Details of the newincome tax treaty and protocol between Turkey and Austria, signed on 28 March 2008, have become available. The treaty was concluded in the German, 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% in case of qualifying companies holding directly at least 25% of the capital of the company paying the dividends (in case a Turkish company pays the dividends, the 5% rate is applicable only if the dividends are exempt in the state of residence, i.e. Austria);
-		15% on interest in general, 10% if the interest is derived by a bank and 5% on interest on a loan or credit made, guaranteed or insured for the purposes of promoting export by the Oesterreichische Kontrollbank AG or a similar Turkish public entity, subject to an exception for interest paid to the other contracting state or the central bank of that other state; and
-		10% on royalties.

There are no provisions for service fees (managerial and technical).

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

Deviations from the OECD Model include that:

-		Art. 4 (Resident) contains a mutual agreement procedure as a tie-breaker rule;
-		Art. 5 (Permanent establishments): the threshold period for a construction PE is reduced to 6 months;
-		Art. 10 (Dividends): the definition of dividends also includes income derived from an investment fund and investment trust;
-		Art. 11 (Interest) allows unlimited source taxation for income from rights or debt claims carrying a right to participate in the profits (including the income derived by a "sleeping partner") or from participating loans and participating bonds;
-		Art. 12 (Royalties): the definition of royalties also includes consideration for the use of, or the right to use, industrial, commercial or scientific equipment;
-		Art. 13 (Capital gains): capital gains other than capital gains on immovable property, movable property pertaining to a permanent establishment, or on ships or aircraft operated in international traffic shall be taxable (with no limitations) in the source state if the holding period does not exceed 1 year; and
-		the treaty contains Art. 14 on "Independent personal services".

Austria generally provides for the exemption-with-progression method to avoid double taxation. For passive income, however, Austria provides for the ordinary credit method, coupled with a tax sparing credit limited at the relevant treaty rates. For the tax sparing credit, an explicit anti-avoidance provision is included in the protocol.

Turkey generally provides for the ordinary credit method to avoid double taxation.

The treaty and protocol make no specific reference to special tax regimes in either Turkey or Austria, and it is assumed that they apply to entities qualifying for any such regimes.

Treaty between Austria and Turkey approved

On 19 June 2008, the Austrian parliament approved the new income tax treaty between Austria-Turkey, signed on 28 March 2008. The new treaty will generally replace the Austria-Turkey income and capital tax treaty of 3 November 1970.