The income and capital tax treaty between Germany and Turkmenistan entered into force on 28 November 2017. The treaty, signed 29 August 2016, replaces the 1981 tax treaty between Germany and the former Soviet Union as it applied in respect of Germany and Turkmenistan.

Taxes Covered

The treaty covers German income tax, corporation tax, trade tax, and applicable surcharges. It covers Turkmen tax on profits (income) of juridical persons, tax on income of individuals, and tax on property.

Withholding Tax Rates

• Dividends - 5% if the beneficial owner is a company directly holding at least 25% of the paying company's capital; otherwise 15%
• Interest - 10%, with an exemption for interest paid in connection with the sale on credit of industrial, commercial or scientific equipment, or in connection with a sale on credit of goods by an enterprise to another enterprise
• Royalties - 10%

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

• Gains from the alienation of immovable property situated in the other State;
• Gains from the alienation of shares or similar rights in a company whose assets directly or indirectly consist principally of immovable property situated in the other State; and
• Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State.

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

Turkmenistan applies the credit method for the elimination of double taxation, while Germany generally applies the exemption method, including for dividends when the beneficial owner is a Germany company that directly owns at least 25% of the capital of the Turkmen payer, and the dividends were not deducted in determining the payer's profits (also applies for taxes on capital if conditions for dividend exemption would be met). However, Germany applies the credit method for dividends not meeting the previous conditions, as well as for interest, royalties, and certain other items of income in accordance with German tax law.

Effective Date

The treaty applies from 1 January 2018. The 1981 tax treaty between Germany and the former Soviet Union ceased to apply in relation to Germany and Turkmenistan from that date.