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Treaty between Philippines and Turkey – details — Orbitax Tax News & Alerts

Details of the Philippines - Turkey Income Tax Treaty and Protocol (2009), have become available. The treaty was concluded in the Turkish and English languages, each text having equal authenticity. The treaty generally follows the UN Model (2001).

The maximum rates of withholding tax are:

-   15% on dividends (10% where the beneficial owner is a company (other than a partnership) which holds directly at least 25% of the capital of the company paying the dividends);
-   10% on interest, subject to an exception; and
-   10% on royalties (15% on royalties arising from the use of or the right to use, any cinematographic films and films or tapes for television or radio broadcasting.

Deviations from the UN Model include:

-   Art. 5 (Permanent establishment) excludes the use of facilities solely for the purpose of delivery of goods and merchandise belonging to the enterprise, and the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of delivery. There is also no provision for insurance agents.
-   Art. 8 (Shipping and air transport) allows the source state to levy a maximum tax of 1.5% on the gross revenue from the operation of ships or aircraft in international traffic.
-   There is an article for professors and teachers (Art. 20).

The Philippines provides for the credit method whereas Turkey provides for the exemption method to avoid double taxation.