June 7, 2021





Today, one of the most important problems facing international investors is the doubletaxation problem. In Turkey, persons resident abroad when paying, payment prevention of double taxation between the person with their resident countries where Turkey. It is essential for them to check whether there is an agreement or not in terms of taxation. If payment a tax treaty in force between Turkey and the countries in which the called party is a resident if there is any and the payment is made, if the person is a resident of this country,It is to go to the relevant article of Turkey's taxation authority and the country of originIt will be determined that it is not. According to the type of payment, the taxation authority is entirely dependent on the country of origin. Can be given, left to the country of origin with certain limits and conditions, or taxation authority can be left to the resident country. In the longstanding practice, a non-resident taxpayer

taxpayer taxpayer in that country, in order to benefit from the provisions of the agreement. He must document that he is a person.

Dividends distributed to shareholders in our country, where companies with foreign partners take place

In relation to the double taxation problem frequently arises and at this point the double taxation problem is

To apply to dividends foreseen in Taxation Avoidance Agreements ("Double Taxation")

The concept of "beneficial owner" in relation to benefiting from discounted withholding

It is very important.discount in many of Turkey's side is the Double Taxation Agreement

The beneficiary of the dividend obtained by the partner receiving the dividend in benefiting from the withholding rate condition is stipulated.

The Place of the Real Beneficiary in Tax Agreements

Overall, Turkey is a party where the real definition of beneficiaries in the tax agreement not given.

However, in Article 3 titled General Definitions of the tax agreement signed with the TRNC,

'' Beneficial Beneficiary means the dividend, interest, intangible rights amount arising in a Contracting State. refers to the residents of other contracting states who actually acquire and transfer to their possession (disposition).does. This statement means dividends, interest and payments through an intermediary person or institution residing in the other contracting state. not to benefit a third state resident who has received royalties from this agreement

It will be applied in the direction of ''.

On the other hand, Belgium, France, Sweden, Italy, Turkey, South Korea and Denmark as tax use the term beneficial owner in the protocols of agreements with some of the countries with which it has signed Additional explanations were made regarding. In these descriptions, this term is used in a third country resident dividend income from the other Contracting State parties to the agreement of Turkey or interest, and subject to interpretation to prevent their enjoyment of this Agreement on royalties. to be kept; however, this prevention cannot be extended to residents of the Contracting States. It has been arranged that it is understood.

OECD Model Tax Agreements

The concept of real beneficiary is defined as "dividends", "interest" and "royalties" in the OECD Model Agreement. costs ”, the model related to the definition of the concept

There is no clear statement in the agreement.

Paragraph 1 and 2 of Article 10 of the model agreement ;

"one. Paid by a company which is a resident of a Contracting State to a resident of the other Contracting State dividends may be taxed in that other State.

2. However, dividends paid by a company which is a resident of a Contracting State.

It may also be taxed according to state legislation; However, the beneficial owner of the dividend If it is a resident of the state, the tax to be collected in this way will not exceed the following rates:

  1. The beneficial owner must directly at least 25 percent of the capital of the company paying the dividend. 5 percent of the gross amount of the dividends for a holding company (excluding partnership);
  2. 15 percent of the gross amount of the dividends in all other cases. ''

With its provision, the taxation authority is in the state where the person receiving the dividend is a resident.

Although it is stated, in the second paragraph of the article, the country of origin where the dividend was obtained is also taxation authority has been granted.In the same paragraph, a limitation has been made on the taxation authority granted to the source state. This the company paying the dividend , provided that it is the real beneficiary of the dividend distributed . 5% of the gross amount of dividends in the source state if it owns at least 25% of its capital. will be taxed .

There is no clear explanation about the concept of true beneficiary and is limited to interpretations only. we stay.

Beneficial beneficiaries under international judicial decisions

We mentioned that the definition of the concept of real beneficiary is not made in our legislation.

Accordingly, in the determination and evaluation of the definition in tax examinations, the above mentioned the real beneficiary who has been the subject of international judicial decisions and past OECD comments Definitions and interpretations of the concept should be taken into consideration. Below is real important in determining the beneficiary and economic and legal international judicial decisions dealing with the approach will be included.

Prevost Decision: In the case subject to this decision, the shares of Prevost company residing in Canada All shares were purchased by Volvo, a Swedish resident, and soon after Transferred to Dutch resident HoldCo. After this transfer, resident in England Henyls acquired 49% of HoldCo. Shareholding signed between the parties Under its contract, Volvo and Henyls will earn at least 80% of Prevost and HoldCo's annual earnings. They have agreed that it will be distributed to shareholders as dividends. Prevost, shareholding within the scope of the agreement, within the scope of the Netherlands-Canada tax agreement

He paid with a 5% tax deduction, and afterwards HoldCo took the dividend from Prevost to Volvo and distributed it to Henyls. As a result of this, the Canadian Revenue Authority, HoldCo's profit claimed that he was not the real beneficiary in terms of share.

