Details of the first-time income tax treaty between South Africa and Turkey , signed on 3 March 2005, have become available. The treaty was concluded in the English and Turkish languages, each text having equal authenticity. The treaty generally follows the OECD Model Convention.
The maximum rates of withholding tax are:
| - | 15% on dividends in general and 10% where the beneficial owner is a company (excluding a partnership) holding directly at least 25% of the capital of the paying company; | |
| - | 10% on interest, subject to the exceptions in respect of interest derived by the governments of the contracting states; and | |
| - | 10% on royalties. |
The treaty permits South Africa to levy a branch profits tax up to a maximum of 5% above the rate of normal tax on companies. This will only apply while the exemption from secondary tax on companies currently afforded to branches of non-resident companies is in effect.
Deviations from the OECD Model include that:
| - | the definition of permanent establishment includes supervisory activities in connection with a building site, a construction, assembly or installation project lasting more than 12 months; | |
| - | the definition of royalties includes payments for the use or the right to use, or the sale of, recordings for radio and television and for the use of, or right to use, industrial, commercial or scientific equipment; | |
| - | profits from the operation of ships or aircraft in international traffic include incidental profits derived from (i) the rental on a bare boat basis of ships or aircraft used in international traffic, and (ii) the use or rental of containers; and | |
| - | the treaty contains an article on independent personnel services based on the UN Model Convention.. |
Both states generally provide for the credit method to avoid double taxation.