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Turkey Ratifies Tax Treaty with Mexico — Orbitax Tax News & Alerts

On 20 February 2015, Turkey published the decree ratifying the pending income tax treaty with Mexico. The treaty, signed 17 December 2013, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Mexican federal income tax and business flat rate tax, and covers Turkish income tax and corporation tax.


If a company is considered resident in both Contracting States, the competent authorities will determine the company's residence for the purpose of the treaty through mutual agreement. If the authorities cannot reach mutual agreement, the company will not be entitled to the benefits of the treaty.

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%
  • Interest - 10% if the gross amount of the interest is paid to a bank, otherwise 15%
  • Royalties - 10%
  • Capital gains - the following gains derived by a resident of one Contracting State may be taxed by the other State:
    • Gains from the alienation of immovable property situated in the other State,
    • Gains from the alienation of shares or similar rights in a company whose property consists directly or indirectly principally of immovable property situated in the other State,
    • Gains from the alienation of shares, participation or other rights in the capital of a company resident in the other State,
    • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State, and
    • Gains from the alienation of other property in the other State when the time between the acquisition and alienation of such property does not exceed 1 year

Double Taxation Relief

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

Entry into Force and Effect

The treaty will enter into force 30 days after the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force.