AGREEMENT BETWEEN THE SWISS CONFEDERATION AND THE REPUBLIC OF TURKEY FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME

THE SWISS FEDERAL COUNCIL AND THE GOVERNMENT OF THE REPUBLIC OF TURKEY

Desiring to conclude an Agreement for the avoidance of double taxation with respect to taxes on income, HAVE AGREED as follows:

Article 1 PERSONS COVERED

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 a Contracting State or of its political subdivisions or local authorities, irrespective of the manner in which they are levied.

2. There shall be regarded as taxes on income all ordinary and extraordinary 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 Switzerland:

   • the federal, cantonal and communal taxes on income (total income, earned income, income from capital, industrial and commercial profits, capital gains and other items of income) (hereinafter referred to as “Swiss tax”); b) in Turkey:
   • the income tax;
   • the corporation tax (hereinafter referred to as “Turkish tax”).

4. The Agreement shall apply also 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 substantial changes which have been made in their respective taxation laws.

5. The Agreement shall not apply to taxes levied by either Contracting State on wagering, gambling or lottery winnings.

Article 3 GENERAL DEFINITIONS

1. For the purposes of this Agreement, unless the context otherwise requires: a) i) the term “Switzerland” means the Swiss Confederation; ii) the term “Turkey” means the territory of the Republic of Turkey, the territorial sea, as well as the maritime areas over which it has exclusive jurisdiction or sovereign rights for the purposes of exploitation and conservation of natural resources in accordance with international law; b) the terms “a Contracting State” and “the other Contracting State” mean Switzerland or Turkey as the context requires; c) the term “tax” means any tax covered by Article 2 of this Agreement; d) the term “person” includes an individual, a company and any other body of persons; e) the term “company” means any body corporate or any entity which is treated as a body corporate for tax purposes; f) the term “head office” (registered office) means the head office registered under the Swiss Code of Obligations or the legal head office registered under the Turkish Code of Commerce; g) the term “national” means, i) any individual possessing the nationality of a Contracting State; ii) any legal person, partnership or association deriving its status as such from the laws in force in a Contracting State; h) 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; i) the term “competent authority” means: i) in Switzerland, the Director of the Federal Tax Administration or his authorised representative; ii) in Turkey, the Minister of Finance or his authorised representative; j) the term “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 or the aircraft or road vehicle is operated solely between places situated in the other Contracting State.

2. As regards the application of the Agreement at any time by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the law of that State for the purposes of the taxes to which the Agreement applies, any meaning under the applicable tax laws of that State prevailing over a meaning given to the term under other laws of that State.

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, head office (registered office), place of management or any other criterion of a similar nature, and also includes that State and any political subdivision or local authority thereof.

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 only 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 only 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 only of the State in which he has an habitual abode; c) if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident only 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 only of the State in which its place of effective management is situated.

Article 5 PERMANENT ESTABLISHMENT

1. For the purposes of this Agreement, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

2. The term “permanent establishment” includes 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.

3. The term “permanent establishment” also encompasses: a) a building site, a construction, assembly or installation project or supervisory activities in connection therewith but only if such site project or activities last more than six months; b) the furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only if activities of that nature continue (for the same or a connected project) within a Contracting State for a period or periods aggregating more than six months within any twelve-month period.

4. Notwithstanding the preceding provisions of this Article, the term “permanent establishment” shall be deemed not 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; f) the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs a) to e), provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.

5. Notwithstanding the provisions of paragraphs 1 and 2, where a person – other than an agent of an independent status to whom paragraph 6 applies – is acting on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for the enterprise, unless the activities of such person are limited to those mentioned in paragraph 4 which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph.

6. An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that 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.

7. 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.

Article 6 INCOME FROM IMMOVABLE PROPERTY

1. Income derived by a resident of a Contracting State from immovable property (including income from agriculture and forestry) situated in the other Contracting State may be taxed in that other State.

2. The term “immovable property” shall have the meaning which it has under 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, fishing places of every kind, 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; ships, aircraft and road vehicles 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 by 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 SHIPPING, AIR AND ROAD TRANSPORT

1. Profits of an enterprise of a Contracting State derived 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 shall also apply to profits 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 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 the competent authorities of the Contracting States may consult together with a view to reach an agreement on the adjustments of profits. Where the mutual agreement is reached, the Contracting State concerned shall make the appropriate adjustment.

