Turkey

This Convention applies to persons resident in one or both Contracting States.

1. This Convention applies to income taxes levied by each of the Contracting States, their political subdivisions or their local entities, irrespective of the system of their levy.

2. Income taxes are all those that tax the entire income or any part thereof, including taxes on profits arising from the disposal of movable or immovable property and taxes on the total amount of wages or salaries paid by enterprises.

3. The current taxes to which this Convention will apply are, in particular:

(a) In Spain:

(i) Personal Income Tax;

(ii) Company Income Tax;

(iii) Non-Resident Income Tax; and

(iv) Local income taxes;

(hereinafter referred to as ‘the Spanish tax’).

(b) Turkey:

(i) Income Tax (Gelir Vergisi);

(ii) Company Tax (Kurumlar Vergisi); and

(iii) the surcharge on income tax and corporation tax (Gelir Vergisi ve Kurumlar Vergisi Üzerinden Al nan Fon Pay)

(hereinafter referred to as ‘Turkish tax’).

4. The Convention shall also apply to taxes of an identical or similar nature which are established after the signature of the Convention and which are added to or replaced by existing taxes. The competent authorities of the Contracting States shall communicate to each other the relevant amendments made to their respective tax laws.

1. For the purposes of this Convention, unless the context of the Convention is different:

a)

(i) the term ‘Spain’ means the Kingdom of Spain and, used geographically, means the territory of the Kingdom of Spain, including its territorial sea and airspace, as well as areas outside its territorial sea in which, under international law, the Kingdom of Spain exercises or may exercise in the future jurisdiction or rights of sovereignty over the seabed, its subsoil and superjacent waters, and its natural resources;

(ii) the term ‘Turkey’ means Turkish territory, including its territorial sea and airspace, as well as maritime areas over which it has jurisdiction or sovereignty rights for the purposes of prospecting, exploitation and conservation of natural resources, in accordance with international law;

(b) the words ‘one Contracting State’ and ‘the other Contracting State’ mean Spain or Turkey, depending on the context;

(c) 'tax' means any tax covered by Article 2 of this Convention;

(d) the term ‘person’ includes natural persons, companies and any other grouping of persons;

(e) the term 'company' means any legal person or any entity which is considered a legal person for tax purposes;

(f) the term ‘national’ means:

(i) a natural person possessing the nationality of a Contracting State;

(ii) a legal person, partnership or association incorporated in accordance with the law in force in a Contracting State;

(g) the terms ‘undertaking of a Contracting State’ and ‘undertaking of the other Contracting State’ mean, respectively, an undertaking operated by a resident of a Contracting State and an undertaking operated by a resident of the other Contracting State;

(h) the expression ‘competent authority’ means:

(i) in Spain: the Minister of Finance or his authorized representative;

(ii) in Turkey: the Ministry of Finance or its authorized representative; and

(i) 'international traffic' means any transport carried out by a ship, aircraft or road vehicle operated by an undertaking of a Contracting State, except where the ship, aircraft or road vehicle is operated only between points situated in the other Contracting State.

2. For the purposes of the application of the Convention at any time by a Contracting State, any term or expression not defined in the Convention shall have, unless a different interpretation is given in its context, the meaning attributed at that time to it by the law of that State concerning the taxes which are the subject of the Convention, the meaning attributed by the tax law to which it would result from other branches of the law of that State prevails.

1. For the purposes of this Convention, the term ‘resident of a Contracting State’ means any person who, under the law of that State, is subject to taxation in that State by reason of his domicile, residence, registered office, seat of address or any other criterion of a similar nature, including also that State and its political subdivisions or local entities. This term does not, however, include persons who are subject to taxation in that State solely for the income they obtain from sources located in that State.

2. Where, under the provisions of paragraph 1, a natural person is resident in both Contracting States, his or her situation shall be resolved as follows:

(a) Such person shall be considered a resident only of the State in which he or she has permanent housing at his or her disposal; if he or she has permanent housing at his or her disposal in both States, he or she shall be considered a resident of the State with which he or she has closer personal and economic relations (centre of vital interests);

(b) If the State in which the person has the centre of his or her vital interests cannot be determined, or if he or she does not have permanent housing at his or her disposal in any of the States, he or she shall be considered a resident only of the State in which he or she habitually lives;

(c) If he or she habitually lives in both States or does not live in either State, he or she shall be considered a resident only of the State of which he or she is a national;

(d) if he is a national of both States or is not a national of either State, the competent authorities of the Contracting States shall decide the case by mutual agreement.

