisions of paragraph 4 of this Article, where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company’s undistributed profits to a tax on the company’s undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

Article 11 – Interest

1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

2. However, such interest may also be taxed in the Contracting State in which it arises, and according to the laws of that State, but if the recipient is the beneficial owner of the interest the tax so charged shall not exceed 15% of the gross amount of the interest.

3. The term “interest” as used in this Article means income from Government securities, bonds or debentures, whether or not secured by mortgage and whether or not carrying a right to participate in profits, and debt-claims of every kind as well as all other income assimilated to income from money lent by the taxation law of the State in which the income arises.

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State carries on business in the other Contracting State, in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such a case, the interest is taxable in that other Contracting State according to its own law.

5. Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a political or administrative subdivision, a local authority or a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated.

6. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Agreement.

Article 12 – Royalties

1. Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

2. However, such royalties may also be taxed in the Contracting State in which they arise, and according to the laws of that State, but if the recipient is the beneficial owner of the royalties the tax so charged shall not exceed 10% of the gross amount of the royalties.

3. The term “royalties” as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, the sale of, any copyright of literary, artistic or scientific work including cinematograph films and recordings for radio and television, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience or for the use of, or the right to use, industrial, commercial or scientific equipment.

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties are paid is effectively connected with such permanent establishment or fixed base. In such a case, the royalties are taxable in that other Contracting State according to its own law.

5. Royalties shall be deemed to arise in a Contracting State when the payer is that State itself, a political or administrative subdivision, a local authority or a resident of that State. Where, however, the person paying the royalties, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties was incurred, and such royalties are borne by such permanent establishment or fixed base, then such royalties shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

6. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties paid, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such a case, the excess part of the payments shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Agreement.

Article 13 – Capital gains

1. Gains derived by a resident of a Contracting State from the alienation of immovable property situated in the other Contracting State (referred to in Article 6) may be taxed in that other State.

2. Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State, or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, may be taxed in the other State.

3. Gains derived by an enterprise of a Contracting State from the alienation of ships, aircraft, road vehicles operated in international traffic, or movable property pertaining to the operation of such ships, aircraft, or road vehicles, shall be taxable only in that State.

4. Gains from the alienation of any property other than those specified in paragraphs 1, 2, and 3 shall be taxable only in the Contracting State of which the alienator is a resident.

5. The Contracting State where the alienator is not a resident retains the right to tax gains derived by a resident of the other State from the alienation of shares or bonds issued by a company which is a resident of the first-mentioned State (excluding shares and bonds quoted on a stock exchange of that State) if:

   • The alienation takes place to a resident of the first-mentioned State.
   • The period between acquisition and alienation does not exceed one year.

Article 14 – Independent personal services

1. Income derived by a resident of a Contracting State from professional services or other activities of an independent character shall be taxable only in that State. However, such income may also be taxed in the other Contracting State if:

   • The services or activities are performed in that other State, and
   • The individual has a fixed base regularly available to them in that other State for performing those services or activities, or they are present in that other State for such activities for 183 days or more in any continuous period of 12 months. In this case, only the income attributable to that fixed base or derived from services performed during their presence in that other State is taxable in that other State.

2. Income derived by an enterprise of a Contracting State from professional services or activities of a similar character shall be taxable only in that State. However, such income may also be taxed in the other Contracting State if:

   • The services or activities are performed in that other State, and
   • The enterprise has a permanent establishment in that other State through which the services or activities are performed, or the period during which the services are performed exceeds 183 days in any continuous period of 12 months. In such cases, only the income attributable to that permanent establishment or to the services performed in that other State is taxable in that other State.

3. The term “professional services” includes independent scientific, literary, artistic, educational or teaching activities, as well as activities of physicians, lawyers, engineers, architects, dentists, accountants, and other activities requiring specific professional skills.

Article 15 – Dependent personal services

1. Taxation of Salaries and Similar Remuneration:

   • Salaries, wages, and similar remuneration derived by a resident of a Contracting State from employment are generally taxable only in that State.
   • If the employment is exercised in the other Contracting State, the remuneration may also be taxed in that other State.

