Ruling Number: 62030549-120[3-2015/861]-14572 Introduction In a private ruling dated February 22, 2016, the Istanbul Tax Office (Taxpayer Services Income Taxes Group Directorate) addressed the taxation of wages earned by a Turkish citizen working in the United Kingdom on behalf of a Turkish resident company. The taxpayer stated that: Since February 21, 2013, they have been working in the United Kingdom on behalf of a Turkish resident company. They have never performed their services in Türkiye. They are a citizen of both the United Kingdom and the Republic of Türkiye. Since August 21, 2005, they have been residing in the United Kingdom. The employer company pays the taxes withheld on their wages in Türkiye. The UK also taxes the same income, considering the taxpayer a resident of the UK. The taxpayer has obtained a Certificate of Residency from the UK. The taxpayer requested clarification on how the wages should be taxed. Double Taxation Treaty Provisions Türkiye-UK Double Taxation Treaty (Effective January 1, 1989) Article 1 – Personal Scope: The treaty applies to persons who are residents of one or both Contracting States. Article 4 – Residence (Paragraphs 1 and 2): 1. “Resident of a Contracting State” means any person who, under the laws of that State, is liable to tax therein by reason of their domicile, residence, place of management, or any other criterion of a similar nature. 2. Where an individual is a resident of both Contracting States, their status shall be determined as follows: (a) They shall be deemed a resident only of the State where they have a permanent home available to them; if they have a permanent home in both States, they shall be deemed a resident only of the State with which their personal and economic relations are closer (center of vital interests); (b) If the center of vital interests cannot be determined, or if they have no permanent home in either State, they shall be deemed a resident only of the State where they habitually stay; (c) If they habitually stay in both States or in neither, they shall be deemed a resident only of the State of which they are a citizen; (d) If they are a citizen of both States or of neither, the competent authorities shall resolve the issue by mutual agreement. Article 15 – Dependent Personal Services (Paragraphs 1 and 2): 1. Subject to Articles 16, 18, 19, and 21, salaries, wages, and other similar income derived by a resident of one Contracting State in respect of employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is exercised in the other State, such income may be taxed in that other State. 2. Notwithstanding paragraph 1, income derived by a resident of one Contracting State from employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if: (a) The recipient stays in the other State for a period or periods not exceeding 183 days in a tax year; (b) The payment is made by or on behalf of an employer who is not a resident of the other State; and (c) The payment is not borne by a permanent establishment or fixed base that the employer has in the other State. Ruling Conclusion Step 1 – Determine Residency Status Under Article 4 The taxpayer has been residing in the UK since August 21, 2005, and has obtained a Certificate of Residency from the UK authorities. Under the tie-breaker rules of Article 4(2): Tie-breaker Rule Application Permanent home Likely the UK (resident since 2005) Center of vital interests Likely the UK Habitual stay UK Citizenship Both UK and Türkiye (neutral) Conclusion: The taxpayer is deemed a resident of the United Kingdom under the DTT. Step 2 – Determine Taxing Right Under Article 15 Factor Determination Where is the taxpayer resident? United Kingdom (under Article 4) Where is the employment exercised? United Kingdom (services performed in the UK) Taxing right under Article 15(1) Only the United Kingdom (since employment is exercised in the UK) Step 3 – Is Türkiye’s Taxing Right Excluded? Under Article 15(1), since the employment is exercised in the UK (the other State), the UK may tax the income. However, the first sentence of Article 15(1) states that income shall be taxable only in the State of residence unless the employment is exercised in the other State. But read together: if employment is exercised in the other State, that other State (UK) may tax. The question is whether Türkiye (the State of residence of the employer) also has a right. The ruling concludes: Since the taxpayer is a resident of the UK and the services are performed in the UK, the exclusive taxing right belongs to the United Kingdom. Türkiye has no taxing right. Therefore: The wages are taxable only in the United Kingdom. No tax should be withheld in Türkiye. Summary Table Question Answer Where is the taxpayer resident under DTT Article 4? United Kingdom Where is the employment exercised? United Kingdom Exclusive taxing right under Article 15(1) United Kingdom Does Türkiye have the right to tax the wages? No Should the Turkish employer withhold tax in Türkiye? No (if Certificate of Residency is provided) Is double taxation occurring? Yes (both countries currently taxing) – but this should be corrected by applying the treaty Required Documentation for Treaty Benefits To benefit from the treaty provisions (exclusive taxing right of the UK, no Turkish tax), the taxpayer must: Obtain a Certificate of Residency from the competent UK authorities proving that they are fully liable to tax in the UK on their worldwide income. Provide the original certificate along with a notarized or Turkish Consulate-certified Turkish translation to the withholding agent (the Turkish employer) and the relevant tax office in Türkiye. If the Certificate of Residency cannot be provided: The Turkish employer may continue to withhold tax under domestic law, and the taxpayer would need to claim a refund or foreign tax credit. Practical Steps for the Taxpayer Obtain UK Certificate of Residency (already obtained, as stated). Submit the certificate (with certified Turkish translation) to the Turkish employer and the Turkish tax office. Request the Turkish employer to stop withholding tax on future wage payments. Claim a refund for Turkish taxes already withheld (if any) from the Turkish tax office. File taxes only in the UK on this wage income. Important Notes The fact that the employer is a Turkish resident company does not give Türkiye the right to tax the wages under the DTT, because the employee is a resident of the UK and the services are performed in the UK. The double taxation currently occurring (both countries taxing the same income) is contrary to the treaty and should be resolved by applying Article 15(1). This private ruling is based on Article 413 of the Tax Procedure Law No. 213. The ruling becomes invalid if incorrect information is provided, or if there is ongoing tax audit, litigation, or reconciliation related to this matter. 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