3. Where under the provisions of paragraph 1 a person other than a natural person is a resident of both Contracting States, he or she shall be considered a resident of the Contracting State in which his or her place of effective management is located. However, where that person has its place of effective management in one of the States and its registered office in the other, the competent authorities of the Contracting States shall consult in order to determine by mutual agreement whether the registered office of that person is to be regarded as its place of effective management or not.

1. For the purposes of this Agreement, the term ‘permanent establishment’ means a fixed place of business through which an undertaking carries out all or part of its activity.

2. The term ‘permanent establishment’ includes, in particular:

(a) the head offices;

(b) branches;

(c) Offices;

(d) factories;

(e) workshops; and

(f) mines, oil or gas wells, quarries or any other place of extraction of natural resources.

3. A work, a construction, an installation or assembly project or the monitoring activities in connection with them only constitute a permanent establishment if the duration of the work, the project or the activities exceeds six months.

4. Notwithstanding the previous provisions of this Article, the term ‘permanent establishment’ shall be deemed not to include:

(a) the use of facilities for the sole purpose of storing, displaying or delivering goods or goods belonging to the undertaking;

(b) the maintenance of a warehouse of goods or goods belonging to the undertaking for the sole purpose of storing, displaying or delivering them;

(c) the maintenance of a deposit of goods or goods belonging to the undertaking for the sole purpose of processing by another undertaking;

(d) the maintenance of a fixed place of business for the sole purpose of buying goods or goods, or collecting information, for the enterprise;

(e) the maintenance of a fixed place of business for the sole purpose of carrying out any other auxiliary or preparatory activity for the undertaking;

(f) the maintenance of a fixed place of business for the sole purpose of carrying out any combination of the activities referred to in subparagraphs (a) to (e), provided that the whole activity of the fixed place of business resulting from that combination retains its auxiliary or preparatory character.

5. By way of derogation from paragraphs 1 and 2, where a person, other than an independent agent to which paragraph 6 applies, acts in a Contracting State on behalf of an undertaking of the other Contracting State, that undertaking shall be deemed to have a permanent establishment in the first State in respect of the activities carried out by that person for the undertaking, if that person:

(a) has and normally exercises in that State powers enabling it to conclude contracts on behalf of the undertaking, unless the activities of such persons are limited to those referred to in paragraph 4 and if they have been carried out through a fixed place of business, they have not determined that such fixed place of business is a permanent establishment in accordance with the provisions of that subparagraph; or

(b) it does not have such powers, but usually maintains in the State referred to above a deposit of goods or goods from which it regularly makes deliveries of goods or goods on behalf of the undertaking. The provisions of the preceding sentence shall not apply unless it is established that, in order to avoid taxation in the first State mentioned above, that person not only makes regular deliveries of goods and goods, but carries out almost all activities related to the sale of goods or goods except the actual conclusion of the sale contract.

6. An undertaking shall not be deemed to have a permanent establishment in a Contracting State merely because it carries out its activities in that State through a broker, a general commissioner or any other independent agent, provided that such persons act within the ordinary framework of their activity.

7. The fact that a company resident of a Contracting State controls or is controlled by a company resident of the other Contracting State, or that it engages in business activities in that other State (whether by permanent establishment or otherwise), does not in itself make any of these companies permanent establishment of the other State.

1. Income from immovable property (including income from agricultural or forestry holdings) situated in the other Contracting State may be taxed in that other Contracting State.

2. The term ‘real property’ shall have the meaning attributed to it by the law of the Contracting State in which the property is situated. In any event, that term shall include property attached to immovable property, livestock and equipment used on farms (including fish farming) and forestry, the rights to which the private law provisions relating to real estate, the use of immovable property and the right to receive fixed or variable payments in exchange for exploitation, or the granting of exploitation, of mineral deposits, sources and other natural resources apply; ships and aircraft shall not be regarded as immovable property.

3. The provisions of paragraph 1 are applicable to income derived from direct use, lease or shareholding, as well as from any other form of exploitation of immovable property.

4. The provisions of paragraphs 1 and 3 also apply to income derived from the immovable property of an undertaking and from immovable property used for the provision of independent personal services.

1. The profits of an undertaking in a Contracting State may be taxed only in that State unless the undertaking carries out its business in the other Contracting State through a permanent establishment situated therein. If the undertaking does so, the profits of the undertaking may be taxed in the other State, but only to the extent that they are attributable to that permanent establishment.

