Tax Treaty Case Law around the Globe 2022

8.1. Introduction

The case is about the definition of “permanent establishment” (PE) and understanding of the concept under the Germany-Türkiye Income Tax Treaty (2011). The decision was given by the Fourth Chamber of the Supreme Administrative Court of Türkiye (Danıştay) (High Court) on 18 January 2021.

Generally, in the past, the interpretation of the PE concept in the Germany-Türkiye Income and Capital Tax Treaty (1985), especially by the Turkish authorities, has created some tension between Türkiye and Germany. In article 5 of the current Germany-Türkiye Income Tax Treaty (2011), the definition and the scope of PE are in line with the OECD Model (2017) and international standards. However, in some earlier decisions, Turkish jurisprudence had interpreted the fixed place of business concept quite broad, for instance, to cover yachts that were used for so-called “blue voyages” within the Turkish coast, depending on the fact that the route of the yachts was fixed and the yachts were moored to the Turkish ports. The UK authorities indeed rightfully disagreed with that approach and tried to emphasize the explanation in the Commentary on Article 5 of the OECD Model of the moving busi...