2. Exceptions for Short-term Employment:

   • Remuneration derived from employment exercised in the other Contracting State may only be taxed in the first-mentioned State if: a. The individual is present in the other State for less than 183 days in a calendar year. b. The remuneration is paid by an employer who is not a resident of the other State. c. The remuneration is not borne by a permanent establishment or fixed base of the employer in the other State.

3. Special Provisions for Transport Operators:

   • Remuneration derived by a resident of a Contracting State from employment aboard ships, aircraft, or road vehicles operated in international traffic by an enterprise of the other Contracting State may be taxed in that other State.

Article 16 – Directors’ fees

• Directors’ fees and similar payments received by a resident of a Contracting State for services as a member of the board of directors of a company resident in the other Contracting State may be taxed in the latter State.

Article 17 – Artistes and athletes

1. Taxation of Income from Personal Activities:

   • Income derived by a resident of a Contracting State as an entertainer (e.g., theatre, motion picture, radio, television artiste) or as an athlete from personal activities exercised in the other Contracting State may be taxed in that other State.

2. Attribution of Income:

   • Income derived from personal activities exercised in a Contracting State by artistes or athletes, even if received by another person, may be taxed in the State where the activities are exercised.

3. Exception for Publicly Supported Visits:

   • Income from activities performed in a Contracting State by artistes or athletes may not be taxed in that State if the visit is substantially supported by public funds of the other Contracting State or its subdivisions.

Article 18 – Pensions

1. Taxation of Pensions and Similar Payments:
   • Pensions and similar remuneration paid in consideration of past employment to a resident of a Contracting State are taxable only in that State.

Article 19 – Government service

1. Remuneration for Services Rendered:

   • Remuneration (excluding pensions) paid by a Contracting State or its subdivisions to an individual for services rendered is taxable only in that State.

2. Pensions from Government Service:

   • Pensions paid by a Contracting State or its subdivisions to an individual for past services rendered are taxable only in that State.

3. Application of Other Articles:

   • Articles 15, 16, and 18 apply to remuneration or pensions related to services rendered in connection with any trade or business carried on by a Contracting State or its subdivisions.

Article 20 – Professors and teachers

• A professor or teacher who is a resident of one Contracting State and makes a temporary visit (up to two years) to the other Contracting State for the purpose of teaching or conducting research at an educational institution will not be taxed in the first-mentioned State on remuneration received for such activities, provided the remuneration is from sources outside the first-mentioned State.

Article 21 – Students

Payments received by a student or business apprentice, who immediately before visiting a Contracting State was a resident of the other Contracting State, and who is in the first-mentioned Contracting State solely for the purpose of education or training, shall not be taxed in the first-mentioned State. This exemption applies to payments received for the student’s maintenance, education, or training, provided that such payments originate from sources outside the first-mentioned State.

Article 22 – Other income

Income items of a resident of a Contracting State, which are not addressed in the preceding Articles of this Agreement, shall be taxable only in the other Contracting State, regardless of where such income arises.

Article 23 – Elimination of double taxation

1. It is agreed that double taxation shall be avoided in accordance with the following paragraphs of this Article.

2. In the case of Turkey:

   • If a resident of Turkey earns income that is taxable in both Italy and Turkey as per this Agreement, Turkey will allow a deduction from the taxpayer’s income tax equal to the amount of tax paid in Italy. This deduction cannot exceed the portion of Turkish income tax applicable to the income that may be taxed in Italy. However, no deduction will be granted if the income is subject in Turkey to a final withholding tax under Turkish law.

3. In the case of Italy:

   • If a resident of Italy earns income that is taxable in Turkey, Italy may include such income in its taxable base as per Article 2 of this Agreement. Italy shall then deduct from its calculated taxes the income tax paid in Turkey, provided that this deduction does not exceed the proportionate Italian tax attributable to the income from Turkey. No deduction applies if the income is subject in Italy to a final withholding tax under Turkish law.