2. Without prejudice to the provisions of paragraph 3, where an undertaking of a Contracting State carries out its business in the other Contracting State by means of a permanent establishment situated therein, in each Contracting State the profits it could have obtained from being a separate and separate undertaking carrying out the same or similar activities shall be attributed to that permanent establishment under the same or similar conditions and shall deal entirely independently with the undertaking from which it is a permanent establishment.

3. For the purpose of determining the benefit of the permanent establishment, the deduction of expenses incurred for the purposes of the permanent establishment shall be permitted, including management and general administrative expenses for the same purposes, whether incurred in the State in which the permanent establishment is located or elsewhere.

4. No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or goods for the enterprise.

5. Where profits include income regulated separately in other articles of this Convention, the provisions of those articles shall not be affected by those of this article.

1. Profits obtained by an undertaking of a Contracting State from operating ships, aircraft or road vehicles in international traffic may only be taxed in that Contracting State.

2. The provisions of paragraph 1 of this Article are also applicable to profits from participation in a pool, on a joint holding or on an international operating body.

1. When

(a) an undertaking of a Contracting State participates directly or indirectly in the direction, control or capital of an undertaking of the other Contracting State; or

(b) the same persons participate directly or indirectly in the direction, control or capital of an undertaking of a Contracting State and of an undertaking of the other Contracting State,

and in either case the two undertakings are, in their commercial or financial relations, bound by accepted or imposed conditions which differ from those which would be agreed by independent undertakings, the profits which would have been obtained by one of the undertakings in the absence of such conditions, and which in fact have not been made because of them, may be included in the profits of that undertaking and may be taxed accordingly.

2. Where a Contracting State includes in the profits of an undertaking of that State - and consequently subjects to taxation - the profits on which an undertaking of the other Contracting State has been subject to taxation in that other State, and the said State first claims that the profits thus included are profits which would have been realized by the undertaking of the State concerned in the first instance if the terms agreed between the two undertakings had been those agreed between independent undertakings, that other State shall make the adjustment which would have been made to the amount of the tax it has received on those profits, if it considers that such adjustment is justified. The other provisions of this Convention shall be taken into account in determining such adjustment, and the competent authorities of the Contracting States shall consult each other where necessary.

1. Dividends paid by a company resident of one Contracting State to a resident of the other Contracting State may be taxed in that other State.

2. However, such dividends may also be taxed in the Contracting State in which the company paying the dividends resides and in accordance with the law of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax thus required may not exceed:

(a) in the case of Spain:

(i) 5 per cent of the gross amount of dividends when they are paid to a company (other than a partnership company) holding directly at least 25 per cent of the capital of the company paying the dividends; and

(ii) 15 per cent of the gross amount of dividends in all other cases.

(b) in the case of Turkey:

(i) 5 per cent of the gross amount of dividends, to the extent that dividends are paid from profits which have been taxed as specified in paragraph 5, where such dividends are paid to a company (other than a partnership company) which holds directly at least 25 per cent of the capital of the company which pays the dividends; and

(ii) 15 per cent of the gross amount of dividends in all other cases.

3. The term ‘dividends’ within the meaning of this Article means the income from shares, shares or enjoyment bonds, parts of mines, parts of founders or other rights, except credit rights, which permit participation in the profits, as well as the income from other social participations subject to the same tax regime as the income from shares under the law of the State of which the distribution company is resident.

4. The profits of a company of a Contracting State operating in the other Contracting State through a permanent establishment situated therein may, after being subject to taxation pursuant to Article 7, be taxed on the remaining amount in the Contracting State in which the permanent establishment is situated and in accordance with the law of that State, but in that case the tax may not exceed

(a) in the case of Spain, 5% of the remaining amount.

(b) in the case of Turkey:

(i) 5 per cent of the remaining amount where the profits of a corporation are encumbered as specified in paragraph 5; and

(ii) 15 per cent of the remaining amount in all other cases.

5. For the purposes of paragraphs 2 and 4, profits are considered to have been taxed in Turkey where they have not been exempted and are subject to the general corporate tax rate (Kurumlar Vergisi).

6. The provisions of paragraphs 1 and 2 do not apply if the beneficial owner of the dividends, resident in one Contracting State, performs in the other Contracting State, of which the company paying the dividends is resident, a business activity through a permanent establishment located there, or provides in that other State independent personal services through a fixed base situated there, and the share generated by the dividends is effectively linked to that permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14 are applicable, as appropriate.

