Fees for Technical Services Tax Rate Between India and Turkey Under DTAA

Quick answer: Fees for technical services (FTS) are combined with royalties in Article 12 of the India-Turkey DTAA and capped at 15% of the gross amount under Article 12(2), against India's domestic rate of 20% under section 207(2) (Table, Sl. No. 2) of the Income-tax Act, 2025 (section 115A of the Income-tax Act, 1961). Article 12(4) defines FTS as managerial, technical or consultancy services, including the provision of technical or other personnel, excluding payments to employees -- and, unlike several other Indian treaties, without any "make available" limitation. The treaty was signed 31 January 1995 and took effect from 1 February 1997; Turkey has signed but not ratified the MLI, so the Principal Purpose Test does not yet apply.

Key takeaways:

• Flat 15% FTS cap under Article 12(2), the same rate that applies to royalties under the same combined article
• Article 12(4) defines FTS broadly: managerial, technical or consultancy services, including provision of personnel
• No "make available" requirement -- broader in scope than the India-USA or India-UK FTS definitions
• Payments to employees are expressly excluded from the FTS definition
• Turkey has signed but not ratified the MLI, so the Principal Purpose Test does not yet apply to this treaty

Fees for Technical Services Tax Rate Between India and Turkey

The India-Turkey DTAA, signed on 31 January 1995 and in force from 1 February 1997, taxes fees for technical services (FTS) under the same Article 12 that governs royalties, with an identical 15% cap on the gross amount. Turkish engineering, construction-supervision, and management-consultancy firms providing services to Indian clients, and Indian IT and consulting firms serving Turkish clients, both rely on this rate.

A defining feature of the India-Turkey treaty is that Article 12(4) contains no "make available" limitation. Under treaties with the USA, UK, or Singapore, a technical service payment is FTS only if it makes technical knowledge, skill or know-how available to the recipient in a way that enables them to apply it independently in future. The India-Turkey treaty imposes no such condition -- any payment for a managerial, technical or consultancy service is FTS regardless of whether knowledge transfer occurs, which broadens the scope of what is taxed at 15% (rather than potentially escaping FTS characterisation and being taxed as business profits instead). For the treaty's full framework, see our India-Turkey DTAA complete guide.

Treaty Rate vs Domestic Rate: Detailed Comparison

Domestic Rate (Without DTAA)

FTS paid to a non-resident is taxed at 20% (plus surcharge and cess) under section 207(2) (Table, Sl. No. 2) of the Income-tax Act, 2025 (section 115A of the Income-tax Act, 1961), doubled from 10% by the Finance Act 2023 with effect from 1 April 2023.

DTAA Rate (With Treaty)

Article 12(2) of the India-Turkey DTAA caps the source-state tax on FTS paid to a Turkish beneficial owner at 15% of the gross amount -- a 5-percentage-point saving over the domestic rate, applying uniformly to managerial, technical, and consultancy fees.

Effective Tax Savings

For a Turkish engineering firm providing project-supervision services to an Indian infrastructure company for EUR 600,000 a year, the treaty saves EUR 30,000 annually: EUR 90,000 withheld at 15% against EUR 120,000 at the 20% domestic rate.

Who Qualifies for the Reduced Rate

Beneficial Ownership Requirement

The 15% cap applies only where the Turkish service provider is the beneficial owner of the fee -- the entity actually performing or contracting for the services, not a mere billing intermediary for a third-country provider.

Tax Residency Requirement

The Turkish service provider must be a tax resident of Turkey under Article 4 and hold a Tax Residency Certificate from the Gelir Idaresi Baskanligi (Turkish Revenue Administration) for the relevant financial year.

Anti-Abuse Rules: MLI Signed But Not Ratified by Turkey

Both India and Turkey signed the MLI on 7 June 2017. India has ratified it and listed this treaty as a Covered Tax Agreement, but Turkey has not deposited its instrument of ratification, so the Principal Purpose Test does not currently modify FTS taxation under this treaty. India's domestic GAAR, applicable under section 159(6) of the Income-tax Act, 2025 (section 90(2A) of the Income-tax Act, 1961), remains the operative anti-abuse safeguard until Turkey ratifies.