4. For the purposes of paragraphs 2 and 3 of this Article:

   • When tax on business profits, dividends, interest, or royalties arising in a Contracting State is exempted or reduced according to that State’s laws, the exempted or reduced tax shall be considered as having been paid in the following amounts:
     • (a) 36% of business profits referred to in Article 7,
     • (b) 15% of the gross amount of dividends referred to in Article 10,
     • (c) 15% of the gross amount of interest referred to in Article 11,
     • (d) 10% of the gross amount of royalties referred to in Article 12.

Article 24 – Non-discrimination

1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith which is different or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances are or may be subjected. This provision applies to persons who are not residents of one or both Contracting States, in addition to residents.

2. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favorably levied in that other State than the taxation levied on enterprises of that other State engaged in the same activities. This does not obligate a Contracting State to grant personal allowances, reliefs, and reductions for taxation purposes on account of civil status or family responsibilities to residents of the other Contracting State, except as provided in paragraph 4 of Article 10.

3. Interest, royalties, and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State, except where specific provisions in Article 9, Article 11, or Article 12 apply.

4. Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned Contracting State to any taxation or any requirement connected therewith which is different or more burdensome than the taxation and connected requirements to which other similar enterprises of that first-mentioned State are or may be subjected.

5. The provisions of this Article shall apply to taxes covered by Article 2 of this Agreement.

Article 25 – Mutual agreement procedure

1. Where a person believes that the actions of one or both Contracting States result or will result in taxation not in accordance with the provisions of this Agreement, the person may present their case to the competent authority of the Contracting State in which they are a resident, or if applicable under paragraph 1 of Article 24, to the competent authority of the Contracting State of which they are a national. This presentation must occur within two years from the first notification of the action resulting in taxation not in accordance with the Agreement.

2. The competent authority shall make every effort to resolve the case through mutual agreement with the competent authority of the other Contracting State, if it finds the objection justified and cannot independently reach a satisfactory solution. The aim is to prevent taxation that does not comply with the Agreement.

3. The competent authorities of the Contracting States shall endeavor to resolve any difficulties or uncertainties regarding the interpretation or application of the Agreement through mutual agreement.

4. The competent authorities of the Contracting States may directly communicate with each other to reach an agreement as described in the preceding paragraphs. If necessary to facilitate agreement, an oral exchange of opinions may occur through a Commission comprising representatives of the competent authorities of both Contracting States.

Article 26 – Exchange of information

1. The competent authorities of the Contracting States shall exchange such information as is necessary to carry out the provisions of this Agreement or the domestic laws concerning taxes covered by this Agreement, provided that such taxation is not contrary to the Agreement and to prevent fiscal evasion. The exchange of information is not restricted by Article 1. Any information received by a Contracting State shall be treated as confidential in the same manner as information obtained under the domestic laws of that State. It shall be disclosed only to persons or authorities (including courts and administrative bodies) involved in the assessment, collection, enforcement, or prosecution related to the taxes covered by the Agreement. Such persons or authorities shall use the information solely for these purposes and may disclose it in public court proceedings or judicial decisions.

2. In no case shall paragraph 1 impose on a Contracting State the obligation:

   • (a) to carry out administrative measures that conflict with the laws or administrative practices of that State or the other Contracting State;
   • (b) to provide information that is not obtainable under the laws or normal administrative practices of that State or the other Contracting State;
   • (c) to provide information that would reveal any trade, business, industrial, commercial, or professional secret, or any trade process or information whose disclosure would be contrary to public policy (ordre public).

Article 27 – Diplomatic agents and consular officers

Nothing in this Agreement shall affect the fiscal privileges of diplomatic agents or consular officials under the general rules of international law or under the provisions of special agreements.

Article 28 – Refunds

1. Taxes withheld at the source in a Contracting State will be refunded upon request of the taxpayer or the State of which the taxpayer is a resident, if the right to collect these taxes is affected by the provisions of this Agreement.

2. Claims for refund must be submitted within the time limit prescribed by the laws of the Contracting State required to carry out the refund. Such claims shall include an official certificate from the Contracting State of which the taxpayer is a resident, certifying that the conditions necessary for claiming all allowances provided by this Agreement have been met.