7. Without prejudice to paragraph 4 of this Article, where a company resident in one Contracting State obtains profits or income from the other Contracting State, that other State may not require any tax on dividends paid by the company, except in so far as such dividends are paid to a resident of that other State or the share generated by the dividends is effectively linked to a permanent establishment located in that other State, or subject the undistributed profits of the company to a tax on them, even if the dividends paid or the undistributed profits consist, in whole or in part, of profits or income from that other State.

1. Interest from one Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

2. However, such interests may also be subject to taxation in the Contracting State from which they come and in accordance with the law of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax thus required may not exceed:

(a) 10 per cent of the gross amount of interest, if it is derived from a loan of any kind granted by a bank, or if the interest is paid in connection with the sale on credit of goods or equipment to an undertaking of a Contracting State.

(b) 15 per cent of the gross amount of interest in all other cases.

3. The term ‘interest’ within the meaning of this Article means income from claims of any kind, with or without mortgage guarantee or benefit-sharing clause of the debtor, and in particular income from public securities and income from bonds or bonds, including premiums and lots attached to such securities, bonds or bonds, as well as any other income assimilated to the amounts lent by the tax legislation of the State from which the proceeds come.

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the interest, resident of one Contracting State, carries out in the other Contracting State, from which the interest is derived, a business activity through a permanent establishment located in that other State or provides independent personal services through a fixed base situated in that other State, and the credit generated by the interest is effectively linked to that permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14 are applicable, as appropriate.

5. Interest shall be considered as originating in a Contracting State where the debtor is the State itself, a political subdivision, a local entity or a resident of that State. However, where the debtor of interest, whether or not resident of a Contracting State, has in a Contracting State a permanent establishment or a fixed basis in respect of which the debt giving rise to the payment of the interest and bearing the burden of the interest has been incurred, the interest shall be deemed to have come from the Contracting State where the permanent establishment or fixed base is situated.

6. Where, on account of the special relations between the debtor and the beneficial owner of the interest, or of those between them and third parties, the amount of interest, having regard to the claim for which it is paid, exceeds that agreed between the debtor and the beneficial owner in the absence of such relationships, the provisions of this article shall apply only to the latter amount. In such a case, the excess may be imposed in accordance with the law of each Contracting State, taking into account the other provisions of this Convention.

1. Fees from one Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

2. However, such fees may also be subject to taxation in the Contracting State from which they come and in accordance with the law of that State but if the beneficial owner of the fees is a resident of the other Contracting State the tax thus required may not exceed 10 per cent of the gross amount of such fees.

3. The term ‘royalties’ within the meaning of this Article means the amounts of any kind paid for the use or grant of use or sale of copyright in literary, artistic or scientific works, including cinematographic films and films or tapes or any other means of reproduction of the image or sound, patents, trademarks or trade marks, designs, plans, formulas or secret procedures, or for information relating to industrial, commercial or scientific experiences or for the use or concession of use of industrial, commercial or scientific equipment.

4. The provisions of paragraphs 1 and 2 do not apply if the beneficial owner of the royalties, resident of one Contracting State, carries out in the other Contracting State, from which the royalties come, a business activity through a permanent establishment located in that other State or provides independent personal services through a fixed base located in that other State, and the right or for which the royalties are paid is effectively linked to that permanent establishment or fixed base. In such cases, the provisions of Article 7 or Article 14 shall apply, as appropriate.

5. The royalties are considered to come from a Contracting State when the debtor is the State itself, a political subdivision, a local entity or a resident of that State. However, where the debtor of the royalties, whether or not he is a resident of a Contracting State, has in one of the Contracting States a permanent establishment or a fixed basis with which the right is actually linked or for which the royalties are paid and which bear the burden thereof, such fees shall be deemed to come from the State where the permanent establishment or fixed base is situated.

6. Where, on account of the special relations between the debtor and the beneficial owner of the royalties, or of those between them and third parties, the amount of the royalties, taking into account the use, right or information for which they are paid, exceeds that for which the debtor and beneficial owner would have agreed in the absence of such relationships, the provisions of this article shall apply only to the latter amount. In such a case, the excess may be imposed in accordance with the law of each Contracting State, taking into account the other provisions of this Convention.

1. Profits that a resident of one Contracting State obtains from the disposal of immovable property as defined in article 6 located in the other Contracting State may be taxed in that other State.

