Tax Treaty Case Law around the Globe 2013

S. 163 Turkey: The Characterisation of Income as Royalty

Billur Yalti

1. S. 165 Introduction

Turkey has seventy-eight Double Tax Conventions (DTC) in force. Turkey’s tax treaties generally follow the provisions of the OECD Model Convention (herein after: OECD MC). Deviations concern withholding taxes and capital gains in particular. Although there is a significant treaty network, the jurisprudence on these treaties is considerably rare. Two of the exceptional cases that concern the characterization of income as ‘royalties’ will be explained and analyzed in this report. Both decisions, which were given by the lower tax courts, are related to the ‘know-how’ provision of Article 12 of the DTCs.

2. Case K.2012/328: Centralized Information System Service Fees

2.1. Facts of the case and the position of the parties

The Bursa Tax Court gave its decision in Case K.2012/328, on 22 March 2012. In the case, a Turkish resident company paid fees to its French parent company for Centralized Information System Services which comprised the use of a computer program, and technical and advisory services thereof. The French company, which was conducting business in automobile manufacturing, had no permanent establish...