Russia–Turkey double tax treaty: practical guide for Turkish companies

Russia-Turkey DTT rates: 10% dividends, 10% interest, 10% royalties. How Turkish companies apply the treaty in 2025–2026 and avoid overpaying.

Treaty at a glance: key rates

Russia and Turkey signed their double tax treaty in 1997. Unlike treaties with Germany, France and most Western countries — which Russia suspended in March 2023 — the Russia-Turkey DTT remains fully in force as of 2026.

For Turkish companies operating in Russia or receiving income from Russian sources, the treaty provides significant relief compared to domestic withholding rates:

Dividends: how to apply the 10% rate

To apply the reduced 10% withholding rate on dividends paid by a Russian subsidiary to a Turkish parent, the Turkish company must provide a tax residency certificate (apostilled, translated into Russian) before the payment date.

If the certificate is not provided in time, the Russian company must withhold at the domestic rate of 15%. The Turkish parent can then claim a refund from the Russian tax authority, but this process takes 3–6 months and requires a separate application.

Interest and royalties: 10% vs 20%

Interest paid by a Russian entity to a Turkish lender and royalties for intellectual property use are both subject to 10% withholding under the DTT — compared to 20% under domestic Russian law.

For interest, the DTT applies to loans, bonds, and trade receivables. Financial leasing payments are generally treated as interest for DTT purposes.

For royalties, the treaty covers payments for the use of copyrights, patents, trademarks, designs, models, formulas and know-how. Software licensing payments to Turkish companies are typically treated as royalties and benefit from the 10% rate.

One important caveat: if the Turkish recipient has a permanent establishment (PE) in Russia and the interest or royalties are effectively connected to that PE, they are taxed in Russia as business profits — not as passive income. In that case, the DTT PE article applies, not the interest or royalties article.

Permanent establishment: when Turkey protects, when it does not

The Russia-Turkey DTT defines PE in line with OECD standards: a fixed place of business through which a company carries on all or part of its business.

A construction site or installation project constitutes a PE only if it lasts more than 12 months. This is more generous than the OECD Model (12 months) and was particularly relevant during the active construction period for Turkish contractors in Russia.

A Turkish company that sends employees to Russia for short-term assignments without creating a fixed place of business does not create a PE, provided the activity does not last more than 183 days in a 12-month period.

In practice, the Russian tax authority has increasingly scrutinised PE claims for Turkish companies. The risk areas are: dependent agent arrangements, prolonged employee secondments, and the use of Russian entities to conduct core business functions.

Capital gains on shares: no Russian tax

Article 13 of the Russia-Turkey DTT provides that gains from the sale of shares (other than shares in a company whose assets consist principally of immovable property in Russia) are taxable only in the state where the seller is resident — i.e., Turkey.

This is a significant advantage. A Turkish holding company that owns shares in a Russian subsidiary and sells them will pay tax in Turkey on the gain, not in Russia. Russian domestic law would impose a 25% tax on such gains.

The exception for "immovable property companies" applies when more than 50% of the company's assets consist of real estate located in Russia. In that case, Russia retains the right to tax the gain. This is relevant for Turkish investors in Russian real estate holding structures.

Practical checklist for Turkish companies