As a result of the Canadian Federal Court of Appeals review;

  • The relationship between HoldCo and its shareholders is not an agency or representative relationship,
  • HoldCo is not a party to the shareholding agreement,
  • Obligation to pay dividends to the shareholders in HoldCo's establishment agreement information There is no provision that makes it
  • If HoldCo does not distribute profits, its shareholders will not be legally compliant with HoldCo. he does not have the right to resort to roads,
  • Profit to be distributed to its shareholders when HoldCo receives its dividends has ownership of its shares denied claims that HoldCo is not a real beneficiary.

Velcro Decision: In this case, Canadian resident Velcro Canada Inc. ("VCI") by the Netherlands resident Velcro Holding BV ("VHBV") is paid royalty and VHBV is 90% of the royalti payments to Velcro Industries BV ("VIBV") , a Netherlands Antilles resident . conveys.

In the case in question, the beneficial owner of the royalties made by the Revenue Administration of Canada is the Antilles. resident claimed to be VIBV and tax assessment was made on behalf of VCI as responsible.

However, Canada Tax Liability Lawsuit has been filed by VCI against the aforementioned assessment. Court of the Netherlands resident VHBV as the real beneficiary of the assessment made

It ruled that it was unlawful.

By referring to the above-mentioned Prevost judgment, the court has emphasized 4 criteria for the determination of the beneficiary, and these four criteria of VHBV decided that it provided. These 4 criteria are;

  • Ownership
  • Authorization to use
  • Risk
  • Control

In line with this information, in determining the beneficial owner, all of the above-mentioned criteria should be evaluated together.

Criteria in the Concept of Beneficial Beneficiary

A source in the government, for example, was born in Turkey and paid to a resident of another contracting state withholding tax in our local legislation on dividends, interest and royalties according to the low rates set in the relevant articles of the agreement, not the rates. to be made, to persons who have the status of beneficial owners who are resident in these countries. needs to be done. The owner of the income in question is the beneficial owner of these payments.If he cannot prove, he will not be able to benefit from the provisions of the agreement. In this case, the source country, namely Turkey, the taxing rights according to the specified withholding tax rate under its own legislation will use.

Recently, many countries are paying increasing attention to the issue and real beneficiaries rules.

We observe that it revised. Examples of these countries are Russia, Poland, the SouthKorea and Austria can be listed. However, in the comments and evaluations on the subject, the country

It should be noted that there are differences on the basis of

Examples of criteria that can be taken into account in real beneficiary evaluation;

  • Whether the person to whom the payment was made receives the payment on his / her own account. (ownership),
  • Right to use / benefit this income,
  • Control / disposition authority over this income,
  • The power to make decisions on this income,
  • Whether he / she takes the risks related to this income,
  • Whether there is an intermediary company, channel company, agency, proxy, or the entire payment whether it has to transfer some of it to another party,
  • Whether there is real economic activity in the country of residence (and whether the payment is also related to this economic activity)
  • Whether a taxpayer has a real economic activity in the country of residence
  • Although it is not easy to determine, the following criteria can be considered as an example;
  • Whether there is a workplace, employees and equipment belonging to the taxpayer,
  • Whether the workplace, employees and equipment in question are proportional to the activity, 
  • The activity in question is carried out by using the company's own resources. not implemented,
  • The taxpayer has its own management staff to carry out its activities. where there is no management staff,
  • Whether the partnership structure can be supported on valid economic grounds,

Evaluation and Conclusion

Although there is no regulation regarding the definition of the true beneficiary concept in Turkish tax legislation, Within the framework of both the OECD Model Tax Agreement and international judicial decisions,

In determining the real beneficiary regarding the dividends distributed to the foreign partner, the dividend paid the company has full legal and economic disposition power on the dividend paid.

It is understood that it should have.

Turkey is a signatory to the OECD- MAKE / BEPS No. 6 Action plan - Tax With the Prevention of Abuse of Agreements, action is taken at this point.is intended to be taken. However, the concept of true beneficiary has so far been hardly tested in practice. it has not been and has not been questioned. However, developments in the world and the

To say that when the regulations are evaluated together, the importance of this concept will increase. is possible. At this point, there is a need for secondary legislation regulation in our country. has.