2. Gains arising from the disposal of movable property forming part of the assets of a permanent establishment held by an undertaking of one Contracting State in the other Contracting State, or movable property belonging to a fixed basis held by a resident of one Contracting State in the other Contracting State for the provision of independent personal services, including gains arising from the disposal of that permanent establishment (alone or with the enterprise as a whole) or from that fixed basis, may be taxed in that other State.

3. Profits derived by a resident of a Contracting State from the alienation of ships, aircraft or road vehicles operated in international traffic or from movable property affected by the operation of such ships, aircraft or road vehicles may only be taxed in that State.

4. Profits arising from the disposal of any property other than those referred to in paragraphs 1, 2 and 3 may be taxed only in the Contracting State in which the transferor resides.

5. Paragraph 4 shall not affect the right of a State to tax, under its own law, the profits obtained by a resident of the other State from the disposal of shares or bonds issued by a resident of the State referred to first, if the disposal is made to a resident of that State and the period between acquisition and disposal does not exceed one year.

1. Income obtained by a natural person resident in a Contracting State from the provision of professional services or other activities of an independent nature may only be taxed in that State. However, such income may also be taxed in the other Contracting State if such services or activities are carried out in that other State and:

(a) the resident normally has a fixed basis in that other State for the performance of such services or activities; or

(b) remains in that other State for the purpose of developing such services or activities for a period or periods totalling 183 days or more in any continuous period of 12 months.

In those circumstances, only that part of the income attributable to the fixed base or derived from the services or activities performed by that person during his presence in that other State, as appropriate, may be taxed in that other State.

2. Income obtained by an undertaking of a Contracting State from the provision of professional services or other activities of a similar nature may only be taxed in that State. However, such income may also be taxed in the other Contracting State if such services or activities are carried out in that other State and:

(a) the undertaking has in that other State a permanent establishment through which such services or activities are carried out; or

(b) the period(s) during which such services or activities are performed total more than 183 days in any continuous period of 12 months.

In these circumstances, only that part of the income attributable to the permanent establishment or to the services or activities carried out in that other State, as appropriate, may be taxed in that other State. In any such case, the enterprise may choose to tax such income in that other State in accordance with article 7 of this Convention as if the income were attributable to a permanent establishment of the enterprise located in that other State. This decision shall not affect the right of that other State to levy a withholding tax on such income.

3. The term ‘professional services’ includes, in particular, independent scientific, literary, artistic, educational or teaching activities, as well as independent activities of doctors, lawyers, engineers, architects, dentists and accountants, and other activities requiring specific professional training.

1. Without prejudice to Articles 16, 18, 19 and 20, salaries, wages and other similar remuneration obtained by a resident of a Contracting State on account of employment may only be subject to taxation in that State unless the employment takes place in the other Contracting State. If the employment is carried out in this way, the remuneration derived therefrom may be subject to taxation in that other State.

2. By way of derogation from paragraph 1, remuneration obtained by a resident of a Contracting State on the basis of employment in the other Contracting State may be taxed only in the State referred to above, if:

(a) the recipient remains in the other State for a period or periods not to exceed a total of 183 days in any twelve-month period beginning or ending in the fiscal year in question; and

(b) remuneration is paid by, or on behalf of, an employer who is not a resident of the other State and

(c) Remuneration is not borne by a permanent establishment or a fixed basis which the employer has in the other State.

3. Notwithstanding the above provisions of this Article, remunerations earned by employment on board a ship, aircraft or road vehicle operated in international traffic by an undertaking of a Contracting State may be subject to taxation in that Contracting State.

Shareholdings and other similar remunerations which a resident of a Contracting State obtains as a member of a Board of Directors of a company resident of the other Contracting State may be taxed in that other State.

1. By way of derogation from Articles 14 and 15, any income which a resident of a Contracting State obtains from the exercise of his personal activities in the other Contracting State as a performer, theatre, film, radio or television actor, or musician, or as an athlete, may be subject to taxation in that other State.

2. Notwithstanding Articles 7, 14 and 15, where income derived from activities carried out by an artist or sportsman and, in that capacity, is attributed not to the artist or sportsman himself, but to another person, such income may be taxed in the Contracting State in which the activities of the artist or sportsman are carried out.

3. Income obtained by an artist or sportsman from activities carried out in a Contracting State shall be exempt from taxation by that State if the visit to that State is entirely financed by public funds from the other Contracting State or from one of its political subdivisions or local entities.

