On July 01, 2020, the Federal Ministry of Finance (BMF) published the “State Exchange List 2020” for the automatic exchange of information on financial accounts in tax matters (AEOI). This list, which has now grown to 100 countries, includes Turkey for the first time. This means that Turkish financial institutions (banks and insurance companies) are also required to report information on accounts, their holders, account balances and income such as interest, dividends and capital gains to the Turkish tax authorities. They then forward these reports to the German tax authorities. In return, Germany reports the same to Turkey. The respective tax authorities then check whether the foreign income has been declared for tax purposes. If this is not the case, there is a charge of tax evasion.
In principle, the exchange of information within the countries takes place at the September 30 of a subsequent year. For the year 2019, the notification would therefore take place on September 30, 2020. However, because of the COVID 19 pandemic, countries participating in the AIA agreed to extend to the December 31, 2020 agreed. This also applies to Turkey. Although the information to be reported from Turkey relates only to 2019. As a rule, however, this information already allows conclusions to be drawn about corresponding account balances and income from previous years. In case of doubt, the tax office may estimate income in previous years.
II. New developments
In August 2020, the Turkish Ministry of Finance has now published an “information manual” for AEOI on its website. It specifies which countries will be included by Turkey in the AEOI. The contracting parties Germany, the Netherlands, Belgium, Austria and France are explicitly excluded, which could not be included by Turkey in the information exchange calendar with Turkey for the calendar year 2020 (in which information is exchanged for the year 2019). At the same time, it is pointed out that the European Union monitors countries that do not automatically exchange information with all member states and discusses sanctions against them. It is thus currently unclear whether, when and how Turkey will transmit account information to the German tax authorities. Against this background, it seems questionable whether those affected can speculate that the AEOI with Turkey will not be implemented after all. In any case, it is clear that the tax authorities of the two countries have different expectations.
III. What can you do?
First, the following should be noted:
If the German tax authorities become aware that income from sources in Turkey has not been declared for tax purposes in Germany, or has been declared incorrectly, they will regularly assume that there has been deliberate tax evasion. Willful tax evasion can be punished by a fine or imprisonment for up to five years, and in serious cases from six months to ten years. Special attention should also be paid to the topic of gifts and inheritance.
The solution must therefore be: “Use the time!” Especially if the Automatic Exchange of Information is now not coming on December 31, 2020, but at a later date, the time remaining until then can be used to clarify and bring about the possibilities and formal requirements for a voluntary disclosure that exempts from punishment. If a voluntary disclosure is filed in time and effectively, one remains free of punishment. Previous experience with Switzerland, Austria and Liechtenstein has shown that it often takes considerable time to compile the necessary information and (bank) documents for an effective voluntary disclosure. A possible delay in the automatic exchange of information may therefore be an opportunity to file a voluntary disclosure in time to avoid prosecution. This is because a voluntary disclosure requires – among other things – that the tax offense has not yet been discovered. If you want to be on the safe side here, you should definitely file a voluntary disclosure before the exchange of information has taken place. After that, it may be too late to file a voluntary disclosure in order to avoid prosecution.
We have many years of experience with the disclosure of cross-border facts and are available to provide professional advice on voluntary disclosures that exempt from punishment.
We do not charge a fee for the non-binding initial consultation.
tel: +49 89 5997606-1040
Munich Site Manager
Head of Criminal Tax Law
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