305 TAX LAW According to the tax agreements signed by Turkey, the profit owner must have a permanent establishment in Turkey in order to be subject to taxation in Turkey. For instance, in parallel with the OECD model agreement, the CADT concluded with Ireland where one of the digital leaders, Google Ireland Limited resides, employs a similar approach on business profits: “The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein.”3 In fact, prior to the effective date of the Resolution, evaluations were made in coordination with the CADT in the rulings provided by the Turkish Revenue Administration: “If the Ireland resident company does not have a permanent establishment in Turkey in terms of Article 5 of the Convention, and does not render the advertising service through this establishment, the right to tax the business profits to be gained in return for the said advertising service belongs only to Ireland.” 4 At this point, it is critical to examine the concept of permanent establishment. Under the CADT, a “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried out. As it is understood, the said establishment is physical and, thus, a digital establishment is out of the scope. Similarly, under Article 156 of the TPL, “The establishment of commercial, industrial, agricultural and professional activities is a place allocated to, or used for the performance of commercial, industrial, agricultural and professional activities such as shops, offices, administrative offices, clinics, branch offices, warehouses, hotels, coffee houses, entertainment and sports places, fields, vineyards, gardens, farms, livestock 3 Convention between Ireland and the Republic of Turkey on the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains, Article 7(1), https://www.gib.gov.tr/fileadmin/mevzuatek/uluslararasi_mevzuat/IRLANDA.htm 4 General Directorate of Revenues’ (“GDR”) ruling dated 23.02.2012 and numbered B.07.1.GİB.4.34.16.01-KVK 30-701.
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