1. Without prejudice to Article 19(2) of this Convention, pensions and other similar remuneration paid on account of previous employment and the annuities defined in paragraph 2 of this Article may only be taxed in the State of which the recipient is resident.

2. ‘Annualities’ means a fixed amount payable periodically at specified times for life or for a specified or determining period of time under an obligation to make payments in exchange for an adequate and full consideration in money or in monetary value.

1. (a) Salaries, wages and other similar remuneration, excluding pensions, paid by a Contracting State or by one of its political subdivisions or local entities to a natural person for services rendered to that State or to that subdivision or entity, may only be subject to taxation in that State.

(b) Such salaries, salaries and similar remuneration may, however, be subject to taxation in the other Contracting State only if the services are provided in that State and the natural person is a resident of that State who:

(i) is a national of that State; or

(ii) has not acquired the resident status of that State only for the purpose of providing services.

2. (a) Pensions paid by a Contracting State or by one of its political subdivisions or local entities, either directly or from constituted funds, to a natural person for services rendered to that State or to that subdivision or entity may be subject to taxation only in that State.

(b) However, such pensions may be subject to taxation in the other Contracting State only if the natural person is a resident and a national of that State.

3. Articles 15, 16, 17 and 18 shall apply to salaries, salaries and other similar remunerations and to pensions paid for services rendered in the context of an enterprise carried out by a Contracting State or by one of its political subdivisions or local authorities.

1. The amounts received to cover the costs of maintenance, study or practical training by a student or a trainees who is, or was, immediately before arriving in a Contracting State, resident of the other Contracting State and who is in the State referred to first for the sole purpose of continuing his studies or practical training, may not be subject to taxation in that State.

2. Remuneration for a student or a trainees who is a national of a Contracting State from employment in the other Contracting State whose purpose is to acquire practical experience in relation to his education or training shall be exempt from taxation in that other Contracting State for a period of two years up to an amount not exceeding a total of EUR 18,000 or its equivalent in Turkish lire in any fiscal year.

1. The income of a resident of a Contracting State, whatever its source, not referred to in the previous articles of this Convention, shall be subject to taxation only in that State.

2. Paragraph 1 does not apply to income, other than income derived from immovable property within the meaning of Article 6(2), where the beneficiary of such income, resident of a Contracting State, engages in business in the other Contracting State through a permanent establishment situated in that Contracting State or provides independent personal services through a fixed base situated in that other State, and the right or for which the income is paid is effectively linked to that permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as appropriate, apply.

1. In Spain, double taxation shall be avoided either in accordance with the provisions imposed by its domestic law or in accordance with the following provisions:

(a) Where a resident of Spain obtains income which, in accordance with the provisions of this Convention, may be taxed in Turkey, Spain shall permit:

(i) the deduction of the income tax of that resident in the amount equal to the tax paid in Turkey;

(ii) the deduction of corporation tax actually paid by the company distributing the dividends, corresponding to the profits from which the dividends are paid, in accordance with its domestic law.

However, such deduction may not exceed the part of the income tax, calculated before the deduction, corresponding to the income that may be taxed in Turkey.

(b) Notwithstanding the provisions of point (a) where a company resident in Spain obtains income which, in accordance with Article 10(2)(a)(i) or Article 10(4)(a)(i), may be taxed in Turkey, Spain shall exempt such income from taxation.

This letter shall not apply to that part of the income of a taxpayer which comes from profits exempt from the Turkish Company Tax in a particular fiscal year.

This method is alternative to that provided for in point (a) of this paragraph and cannot be applied jointly for the same income.

(c) Where under any provision of this Agreement the income obtained by a resident of Spain is tax-exempt in Spain, Spain may, however, take into account the exempt income in calculating the tax on the rest of the income of that resident.

(d) For the purposes of paragraph 1(a)(i), the term ‘tax paid in Turkey’ shall be considered to include Turkish interest and royalty tax, in any amount, which would have had to be paid under Turkish tax law if it were not for any Turkish tax reduction or exemption granted under the provisions on special incentives to promote the economic development of Turkey.

By way of derogation from the preceding sentence, the income tax paid in Turkey shall be calculated:

(i) for dividends referred to in Article 10(2)(a)(ii) and Article 10(4)(a)(ii), at a rate of 15 per cent;

(ii) in the case of interest referred to in article 11 (2) (a), at a rate of 10 per cent;

(iii) in the case of interest referred to in Article 11(2)(b), at a rate of 15 per cent;

(iv) in the case of the fees referred to in Article 12(2), at a rate of 10 per cent.

