Turkmenistan’s International Tax Agreements and Their Implications

Turkmenistan, a Central Asian country bordered by the Caspian Sea, Iran, Afghanistan, Uzbekistan, and Kazakhstan, is rich in natural gas reserves and has a rapidly developing economy. An essential aspect of promoting international business operations and investment is the array of international tax agreements that Turkmenistan has signed with various countries. Such agreements aim to facilitate cross-border trade and investment by addressing and preventing double taxation, which can otherwise impede economic growth.

### **Overview of Turkmenistan’s Economy**

Turkmenistan’s economy is primarily driven by its vast reserves of natural gas and oil. It’s the 4th largest natural gas producer globally, focusing heavily on export markets such as China, Russia, and Iran. Furthermore, Turkmenistan has invested significantly in infrastructure, including pipelines and transportation, to facilitate its energy exports.

In recent years, the Turkmen government has shown increased interest in diversifying its economy. Efforts are being made to develop other sectors such as agriculture, textiles, and tourism to reduce its reliance on hydrocarbon revenues.

### **International Tax Agreements**

To promote foreign investment and foster economic growth, Turkmenistan engages in tax treaties with other countries. These agreements primarily aim at avoiding double taxation and preventing tax evasion. Such treaties are based on the Model Tax Convention provided by the OECD (Organization for Economic Co-operation and Development) or the UN (United Nations) models, which standardize the rules and principles for international tax relations.

Key objectives of these tax treaties include:

– **Elimination of Double Taxation**: They prevent taxpayers from being taxed twice on the same income – once in Turkmenistan and once in the partner country.
– **Exchange of Information**: These agreements facilitate the exchange of information between tax authorities, reducing tax evasion.
– **Non-Discrimination**: They ensure that nationals or enterprises of one country are not treated less favorably than those of the partner country.

### **Current Agreements and Partner Countries**

Turkmenistan has signed Double Taxation Avoidance Agreements (DTAAs) with several countries, including but not limited to:

– **Russia**: One of Turkmenistan’s major trading partners, especially in the energy sector.
– **Germany**: A significant partner in business and development projects.
– **Turkey**: A crucial ally with extensive business engagements in construction and trade.
– **China**: Turkmenistan’s primary gas export destination with agreements to manage the booming energy trade.

These treaties cover various aspects of taxation, such as business profits, dividends, interests, royalties, and capital gains, influencing substantial sectors of the Turkmen economy.

### **Implications of Tax Agreements**

1. **Increased Foreign Investment**: By eliminating the burden of double taxation, these agreements make Turkmenistan a more attractive destination for foreign investors.

2. **Economic Stability and Growth**: Stable and predictable tax environments foster economic growth. Such agreements provide clarity and reduce the tax burden, encouraging foreign enterprises to operate in Turkmenistan.

3. **Enhanced Trade Relations**: Strengthening economic partnerships with key countries through tax treaties facilitates better trade relations and international cooperation.

4. **Anti-Evasion Measures**: The exchange of information clauses within the DTAAs help curb tax evasion and ensure compliance with tax laws.

5. **Competitiveness**: These treaties improve Turkmenistan’s competitiveness on the global stage as businesses look favorably upon countries that offer clear and fair tax regimes.

### **Conclusion**

Turkmenistan’s international tax agreements play a crucial role in shaping its economic landscape. By minimizing the risk of double taxation, facilitating the exchange of information, and ensuring non-discrimination, these agreements create a more favorable climate for foreign investments and trade. As Turkmenistan continues to grow and diversify its economy, the strategic implementation and expansion of such treaties will be pivotal in driving sustained economic development and integrating into the global economy more efficiently.

Suggested Related Links on Turkmenistan’s International Tax Agreements and Their Implications:

OECD

International Monetary Fund

The World Bank

United Nations

KPMG

PricewaterhouseCoopers (PwC)

Ernst & Young (EY)

Deloitte

Baker McKenzie

International Centre for Tax and Development (ICTD)