ARTICLE 11 — U.S. Income Tax Treaty

Interest

Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
However, such interest may also be taxed in the Contracting State in which it arises, and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed 15 percent of the gross amount of the interest, except that, if the interest is derived from a loan of whatever kind granted by a financial institution, such as a bank, savings institution, or insurance company, the interest shall not be taxed at an amount in excess of 10 percent of the gross amount of such interest.
Notwithstanding the provisions of paragraph 2, interest arising in:

a) the United States and paid to the Government of Turkey or to the Central Bank of Turkey (Turkiye Cumhuriyet Merkez Bankasi) shall be exempt from United States tax;

b) Turkey and paid to the Government of the United States or any Federal Reserve Bank shall be exempt from Turkish tax;

c) a Contracting State in connection with a loan or credit guaranteed or insured by the Government of the other Contracting State shall be exempt from taxation in the first-mentioned State. The competent authorities shall by mutual agreement determine the scope of subparagraph c) of this paragraph.

The term "interest" as used in this Article:

a) means income from debt-claims of every kind, whether or not secured by mortgage, and whether or not carrying a right to participate in the debtor's profits, and all other income that is characterized as income from money lent by the laws of the Contracting State in which the income arises, and in particular, income from government securities, and income from bonds or debentures, including premiums or prizes attaching to such securities, bonds or debentures; and

b) includes, in the case of the United States the excess, if any, of the amount of interest borne by a permanent establishment, fixed base, or trade or business subject to tax on a net basis in the United States under Article 6 (Income from Immovable Property (Real Property)) or paragraph 1 of Article 13 (Gains) over the interest paid by that permanent establishment, fixed base, or trade or business in the United States. However, the term interest does not include income dealt within Article 10 (Dividends).

The provisions of paragraphs 1, 2 and 3 shall not apply if the recipient of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises through a permanent establishment situated therein, or, in the case of a resident of Turkey, performs in the United States independent personal services from a fixed base situated in the United States, and the interest is attributable to that permanent establishment or fixed base. In such case, the provisions of Article 7 (Business Profits) or Article 14 (Independent Personal Services), as the case may be, shall apply.
Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a political subdivision, local authority or resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base or a trade or business subject to tax in that State on a net basis under Article 6 (Income from Immovable Property (Real Property)) or Article 13 (Gains), and such interest is borne by such permanent establishment, fixed base, or trade or business, then such interest shall be deemed to arise in the State in which the permanent establishment, fixed base, or trade or business is situated. Interest described in subparagraph b) of paragraph 4 shall be deemed to arise in the United States.
Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debtclaim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last mentioned amount. In that case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.
The provisions of paragraphs 2 and 3 shall not apply to:

a) an excess inclusion with respect to a residual interest in a United States real estate mortgage investment conduit; or

b) interest that is contingent interest of a type that does not qualify as portfolio interest under United States law, and to equivalent amounts under Turkish law.

Income described in subparagraph a) may be taxed in accordance with the domestic law of the Contracting State in which the interest arises, and income described in subparagraph b) will be taxed in accordance with the provisions of Article 10 (Dividends), as if it were a dividend.