Ruling Number: 37538499-120[4-2014-1]-19 Introduction In a private ruling dated May 26, 2014, the Malatya Tax Office (Taxpayer Services Group Directorate) addressed the taxation of wages received by a German national working as a representative of a German resident company in Türkiye. The taxpayer stated that: They act as the representative of a company established in Germany. They hold German citizenship. Due to their work, they spend more than 183 days per year in Türkiye. Their wages are paid by the German company after social security deductions into their bank account in Germany. The taxpayer requested clarification on whether, as a German national spending more than 183 days in Türkiye, they are subject to income tax in Türkiye and how they should be taxed. Legal Framework – Domestic Law Income Tax Law (Law No. 193) Article 1 – Scope: Income derived by real persons is subject to income tax. Income is the net amount of earnings and proceeds obtained by a real person during a calendar year. Article 3(1)(1) – Full Liability: Real persons resident in Türkiye are taxed on their worldwide income. Article 4 – Residence in Türkiye: The following persons are considered resident in Türkiye: 1. Those whose domicile is in Türkiye; 2. Those who stay continuously in Türkiye for more than six months in a calendar year (temporary absences do not interrupt the period). Article 61 – Definition of Wages: Wages are cash, benefits in kind, and other advantages provided to employees dependent on an employer and affiliated with a specific workplace in return for services. The nature of wages is not changed by being paid under different names (allowances, compensation, bonuses, premiums, etc.) or as a percentage of profits. Article 86 – Annual Return Not Required (Paragraph 1(b)): For full liability taxpayers, an annual return is not required for wages received from a single employer that have been subject to withholding tax. (Exception applies if wages from a second or subsequent employer exceed the second income bracket threshold.) Article 94 – Withholding Tax Obligation: Withholding tax applies to wages and other payments considered wages under Article 61 (except those benefiting from exemptions). Article 95(1) – Annual Return Requirement for Wages Paid from Abroad: Wages received directly from an employer in a foreign country must be declared through an annual return. Important: Wages received from an employer located abroad are not subject to withholding tax in Türkiye. Instead, the employee must file an annual income tax return in March of the following year with the tax office where their domicile is located, declaring the wages together with any other income derived in Türkiye. The fact that wages are received directly abroad, sent to Türkiye, or deposited in a bank does not change the tax treatment. Double Taxation Treaty Provisions Türkiye-Germany Double Taxation Treaty (Effective January 1, 2011 – entered into force August 1, 2012) Article 1 – Covered Persons: The treaty applies to persons who are residents of one or both Contracting States. Article 4 – Resident: 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 home, domicile, 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: 1. Subject to Articles 16, 18, 19, and 20, 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 any 12-month period beginning or ending in the fiscal year concerned; (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 of the DTT The taxpayer spends more than 183 days per year in Türkiye and holds German citizenship. Under Article 4(2) of the DTT: Tie-breaker Rule Application Permanent home Must be assessed based on facts Center of vital interests Must be assessed based on facts Habitual stay More than 183 days in Türkiye → Türkiye Citizenship German citizenship → Germany Key principle: Habitual stay takes precedence over citizenship. Since the taxpayer spends more than 183 days in Türkiye, they are likely deemed a resident of Türkiye under the tie-breaker rules. Step 2 – Taxing Right under Article 15 (Dependent Personal Services) Factor Determination Residency status Türkiye (under Article 4) Where is employment exercised? Türkiye Taxing right under Article 15(1) Türkiye (exclusive right, unless employment exercised in Germany) Conclusion: Türkiye has the right to tax the wages. Step 3 – Domestic Tax Treatment (No Withholding Tax Applicable) Since the employer is a German resident company (not a Turkish resident employer): No withholding tax will be applied to the wages in Türkiye. The taxpayer must file an annual income tax return in March of the following year with the tax office where their domicile is located. The wages (together with any other income derived in Türkiye) must be declared and taxed according to Turkish income tax brackets. Step 4 – Exception under Article 15(2) (Not Applicable) The exception under Article 15(2) (taxable only in the first-mentioned State) would apply if: The taxpayer stayed in the other State for less than 183 days (not the case here). Since the taxpayer stays more than 183 days in Türkiye, the exception does not apply, and Türkiye retains the taxing right. Summary Table Question Answer Is the taxpayer a resident of Türkiye? Yes (stays more than 183 days – habitual stay under Article 4) Does Türkiye have the right to tax the wages? Yes (Article 15(1) – employment exercised in Türkiye) Will withholding tax be applied in Türkiye? No (employer is not a Turkish resident) How should the taxpayer be taxed? File annual income tax return in March (domicile tax office) What must be declared? Wages from German employer + any other Türkiye-source income Does Germany have the right to tax? No (if Türkiye is the resident State) Important Notes 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. Acting in accordance with this ruling protects the taxpayer from tax penalties and default interest for the related transactions. Legal Notice: The information in this article is intended for information purposes only. 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