By Rashmi Pandya, Macalvins’ COO
Recent news of the UK and Türkiye’s negotiations to revise their existing Free Trade Agreement (FTA) has given motion to the thought that UK businesses ought to consider expanding their operations to the Land of the Crescent Moon.
I often liken this process to the explorers of old, setting sail for uncharted territories before the globe was fully mapped out.
Expanding into a new country is much the same – navigating unknown waters, preparing for new challenges, and discovering the opportunities that lie beyond the horizon.
One of the critical aspects of managing cross-border operations is understanding and capitalising on tax treaties to minimise the impact of double taxation.
Just as an explorer needed the right tools and knowledge, businesses need to be well-versed in these treaties to ensure their international ventures are successful.
UK-Türkiye Double Taxation Agreement
The UK and Türkiye have a long-standing Double Taxation Agreement (DTA), which is a vital tool for any business looking to expand into this new market.
This agreement is designed to prevent businesses from being taxed twice on the same income.
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 helps reduce the overall tax burden and ensures that businesses aren’t penalised for operating across borders.
FTA revisions – A boon for British businesses?
The recent announcement that the UK and Türkiye are set to revise their FTA could provide major advantages to 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 comprehensive tax provisions, offering even greater relief for businesses operating between these two markets.
With the UK’s new Business and Trade Minister, Jonathan Reynolds, and Türkiye’s Trade Minister, Omer Bolat, aiming to strengthen economic ties, this could be an opportunity to secure better tax treatment for your business.
Their target to surpass £15 billion in bilateral trade by 2024 suggests that the revised FTA will better reflect current economic realities, potentially creating more favourable conditions for your operations.
Making the most of the DTA in light of new opportunities
As the FTA evolves, it’s more important than ever to stay ahead of the curve by actively reviewing your tax strategies.
In my opinion, staying informed on the progress of FTA negotiations is essential.
These revisions could drastically impact your tax obligations, and being prepared to adapt your strategies quickly will give you a distinct advantage.
I think that this could also be the perfect moment to reassess your business structure in Türkiye.
Aligning your operations with the new trade terms could unlock tax efficiencies, and failing to do so might leave you at a competitive disadvantage.
I strongly believe that UK businesses should be ready to seize new opportunities, particularly in services and investments.
With sectors like renewable energy poised to benefit from the revised FTA, those who position themselves early will likely reap the rewards.
If you’re looking at Türkiye as a viable location to expand your business operations, we are here to guide you and ensure you make the most of the opportunities ahead. Contact us today for more information.