The exemption covers more than 90 percent of the Turks who retired from jobs in Germany but are currently living in Turkey. The 1985 deal, which prevented the double taxation of both countries’ citizens, whether they are in Turkey or in Germany, was unilaterally scrapped by Germany on July 21, 2009. The agreement was due to expire in 2011.
Turkey has been in discussions with the German authorities since then to try to convince them to sign another agreement or at least to ensure the current one stays in effect until the previously determined expiry date of 2011. The parties agreed to the new conditions after a Turkish delegation headed by Revenues Administration (GİB) President Mehmet Kilci held a final meeting on May 4 and 5.
Defending the cancellation of the deal a year ago, Berlin claimed that its move was mainly due to “changed” economic relations between the two countries.
Germany wants to levy a tax on its retirees residing in Turkey; however, Turkey objected on the grounds that it does not tax pensions, which means that it would not be able to implement a reciprocal action for Germans who worked in Turkey and German retirees living in Turkey. Germany’s tax on pensions starts at a rate of 12 percent.
The two countries have held four rounds of talks so far, failing to reconcile their differences. According to the new deal, a pensioner who gets less than 10,000 euros in total per year will continue not to pay any tax on his or her earnings. But anyone who gets a pension equal to or higher than this amount will have to pay 10 percent tax to the German Finance Ministry.