3. The competent authorities of the Contracting States shall mutually agree on the implementation of this Article, in accordance with the provisions of Article 25 of this Agreement.

CHAPTER VI – Final Provisions

Article 29 – Entry into force

1. Each Contracting State shall notify the other when it has completed its required procedures for bringing this Agreement into force. The Agreement shall enter into force on the first day of the second month following the date of receipt of the latter of these notifications.

2. The provisions of this Agreement shall apply to taxes for any taxable period beginning on or after the first day of January of the calendar year immediately following the year in which the Agreement enters into force.

3. The existing Agreement between the Government of the Republic of Turkey and the Government of the Italian Republic for the avoidance of double taxation on income arising from the exercise of maritime and air navigation, signed in Ankara on 29th September 1981, with exchange of notes, shall terminate and cease to have effect regarding taxes covered by this Agreement, in accordance with paragraph 2 of this Article.

Article 30 – Termination

This Agreement shall remain in force until terminated by one of the Contracting States. Either Contracting State may terminate the Agreement by giving notice through diplomatic channels, at least six months before the end of any calendar year after the expiration of five years from the date the Agreement entered into force. Upon termination, the Agreement shall cease to have effect for taxes with respect to any taxable year beginning on or after the first day of January of the year following the year in which the termination notice was given.

In witness whereof, the undersigned, duly authorized, have signed this Agreement in duplicate at Ankara on the 27th day of July 1990, in the Turkish, Italian, and English languages, all texts being equally authoritative, except in cases of doubt, where the English text shall prevail.

PROTOCOL

I. Ad Article 4

In respect of the provisions of the second sentence of paragraph 1 of Article 4, a person who is subject to non-resident status in one of the Contracting States shall not be considered a resident of that State for the purposes of the Agreement.

II. Ad Article 7

In respect of paragraph 1 of Article 7, profits derived from the sale of goods or merchandise of the same or similar kind as those sold, or from other business activities of the same or similar kind as those conducted through a permanent establishment, may be attributed to that permanent establishment if it is demonstrated that such transactions were undertaken to avoid taxation in the State where the permanent establishment is located.

III. Ad Article 7

In respect of paragraph 3 of Article 7, no deductions shall be permitted for payments (other than reimbursement of actual expenses incurred) made by the permanent establishment to the head office or any other office of the enterprise, including royalties, fees, or similar payments for the use of licenses, patents, or other rights, commissions for services rendered or for management, or interest on loans to the permanent establishment, except in the case of a banking enterprise.

IV. Ad Article 7

In respect of paragraph 3 of Article 7, the term “expenses which are incurred for the purposes of the permanent establishment” refers to expenses directly related to the activities of the permanent establishment.

V. Ad Articles 10, 11 and 12

It is understood that the clause regarding “beneficial owner” shall be interpreted such that a resident of a third country shall not be entitled to benefits under the Tax Agreement with respect to dividends, interest, and royalties derived from Turkey or Italy. However, this restriction shall not apply to residents of a Contracting State.

VI. Ad Article 10

In respect of paragraph 3 of Article 10, it is understood that dividends in the case of Turkey shall also include income from investment funds and investment trusts.

VII. Ad Article 25

In respect of paragraph 1 of Article 25, the phrase “irrespective of the remedies provided by the domestic law” means that the mutual agreement procedure is not an alternative to national judicial proceedings, which must be initiated preventively in any case where a claim concerns taxes assessed not in accordance with this Agreement.

VIII. Ad Article 28

It is understood that the provisions of paragraph 3 of Article 28 shall not prevent the competent authorities of the Contracting States from mutually agreeing to other practices for allowing reductions for taxation purposes as provided in this Agreement.

In witness whereof, the undersigned, duly authorized, have signed this Protocol in duplicate at Ankara on the 27th day of July 1990, in the Turkish, Italian, and English languages, all texts being equally authoritative, except in cases of doubt, where the English text shall prevail.

For the Government of the Republic of Turkey:

Ali Bozer
The Minister of Foreign Affairs

For the Government of the Republic of Italy:

Gianni de Michelis
The Minister of Foreign Affairs