I have a client who is resident for tax purposes in both UK and Turkey.
He has made a disposal of a residential property in Turkey in which a gain has arisen.
TCGA 1992 s1A gives the UK taxing rights on worldwide disposals for UK tax residents:
“A person who is UK resident for a tax year is chargeable to capital gains tax on chargeable gains accruing to the person in the tax year on the disposal of assets wherever situated.”
Under the UK - Turkey double tax agreement, he would be deemed a Turkish resident for treaty purposes. This takes us to Article 13 which deals with capital gains. I’m exuding paragraphs 2 and 3 as they aren’t relevant to the situation.
(1) Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 of this Agreement and situated in the other Contracting State may be taxed in that other State.
(4) Gains from the alienation of any property other than that referred to in paragraphs (1), (2) and (3) of this Article shall be taxable only in the Contracting State of which the alienator is a resident. However, such gains which arise in a Contracting State from the alienation of property within a period of one year from the date of its acquisition may be taxed in that State.
If he was UK resident under the treaty, then the answer is a straight yes, he is subject to UK tax. But the fact he is Turkish resident under the tie breakers has me doubting the position.
Given he is a Turkish resident for treaty purposes, neither of these paragraphs seem to cover the situation we have (a Turkish resident disposing of Turkish immovable property).
That being the case, does that simply mean that as my client is a UK tax resident under UK law, and as the double tax agreement does not provide any form of relief or exemption, he is therefore subject to UK tax on his gain?
Edit: for clarity, we have been advised that there is no tax due in Turkey on this gain - something to do with him having owned the property 5 years. Therefore there is no foreign tax avaialble to offset if there is UK tax due.