Details of the first-timeincome tax treaty and protocol between Turkey and Portugal signed on 11 May 2005, have become available. The treaty was concluded in the Portuguese, Turkish and English languages, each text having equal authenticity. In the case of divergence, however, the English text prevails. The treaty generally follows the OECD Model Convention..

The maximum rates of withholding tax are:

-		15% on dividends in general and 5% if the beneficial owner is a company (other than a partnership) that, for an uninterrupted period of 2 years prior to the payment of the dividends, or for the "lifetime" of the paying company if the latter exists for less than 2 years, holds directly at least 25% of the capital of the distributing company. Under the protocol, the term "dividends" includes in the case of Portugal, profits attributed under an arrangement for participation in profits (associação em participação) and in the case of Turkey, income derived from an investment fund and investment trust'
-		15% on interest in general and 10% if the interest if it is paid on a loan made for a period of more than two years. The definition of interest includes penalty charges; and
-		10% on royalties. The definition of royalties includes (i) payments for the use or the right to use films or recordings for radio or television broadcasting or for the use of, or the right to use industrial, commercial or scientific equipment, and (ii) gains derived from the use of a right or property mentioned in the Art. 12 (Royalty) in the case of an alienation of such right or property to the extent that such gains are contingent on the productivity, use, or disposition thereof.

The treaty permits both states to levy a branch profits tax up to a maximum of 5%.

Deviations from the OECD Model include that:

-		the definition of a permanent establishment includes: (i) a building site, construction, assembly or installation project or supervisory activities in connection therewith constitute a PE only if it lasts for more than 9 months; and (ii) an independent agent who has no authority to conclude contracts on behalf of the non-resident enterprise, but habitually maintains a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise and conducts any other activity that contributes to the sale of goods or merchandise;
-		both countries may levy a tax on gains if a country's resident acquires from an another country's resident shares that represent a participation of more than 25% of the capital stock of the first country's resident company, if the period between acquisition and alienation does not exceed 1 year;
-		the treaty contains a separate article on independent personal services; and
-		the non-discrimination article applies only to taxes covered by the tax treaty

Both states generally provide for the credit method to avoid double taxation.

Treaty between Turkey and Portugal enters into force

The first-time income tax treaty and protocol between Turkey and Portugal, signed on 11 May 2005, entered into force on 18 December 2006. The treaty generally applies from 1 January 2007.