3. A Contracting State shall not change the profits of an enterprise in the circumstances referred to in paragraph 1 after the expiry of the time limits provided in its national laws and, in any case, after five years from the end of the year in which the profits which would be subject to such change would have accrued to an enterprise of that State.

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 beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed: a) in the case of Switzerland: (i) 5 per cent of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) which holds directly at least 20 per cent of the capital of the company paying the dividends; (ii) 15 per cent of the gross amount of the dividends in all other cases; b) in the case of Turkey: (i) 5 per cent of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) which holds directly at least 20 per cent of the capital of the company paying the dividends provided that a relief from Swiss tax is granted for such dividends by way of an abatement of the profits tax in proportion corresponding to the ratio between the earnings from participations and the total profits or by way of an equivalent relief; (ii) 15 per cent of the gross amount of the dividends in all other cases.

   This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of these limitations.

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, but the tax so charged shall not exceed: a) in the case of Switzerland, 5 per cent of the remaining amount; b) in the case of Turkey, (i) 5 per cent of the remaining amount if the profits of the company are exempted from tax in Switzerland; (ii) 15 per cent of the remaining amount in all other cases.

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 case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

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 beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed: a) 5 per cent of the gross amount of the interest paid in respect of a loan or credit made, guaranteed or insured for the purposes of promoting export by an Eximbank or similar institution, the objective of which is to promote the export; b) 10 per cent of the gross amount of the interest if the interest is derived by a bank; c) 10 per cent of the gross amount of the interest in all other cases.

   The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of these limitations.

3. Notwithstanding the provisions of paragraph 2, interest shall be exempted from tax in the Contracting State in which it arises if it is paid to the other Contracting State or the Central Bank of that other State.

4. 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.

5. The provisions of paragraphs 1, 2 and 3 shall not apply if the beneficial owner of the interest, being a resident of one of the Contracting States, 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 case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

6. Interest shall be deemed to arise in a Contracting State when the payer is 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 State in which the permanent establishment or fixed base is situated.

7. 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 laws 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. If the beneficial owner of the royalties is a resident of the other Contracting State, the tax charged shall not exceed 10% of the gross amount of the royalties. The competent authorities of both Contracting States will mutually agree on how these limitations will be applied.

3. The term “royalties” includes payments received for:

   • Use of, or the right to use, copyrights of literary, artistic, or scientific work, including films and recordings for radio or television.
   • Use of patents, trademarks, designs, models, plans, secret formulas or processes.
   • Information concerning industrial, commercial, or scientific experience.
   • Use of, or the right to use, industrial, commercial, or scientific equipment.

4. Paragraphs 1 and 2 do not apply if:

   • The beneficial owner of the royalties, a resident of one Contracting State, carries on business in the other Contracting State where the royalties arise, through a permanent establishment or fixed base.
   • The provisions of Article 7 or Article 14 will then apply accordingly.

5. Royalties are considered to arise in a Contracting State when the payer is a resident of that State. If the payer has a permanent establishment or fixed base in a Contracting State, and the royalties are effectively connected with that establishment or base, the royalties are deemed to arise in that Contracting State.

6. If a special relationship between the payer and the beneficial owner results in higher royalties than would be agreed upon by independent parties, the taxation under this Article applies only to the agreed amount. Any excess payments remain taxable according to each Contracting State’s laws.

Article 13: Capital Gains

1. Gains derived by a resident of a Contracting State from the sale of immovable property located in the other Contracting State may be taxed in that other State.

2. Gains from the sale of movable property forming part of the business property of a permanent establishment in the other Contracting State, or movable property related to a fixed base for performing independent personal services, may be taxed in that other State.

3. Gains from the sale of ships, aircraft, or road vehicles used in international traffic, or movable property related to their operation, are taxable only in the Contracting State where the enterprise is resident.

4. Gains from the sale of any property not covered in paragraphs 1, 2, and 3 are taxable only in the Contracting State where the seller is a resident. However, gains from the other Contracting State are taxable there if the period between acquisition and sale does not exceed one year.

