As the UK and Türkiye embark on negotiations to revise their existing Free Trade Agreement (FTA), now could be the perfect time for UK businesses to consider expanding their operations to the Land of the Crescent Moon.
One of the critical aspects of managing cross-border operations is understanding and capitalising on tax treaties to minimise the impact of double taxation.
Understanding the UK-Türkiye Double Taxation Agreement
The UK and Türkiye have a long-standing Double Taxation Agreement (DTA) designed to prevent businesses from being taxed twice on the same income.
This agreement provides clear guidelines for any UK company operating in Türkiye or vice versa on how tax obligations are divided between the two nations.
Under this DTA, businesses can often claim relief on the taxes paid in one country against their tax liabilities in the other.
For example, if a UK-based company pays Corporation Tax on its profits in Türkiye, it can claim a credit for those taxes when filing its UK tax return.
This will help with reducing the overall tax burden and ensuring that businesses are not penalised for operating internationally.
The impact of upcoming FTA revisions
The recent announcement that the UK and Türkiye are set to negotiate a revision of their existing FTA could have wider implications for UK businesses that are already operating or looking to operate in Türkiye.
As these discussions unfold, one of the key areas of focus is likely to be the inclusion of services and investments within the agreement.
Expanding the scope of the FTA could lead to more thorough tax provisions, potentially offering even greater relief for businesses operating across these two markets.
The negotiations, driven by the UK’s new Business and Trade Minister Jonathan Reynolds and Türkiye’s Trade Minister Omer Bolat, aim to strengthen the economic ties between the two countries.
With a target to surpass £15 billion in bilateral trade by 2024, the focus on enhancing the FTA to better reflect current economic realities could lead to more favourable conditions for businesses, including better tax treatment.
Taking advantage of the DTA in light of new opportunities
As the FTA continues to develop, UK businesses should be proactive in reviewing their tax strategies. Here are a few steps to consider:
Stay informed on FTA developments
With the FTA revisions likely to impact tax obligations, businesses must stay updated on the progress of negotiations. Understanding the changes as they occur will allow companies to adjust their tax strategies promptly.
Consult with tax experts
Given the complexities of international tax law, our team of tax professionals understand both UK and Turkish tax systems and can help you with the DTA, ensuring that you are fully compliant while taking advantage of available tax reliefs.
Evaluate your business structure
Depending on the outcome of the FTA negotiations, it may be advantageous to reassess your business structure in Türkiye if you have operations there.
Whether it’s the possibility of setting up a new entity or restructuring existing operations, making sure your business model reflects the new trade terms could result in tax efficiencies.
Plan for investment and services expansion
As the FTA is expected to include more provisions on services and investments, UK businesses should prepare for potential opportunities in these areas.
This might involve exploring new markets in Türkiye or increasing investment in sectors like renewable energy, which has been highlighted as a key area of cooperation.
If you would like to know more about the best financial strategies to successfully expand your operations in Türkiye, we are here to help. Contact us today for more information.
Reanda UK is a subsidiary of leading independent accountancy firm Grunberg & Co Limited. Our aim is to help businesses and individuals to navigate the UK’s world-renowned business and tax infrastructure, and to support them with their international ambitions. To find out how we can help you, please contact us.