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Turkey Approves Tax Treaty with Kosovo — Orbitax Tax News & Alerts

On 26 February 2015, the Turkish Council of Ministers approved for ratification the pending income tax treaty with Kosovo. The treaty was signed 10 September 2012, and is the first of its kind between the two jurisdictions.

Taxes Covered

The treaty covers Kosovo personal income tax and corporate income tax, and covers Turkish income tax and corporation tax.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 25% of the paying company's capital, otherwise 15% (a protocol to the treaty, signed the same date, includes the provision that dividends paid by a resident of Kosovo to a resident of Turkey are exempt from withholding tax)
  • Interest - 10%
  • Royalties - 10%
  • Capital Gains - generally exempt, except for gains from the alienation of immovable property, and gains from the alienation if movable property forming part of the business property of a permanent establishment

Double Taxation Relief

Both jurisdictions apply the credit method for the elimination of double taxation.

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force.