Article 14: Independent Personal Services

1. Income derived by a resident of one Contracting State from independent professional services or activities is taxable only in that State.

2. However, such income may also be taxed in the other Contracting State if:

   • The services or activities are performed in that other State.
   • The individual has a fixed base regularly available in that other State for performing such services or activities.
   • The individual is present in that other State for 183 days or more in any continuous 12-month period to perform these services or activities.

3. In such cases, only income attributable to the fixed base or derived from services performed during the presence in that other State is taxable in that other State.

4. “Professional services” include independent scientific, literary, artistic, educational, or teaching activities, as well as services provided by physicians, lawyers, engineers, architects, dentists, accountants, and other professions requiring specific skills.

Article 15: Dependent Personal Services

1. Salaries, wages, and similar remuneration received by a resident of a Contracting State for employment are taxable only in that State, unless the employment is exercised in the other Contracting State. If the employment is exercised there, the remuneration derived may be taxed in the other State.

2. However, remuneration for employment exercised in the other Contracting State shall be taxable only in the first State if:

   • The recipient is present in the other State for a total of 183 days or less in the calendar year.
   • The remuneration is paid by or on behalf of an employer who is not a resident of the other State.
   • The remuneration is not borne by a permanent establishment or fixed base the employer has in the other State.

3. Remuneration derived from employment aboard ships, aircraft, or road vehicles used in international traffic may be taxed in the Contracting State where the enterprise operating the vehicle is a resident.

Article 16: Directors’ Fees

Directors’ fees and similar payments received by a resident of one Contracting State 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 Sportsmen

1. Income earned by a resident of one Contracting State as an entertainer (theatre, motion picture, radio, television artiste, musician) or as a sportsman from personal activities exercised in the other Contracting State may be taxed in that other State.

2. If income from such activities accrues not to the artiste or sportsman themselves but to another person, the income may be taxed in the Contracting State where the activities were performed, notwithstanding other provisions in the agreement.

3. Paragraphs 1 and 2 do not apply to income derived from activities in a Contracting State if the visit is substantially supported by public funds from the other Contracting State, a political subdivision, or a local authority thereof.

Article 18: Pensions

1. Pensions and similar remuneration paid to a resident of a Contracting State in consideration of past employment, and annuities as defined in paragraph 2 of this Article, shall be taxable exclusively in that State, subject to the conditions in Article 19, paragraph 1.

2. For the purposes of this Article, “annuity” refers to a specified sum payable periodically at agreed times throughout life or for a determined period. Such payments are made under an obligation to provide compensation in full and fair exchange for money or money’s worth.

Article 19: Government Services

1. Remuneration, including pensions, paid by a Contracting State or its political subdivision or local authority, to an individual for services rendered in a governmental capacity shall be taxable only in that State. This includes payments made directly by the State or from funds established by it.

2. The provisions outlined in Articles 15, 16, 17, and 18 shall also apply to remuneration or pensions for services rendered in connection with any trade or business conducted by a Contracting State, its political subdivision, or a local authority thereof.

Article 20: Students

1. Payments for maintenance, education, or training received by a student or business apprentice, who immediately before visiting one Contracting State was a resident of the other Contracting State, and who is present in the former State solely for educational or training purposes, shall not be subject to taxation in that State, provided that such payments originate from sources outside that State.

2. Additionally, regarding grants, scholarships, and employment remuneration not covered in paragraph 1, a student or business apprentice described in paragraph 1 shall be entitled, during their education or training period, to the same tax exemptions, reliefs, or reductions available to residents of the State they are visitin

Article 21: Other Income

1. Income items of a resident of a Contracting State, regardless of their source, which are not addressed in the preceding Articles of this Agreement, shall be taxable exclusively in that State.

2. Paragraph 1 does not apply to income, excluding income from immovable property as defined in paragraph 2 of Article 6, if:

   • The recipient, a resident of a Contracting State, conducts business in the other Contracting State through a permanent establishment located there, or
   • Performs independent personal services from a fixed base situated in that other State, and the right or property from which the income is derived is effectively linked with such permanent establishment or fixed base. In such instances, the provisions of either Article 7 or Article 14 shall be applicable, as appropriate.