Turkey: Reminder: Renewal of Certificates of Tax Residence - New deadlines

16.12.2015

Further to our announcement A15109, dated 22 June 2015, Clearstream Banking1 wishes to remind customers that our local depository, TEB Istanbul, informed Clearstream Banking that the Certificates of Tax Residence (COTRs) should be renewed annually in order to benefit from lower Double Taxation Treaty rates on cash dividends.

Background

Temporary Article 67, which was added to the Income Tax Law through Article 30 of the Law number 5281, contains provisions relating to the taxation of the gains derived from the alienation and the retention of the marketable securities and other capital market instruments, and the taxation of the deposit interests, repo gains and the income that is derived from the private finance institutions.

The Income Tax General Communiqué Series No.257, published on 30 October 2005, detailed the regulations under Temporary Article 67. This Communiqué clarified, in Article 10, that COTRs had to be renewed on a yearly basis for both non-resident institutions and individuals.

The Income Tax General Communiqué Series No.258, published on 30 September 2006, further clarified the changes on regulations under Temporary Article 67. According to Article 3.9 (Presentation of COTR) of the communiqué, that refers to Article 10 of Communiqué No 257, COTRs had to be renewed on a yearly basis for non-resident individuals and every three year for non-resident institutions.

Our local depository based their renewal procedure on the latest Communiqué No 258. Clearstream followed this approach and until today, COTRs provided by Clearstream customers in order to benefit from the DTT rates were to be renewed annually for non-resident individuals and every three years for non-residents institutions, until the 31 March of the following year.

During the last two years, Turkish companies issuing and paying the cash dividends have frequently required the custodians to provide COTRs annually rather than every three years.

Impact on customers

Due to the insistence of the issuing companies, our local depository has decided to change their renewal procedure and to collect COTRs for both non-resident individuals and institutions on a yearly basis and at the latest until the end of January of the following year.

For non-resident individuals

The renewal of the COTR is already on an annual basis. The depository confirmed that the deadline of 31 March is still valid but it is only a tolerance by the Turkish tax authorities. Therefore, we strongly advise our customers to renew their COTR as soon as possible.

For non-resident institutions

The COTR has to now be renewed on an annual basis, before the end of March of the following year at the latest.

Beneficial owners who had provided COTRs during the years 2013 and 2014 and that were considered as valid until the 31 March 2016 and 31 March 2017 respectively are requested to renew their certificates as soon as possible. In any case, these should be renewed before the next dividend payment in order to obtain relief at source in 2015.

The certificates that were renewed in 2015 will expire on 31 December 2015 and will have to be renewed before the end of January 2016.

Customers are kindly reminded that a COTR has to contain the beneficial owner's full name, TIN and address. It must be issued by the beneficial owner's tax authorities and must include a reference to article 4 of the DTT or reference to the Double Taxation Convention between the country of residence of the beneficial owner and Turkey, and may not contain phrases such as "exempt from tax" or "not liable to tax".

Further information

For further information, please contact the Clearstream Banking Tax Help Desk, Clearstream Banking Client Services or your Relationship Officer.

------------------------------

1. Clearstream Banking refers collectively to Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500, and Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248.