No Permanent Establishment Attribution

Where the services generating the fee are effectively connected with a permanent establishment the Turkish provider has in India, the 15% cap does not apply; the fee is instead taxed as business profits under Article 7.

FTS-Specific Treaty Provisions Under Article 12

Definition of Fees for Technical Services (Article 12(4))

The treaty defines FTS as payments of any kind for services of a managerial, technical or consultancy nature, including the provision of services of technical or other personnel, but excludes payments to an employee of the person making the payments. This is a wide, personnel-inclusive definition: it covers deputing Turkish engineers or managers to an Indian project, not merely providing advisory reports.

Combined Rate with Royalties Under Article 12(2)

Because FTS and royalties share Article 12(2), there is no need to distinguish between the two for rate purposes -- both are capped at 15%. The distinction still matters for correct characterisation on Form 146 and in transfer pricing documentation, since royalties and FTS are reported and analysed differently even where the withholding rate coincides.

No "Make Available" Limitation

The absence of a make-available test in Article 12(4) means routine consultancy, project-management, and technical-support services rendered by a Turkish provider to an Indian client are FTS under this treaty even if no lasting technical capability is transferred to the Indian side -- a materially broader scope than under treaties that import the make-available concept.

Documentation Required to Claim the Reduced Rate

Tax Residency Certificate (TRC)

The Turkish service provider must furnish a TRC from the Gelir Idaresi Baskanligi, required under section 159(8) of the Income-tax Act, 2025 (section 90(4) of the Income-tax Act, 1961).

Form 41 (formerly Form 10F)

If the TRC lacks the prescribed particulars, Form 41 must be filed electronically on the Indian income tax e-filing portal.

Self-Declaration and Service Agreement

A self-declaration confirming beneficial ownership and no Indian PE to which the services are attributable, together with the underlying service agreement describing the nature of the services (to support the managerial/technical/consultancy characterisation), should be retained by the Indian payer.

Withholding Procedure for Indian Payers

Section 393(2): TDS Obligation

Under section 393(2) of the Income-tax Act, 2025 (Table, Sl. No. 17; section 195 of the Income-tax Act, 1961), the Indian payer must deduct TDS at the time of credit or payment, whichever is earlier -- 15% with valid treaty documentation, or 20% under domestic law without it.

Forms 145 and 146 (formerly Forms 15CA and 15CB)

Before remitting the fee, the Indian payer must file Form 145 electronically, and obtain Form 146 from a Chartered Accountant for remittances exceeding INR 5 lakh, describing the services and the treaty article relied upon.

Section 395(1): Lower Withholding Certificate

A Turkish service provider expecting a lower actual liability may apply to the Assessing Officer for a certificate under section 395(1) of the Income-tax Act, 2025 (section 197 of the Income-tax Act, 1961).

FTS vs Independent Personal Services

Not every cross-border technical or consultancy payment falls under Article 12. Where a Turkish individual professional -- rather than a company -- provides technical or consultancy services to an Indian client in their personal capacity, the treaty's Independent Personal Services article (Article 14) can apply instead, taxing the income only where the individual has a fixed base regularly available in India or spends a specified period there in the tax year. Businesses paying Turkish consultants should first confirm whether the counterparty is a company or firm (Article 12(4) FTS, 15% cap) or an individual providing services personally (potentially Article 14), since the two articles carry different taxing thresholds and neither should be applied by default.

Common Compliance Points

Because Article 12(4) excludes payments to employees, Indian companies that second Turkish personnel directly onto their own payroll -- rather than contracting for services from the Turkish entity -- should apply the salary-taxation rules under the treaty's personal-services articles, not the 15% FTS cap. Conversely, a services contract under which a Turkish firm deputes its own staff to work on an Indian project (with the staff remaining employed and paid by the Turkish firm) is squarely within the Article 12(4) "provision of services of technical or other personnel" limb and is taxed at 15%.

