Many countries in the world are compelled to tax the worldwide income of their residents, however receiving information on the income of these individuals earned abroad is not that simple – it requires cooperation between countries.
To address the difficulty of cooperation, the Organisation for Economic Co-operation and Development (OECD) drafted an agreement in 2017, which was also signed by Turkey. The agreement named “Convention on Mutual Administrative Assistance in Tax Matters” was ratified two years later in 2019.
Although Turkey had vowed to provide tax information under the agreement, the implementation was delayed.
The information exchange has been made possible only with the issuance of a presidential decree on May 31, 2021, which authorized the Turkish Revenue Administration to share the information of individuals who are tax residents in the relevant country.
Turkey's delay in sharing the relevant information for four years now was perceived as an effort to “prevent the exposure of Turkish-origin people's incomes and assets.”
The newly implemented mechanism carries the utmost importance for five million Turkish-origin people who are residing in Europe but have financial accounts in Turkey. Of these million people, three million are said to be living in Germany.
As part of the agreement, Turkey started to share tax information with authorities in Austria, Belgium, France, Germany and the Netherlands, Deutsche Welle's Turkish service reported on Oct. 20.
The financial information of German citizens is being sent to the Federal Central Tax Office in Germany's Bonn city, which forwards the relevant data to local tax offices, Deutsche Welle report said. And the local German tax offices compare the information sent by Turkey with the relevant resident's tax declaration to see if there is wrong or missing information.
International tax specialist Cevdet Koçaş told Deutsche Welle that any German resident who has not so far completely reported their earnings made in Turkey will experience a problem. According to Koçaş, Germany might demand tax from its residents for up to 10 years back.
German laws foresee a monetary fine or up to five years jail term for those who are determined to have committed tax fraud on purpose, according to the Deutsche Welle report. In heavy fraud cases, the jail term can go up to ten years, the report noted.