ECONOMY

Greek-Turkish tax pact

Greece and Turkey will sign a double taxation treaty next week in a move to bolster economic relations, Greek officials said yesterday. Finance Minister Nikos Christodoulakis will sign the accord during an official visit to Turkey that begins tomorrow. A key benefit to Greece in the taxation treaty regards the shipping industry, a major part of the Greek economy. «After negotiations that lasted about five years, Turkey’s acceptance of the flag of a vessel as a criterion of Greek ship ownership for taxation purposes was a major breakthrough,» a Finance Ministry official said. Based on the treaty, Greek cargo vessels will not be required to pay taxes to Turkey as is currently the practice, a tax break that will greatly benefit Greek shipping. Likewise, Greek companies active in Turkey will enjoy a lower tax rate on dividends compared to Turkish businesses. Their rate will come down to 15 versus 16.5 percent. «The treaty to avoid double taxation is the most significant economic agreement between the two countries. In many cases, taxation is lowered to match rates that apply in the interior of each country,» the official said. The treaty sets a 12 percent tax rate on interest income, providing construction companies with a 10-month tax-exempt period. As relief for trucks in transit – transporting goods between the two countries – the agreement establishes that henceforth they will only be taxed in the country they are based in. The treaty also entails a 12 percent tax break on bank loans from one country to the other to finance investment in infrastructure and heavy industry, a provision that seeks to boost capital flows between Greece and Turkey. (Reuters)