It is known that international tax regulations are challenging to understand, especially for Individuals and companies working in multiple countries. This article analyzes the U.S.-Turkey Tax Treaty and explains the treaty's benefits to the people it affects. Whether you are seeking an opinion from an expert in cross-border tax accounting, expat tax accountant, or currently managing a business within the USA with Turkish relations, it is crucial to understand this document.

Benefits to Individuals

The U.S.-Turkey Tax Treaty ensures that no citizen or permanent resident of the U.S. and Turkey could be double taxed.

Double taxation occurs when an individual is qualified as a tax resident in two or more countries' taxation systems. The individual can be taxed in another country upon their residence for a certain number of days.

For instance, a U.S. citizen living in Turkey or a Turkish citizen residing in the U.S. might experience double taxation, given that each government can apply its unique tax laws. On the contrary, the treaty provides for the division of the residence with a set of stipulations regarding where tax is paid and the amount he or she can claim an allowable credit for his writing. Specifically, the treaty outlines the type of income that each country should be taxed. For example, the payment for personal services is taxed only by the country of residence unless it is performed in another country and is also claimed in additional conditions. It also covers pensions, annuities, alimony, and social security payments. The pensions are only taxable to its current country, which can save retirees quite a pipeline (U.S. Department of the Treasury).

Benefit to Businesses

For businesses, the U.S.-Turkey Tax Treaty generally provides several provisions that can be very advantageous for multinational corporations and small businesses that have establishments in both countries. One example is that the treaty seeks to eliminate double taxation of business income, meaning that the same revenue of a business is not taxed in both the U.S. and Turkey. (Internal Revenue Service, 2020)

There are also withholding rates established on dividends, interest, and royalties. “Maximum rates are stated that are generally lower than domestic rates of the two nations and this can mean substantial tax savings for businesses involved in cross-border transactions”. Among non-specific business benefits, the treaty includes a non-discrimination clause, which means that the nationals of the two countries and businesses of one country may not be favored less than the nationals and businesses of the other country.

This results in a level playing field and encourages business and trade between the U.S. and Turkey. Therefore, it is important for businesses to consult with a cross-border tax accountant or a trusted tax consultant knowledgeable in U.S.-Turkey tax implications to optimize their tax planning strategy and ensure compliance with tax laws sophisticated and numerous international tax treaties.

Thus, it can be sometimes difficult to find a competent ‘cross border tax accountant near me’ or an ‘expat tax accountant’; however, firms specializing in international tax are well-prepared to deal with the peculiarities of the U.S. and Turkey Treaty. For those who have businesses in the USA concerning Turkey, utilizing specialized services provided by The Finance Zoom enables maximizing the benefits from the treaty and minimizing the risks. In conclusion, the U.S.-Turkey Tax Treaty is a significant tool for the alleviation of tax burden, non-discrimination, and more effective interaction between the countries for both people and businesses. Nevertheless, in most cases, the application of these advantages is possible only with the help of qualified tax professionals because of the treaty specificity. Due to expanding global trade, and the development of international workforce cooperation, experts specializing in international tax treaties, and such treaties will get more and more necessary.

References

- U.S. Department of the Treasury. "United States Income Tax Treaties - A to Z." https://www.treasury.gov/resource-center/tax-policy/treaties/Pages/default.aspx.

- Internal Revenue Service (IRS). "Tax Treaties." https://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z. (2020).