2. Double taxation in Turkey will be avoided as follows:

(a) Subject to the provisions of Turkish legislation relating to the possibility of deducting from Turkish tax taxes payable in a foreign territory, Spanish taxes payable under Spanish legislation and in accordance with this Convention on income (including profits and profits that may be taxed) obtained by a resident of Turkey and from Spain may be deducted from Turkish tax on such income. However, such deduction may not exceed the part of the Turkish tax, calculated before the deduction, corresponding to those income.

(b) Where under any provision of this Convention the income obtained by a resident of Turkey is tax-exempt in Turkey, Turkey may, however, take into account such exempt income in calculating the tax on the rest of the income of that resident.

1. Nationals of one Contracting State shall not be subject in the other Contracting State to any taxes or obligations relating thereto which are not or are more burdensome than those to which nationals of that other State who are under the same conditions, in particular with regard to residence, are or may be subject. Notwithstanding article 1, this provision also applies to persons who are not residents of one or any of the Contracting States.

2. Subject to Article 10(4), permanent establishments held by an undertaking of one Contracting State in the other Contracting State shall not be subject to taxation in that State in a less favourable manner than undertakings of that other State carrying out the same activities.

3. Unless the provisions of Article 9(1) of Article 11(6) or Article 12(6) apply, interest, royalties and other expenses paid by an undertaking of a Contracting State to a resident of the other Contracting State shall be deductible, in order to determine the profits subject to taxation of that undertaking, under the same conditions as if they had been paid to a resident of the State referred to first.

4. Undertakings of a Contracting State whose capital is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State shall not be subject in the State referred to above to any tax or obligation relating thereto which is not or is more burdensome than those to which other similar undertakings of the State referred to in the first instance are or may be subject.

5. These provisions may not be interpreted as obliging a Contracting State to grant to residents of the other Contracting State the personal deductions, reliefs and tax reductions it grants to its own residents in view of their marital status or family burdens.

6. By way of derogation from Article 2, the provisions of this Article shall apply to all taxes, whatever their nature or name.

1. Where a resident of a Contracting State considers that the measures taken by one or both Contracting States involve or may entail for him an imposition which is not in conformity with the provisions of this Convention, irrespective of the remedies provided for by the domestic law of those States, he may submit his case to the competent authority of the Contracting State of which he is resident or, if Article 23 (1) applies, to that of the Contracting State of which he is a national. The case must arise within three years of the first notification of the measure involving an imposition not in accordance with the provisions of the Convention.

2. The competent authority, if it finds the complaint well founded and if it cannot find a satisfactory solution on its own, shall endeavour to resolve the matter by amicable agreement with the competent authority of the other Contracting State, in order to avoid an imposition that does not comply with this Convention. The agreement shall apply irrespective of the time limits provided for by the domestic law of the Contracting States.

3. The competent authorities of the Contracting States shall endeavour to resolve any difficulties or doubts arising from the interpretation or application of the Convention by means of an amicable agreement. They may also agree to try to avoid double taxation in cases not covered by the Convention.

4. The competent authorities of the Contracting States may communicate directly with each other in order to reach agreement within the meaning of the preceding paragraphs. Where it is considered that this agreement may be facilitated by an oral exchange of views, it may be carried out through a committee composed of representatives of the competent authorities of the Contracting States.

1. The competent authorities of the Contracting States shall exchange the information necessary to implement the provisions of this Convention or the domestic law of the Contracting States relating to taxes of any kind and designation required on behalf of the Contracting States or their political subdivisions or local entities, to the extent that such taxation is not contrary to the Convention. The exchange of information shall not be limited by Articles 1 and 2. Information received by a Contracting State shall be kept secret in the same way as information obtained on the basis of the domestic law of that State and shall be communicated only to persons or authorities, including administrative courts and bodies, responsible for the management or collection of the taxes referred to in the first sentence, the declaratory or executive procedures relating to such taxes, or the resolution of appeals relating thereto. Such persons or authorities shall use this information only for these purposes. They may disclose the information at public court hearings or in court judgements.

2. In no case may the provisions of paragraph 1 be interpreted as obliging one of the Contracting States:

(a) take administrative measures contrary to its legislation and administrative practice or those of the other Contracting State;

(b) to provide information which cannot be obtained on the basis of their own legislation or in the exercise of their normal administrative practice, or that of the other Contracting State;

(c) provide information revealing trade, industrial or professional secrets, commercial procedures or information whose communication is contrary to public policy (ordre public).

