Turkey is the latest country to sign up to the automatic exchange of information as part of efforts to combat cross-border tax evasion. It is still possible to submit a voluntary declaration for tax evasion.

There are now more than 100 countries participating in the automatic exchange of (financial) information (AEOI). Former tax havens such as Switzerland, Austria, and Liechtenstein have already signed up, and Turkey is now following suit. The process involves countries committing to mutually exchange the banking information of taxpayers who reside in another country, making it increasingly difficult to conceal untaxed income from foreign accounts from the exchequer. We at the commercial law firm MTR Rechtsanwälte can report that this now applies to accounts in Turkey as well.

The information exchanged always relates to the previous year, which means information from the calendar year 2019 was exchanged in 2020. The transfer of data is normally supposed to take place by September 30. Due to the coronavirus pandemic, the participating countries have agreed that this year the transfer of data will not be required until December 31.

Turkey’s participation in the exchange of information is of great importance to the German tax authorities. They will receive the financial information of all taxpayers registered in Germany with an account in Turkey. The authorities are then able to examine whether taxes have been duly paid on the income deposited in the foreign account. Should they come across irregularities in doing so, this can quickly give way to accusations of tax evasion and the threat of commensurate sanctions. 

Exemption from punishment is possible by submitting a voluntary declaration, though this has to occur before the tax evasion is discovered by the authorities. Since this year the data does not need to be transferred as part of the AEOI until December 31, the parties concerned can still take action before the tax evasion is discovered. That said, the voluntary declaration must not only be submitted in due time but also be exhaustive if it is to be capable of leading to an exemption from punishment. 

These represent significant obstacles for a layperson, with even minor errors potentially resulting in the voluntary declaration failing to achieve the desired outcome. Those concerned should not turn to their tax office for answers to any questions, as voluntary disclosure may no longer be possible as a result.

The best course of action is to consult with lawyers with experience in the field of tax law. They are familiar with the requirements a voluntary declaration needs to fulfil in order for it to be able to lead to an exemption from punishment.

https://www.mtrlegal.com/en/legal-advice/tax-law/voluntary-disclosure.html