Details of the income tax treaty and protocol between Norway and Turkey, signed on 15 January 2010, have become available. The treaty was concluded in the Norwegian, 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. Once effective, the treaty will replace the Norway-Turkey income and capital treaty of 16 December 1971.
The maximum rates of withholding tax are:
|-||15% generally on dividends (Art. 10(2)(c) of the Treaty); 5% on dividends provided that such dividends are tax exempt in the other state and (i) the beneficial owner is a company (other than a partnership) which owns directly at least 20% of the capital of the company distributing the dividends (Art. 10(2)(a) of the Treaty), or (ii) the dividend is derived, in the case of Norway, by the Government Pension Fund or, in the case of Turkey, by the Government Social Security Fund (Art. 10(2)(b) of the Treaty);|
|-||15% on interest in general (Art. 11(2)(c) of the Treaty); 10% if paid to a bank (Art. 11(2)(b) of the Treaty); 5% if paid to certain credit institutions providing export credits or a government pension or social security fund (Art. 11(2)(a) of the Treaty); and|
|-||10% on royalties (Art. 12(2) of the Treaty).|
Deviations from the OECD Model include that:
|-||the term "permanent establishment" (PE) also encompasses: (i) a building site, a construction, assembly or installation project or connecting supervisory therewith provided that such site, project or activities continue for a period of more than 6 months (Art. 5(3) of the Treaty); and (ii) a situation where an enterprise of a contracting state performs services in the other contracting state either (a) through one or more individuals who are present in the other state during a period or periods exceeding in the aggregate 183 days within any 12-month period, and more than 50% of the gross revenues attributable to active business activities of the enterprise during this period or periods are derived from services in that other state through an individual or those individuals; or (b) during a period or periods exceeding in the aggregate 183 days within any 12-month period, and these services are performed for the same project or connected projects through one or more individuals who are performing such services in that state or are present in that state for the purpose of performing such services. An individual who performs such services on behalf of another enterprise is excluded, unless the first-mentioned enterprise supervises, directs or controls the manner in which such services are performed by the individual (Art. 5(4) of the Treaty);|
|-||the term "royalties" includes payments for the use of, or the right to use of recordings for radio and television, and industrial, commercial or scientific equipment (Art. 12(3) of the Treaty);|
|-||the treaty contains a provision regarding independent personal services based on Art. 14 of the UN Model Convention (Art. 14 of the Treaty);|
|-||alimony and other maintenance payments to a resident of the other state shall be taxable in the residence state of the recipient. However, such payment shall, to the extent it is not allowable as a relief to the payer, be taxable only in the source state (Art. 18(3) of the Treaty);|
|-||the treaty includes a provision regarding offshore activities. Under this provision, a person carrying out offshore activities in the other contracting state is deemed to have a PE there if those activities exceed 30 days in the aggregate in any 12-month period, (Art. 21 of the Treaty); and|
|-||the term "dividends" includes the payment of manufactured dividends, (i.e. an amount corresponding to the dividends which are distributed on the borrowed shares during the loan period), by a borrower to a lender under a securities lending agreement. In the case of Turkey, the "dividends" term includes income derived from an investment fund or an investment trust (Para. 4 of the Protocol).|
Both countries provide for the credit and exemption-with-progression methods to avoid double taxation (Art. 23(1)(a) and (b) of the Treaty).