The provisions of this Convention shall not affect the tax privileges enjoyed by members of diplomatic missions or consular offices in accordance with the general principles of international law or under the provisions of special agreements.

Each Contracting State shall notify the other through diplomatic channels that the procedures required by its domestic law for the entry into force of this Convention have been complied with. The Convention shall enter into force on the date of the last of these notifications and its provisions shall take effect with respect to taxes for any tax period beginning on or after 1 January of the year following the entry into force of the Convention.

The Convention shall remain in force until it is denounced by one of the Contracting States. Any Contracting State may denounce the Convention by diplomatic means, within five years of its entry into force, at least six months before the end of any calendar year. In such a case, the Convention shall cease to have effect with respect to taxes for any tax period beginning on or after 1 January of the year following the year in which the complaint is notified.

In faith, the signatories, duly authorized to do so, have signed this Convention.

Done in three copies in Madrid, on 5 July 2002, in English, Turkish and Spanish, the three texts being equally authentic. In the event of any divergence between any of the texts, the English text shall prevail.

[heading] PROTOCOL

At the time of signing the Convention between the Kingdom of Spain and the Republic of Turkey to Prevent Double Taxation and Tax Evasion in Income Tax, the signatories have agreed on the following provisions which form an integral part of the Convention:

1. With reference to Article 7(3), no deduction shall be allowed for the amounts paid (provided that it is not for reimbursement of expenditure, including actual research and development expenditure) by the permanent establishment to the head office or any other head office of an undertaking in respect of fees, interest (except in the case of banking companies) and fees paid for services rendered or by the management.

2. With reference to Article 10(3), the term ‘dividends’ in the case of Turkey shall be understood to include income from an investment fund and an investment trust.

3. With reference to Article 10(5): For the purposes of this Convention the term ‘general rate’ is interpreted as the general rate without reductions of corporation tax as set out in the Turkish Company Tax Act.

If Turkey establishes a reduced rate, the Turkish authorities shall notify the Spanish authorities thereof with a view to deciding jointly whether the provisions of Article 10(2)(a)(i) or Article 10(4)(a)(i), as appropriate, apply to income from profits that they have paid under this reduced rate.

4. With reference to Article 11(2)(a): In the case of Spain, the term ‘bank’ shall be understood to include savings banks.

5. With reference to Article 11(3), it shall be understood that, in the case of Spain, penalties for late payment shall not be considered as interest for the purposes of this Article.

6. With reference to Articles 12 and 13: In the case of any payment received as a consideration for the sale of goods within the meaning of Article 12(3), the provisions of Article 13 shall apply unless it is established that such payment did not constitute a payment for a genuine disposal of those goods. In that case, the provisions of article 12 shall apply.

7. With reference to Article 14(2), services or activities shall be deemed to be provided by an undertaking of one Contracting State in the other Contracting State if they are carried out through employees or other contracted personnel in that other State for the purpose of carrying out such services or activities (for the same or related project).

8. With reference to Article 22: The exemption provided for in Article 22(1)(b) shall not apply where the main purpose of any person related to the creation or assignment of the shares or other rights in respect of which the income is paid, is to benefit from this provision by such creation or assignment. In such a case, the provisions of Articles 10(2)(a)(ii) or 10.4(a)(ii) shall apply.

The provisions of Article 22(1)(d) shall cease to apply from 10 years after the entry into force of this Convention. After that period, the competent authorities shall jointly consider an extension of the time limit for the above-mentioned provisions.

9. With reference to Article 24: With regard to Article 24(2), it shall be understood that the taxpayer should, in the case of Turkey, claim reimbursement arising from the mutual agreement procedure within one year of the tax administration having notified the taxpayer of the outcome of the mutual agreement procedure.

In faith, the signatories, duly authorized to do so, have signed this Protocol.

Done in three copies in Madrid, on 5 July 2002, in English, Turkish and Spanish, the three texts being equally authentic. In the event of any divergence between any of the texts, the English text shall prevail.

This Convention entered into force on 18 December 2003, the date of the last cross-notification between the two States by reporting compliance with domestic legal procedures, as set out in its article 27.

What is made public for general knowledge.

[ignore]Madrid, January 2, 2004.–The Technical Secretary General, Julio Núñez Montesinos.