Practical Examples and Calculations

Example 1: Project-Supervision Services

Ankara Muhendislik Danismanlik A.S. provides construction-supervision services to an Indian infrastructure developer for INR 5 crore.

• Without DTAA: TDS at 20% = INR 1 crore.
• With DTAA: TDS at 15% = INR 75 lakh.
• Saving: INR 25 lakh.

Example 2: Deputed Technical Personnel

A Turkish manufacturer deputes three of its own engineers to commission machinery at an Indian factory, invoicing the Indian buyer INR 60 lakh for the personnel's time, while the engineers remain employed and paid by the Turkish company. This falls within Article 12(4)'s "provision of services of technical or other personnel" and is taxed at 15% (INR 9 lakh), not under the employee-payment exclusion, because the Indian buyer pays the Turkish company, not the individual engineers.

Example 3: Management Consultancy Without Technology Transfer

A Turkish consultancy advises an Indian retailer on store-operations restructuring for INR 40 lakh, with no lasting technical capability transferred to the Indian team. Because Article 12(4) carries no make-available requirement, this consultancy fee is FTS at 15% (INR 6 lakh) regardless of the absence of technology transfer -- a result that would differ under a make-available treaty such as India-USA.

For structuring cross-border service arrangements, see our tax advisory and cross-border payments services, and our guide to registering a company in India from Turkey for Turkish firms setting up a permanent local presence rather than delivering services on a cross-border FTS basis.

Frequently Asked Questions

What is the fees-for-technical-services tax rate under the India-Turkey DTAA?

Article 12(2) of the India-Turkey DTAA caps withholding tax on fees for technical services (FTS) at 15% of the gross amount, the same cap that applies to royalties under the same combined article. This compares to India's domestic rate of 20% under section 207(2) (Table, Sl. No. 2) of the Income-tax Act, 2025 (section 115A of the Income-tax Act, 1961).

Does the India-Turkey DTAA have a 'make available' clause for FTS?

No. Unlike the India-USA or India-UK treaties, the India-Turkey DTAA does not condition FTS taxation on technical knowledge being 'made available' to the Indian recipient. Article 12(4) defines FTS broadly as managerial, technical or consultancy services, so the 15% cap applies regardless of whether know-how is transferred.

Are payments to individual employees covered as FTS?

No. Article 12(4) expressly excludes payments to an employee of the person making the payments from the FTS definition. Such payments are instead governed by the treaty's dependent or independent personal services articles, not Article 12, so an Indian company paying salary directly to a seconded Turkish employee should apply the personal-services rules rather than the 15% FTS withholding rate.

How is FTS distinguished from royalties under this treaty?

The treaty does not need to distinguish them for rate purposes, since both fall under the same 15% cap in Article 12(2). The distinction still matters for characterisation: royalties (Article 12(3)) cover licensing of IP and equipment, while FTS (Article 12(4)) covers the provision of managerial, technical or consultancy services and personnel, excluding employee payments.

What documents does a Turkish service provider need to claim the reduced rate?

A Tax Residency Certificate from the Gelir Idaresi Baskanligi, electronically filed Form 41 (formerly Form 10F), and a self-declaration confirming beneficial ownership and no Indian permanent establishment to which the services are attributable. The Indian payer must file Form 145 and, for remittances over INR 5 lakh, obtain Form 146.

Does the MLI Principal Purpose Test apply to FTS under this treaty?

Not yet. Both India and Turkey signed the MLI on 7 June 2017 and India has ratified it, listing this treaty as a Covered Tax Agreement, but Turkey has not deposited its instrument of ratification. Until it does, the PPT does not modify FTS taxation under this treaty; India's domestic GAAR remains the operative safeguard.