Information on bank accounts will soon be exchanged between Turkey and Germany

December 16, 2020

Automatic Exchange of Information between Germany and Turkey

Since 2014, it is possible to automatically exchange data on bank accounts between numerous countries. The purpose of this is to combat international tax reductions. Turkey is one of the countries which signed the corresponding agreement. The German Federal Ministry of Finance (“Bundesfinanzministerium”) announced that an exchange of the 2019 data between the German and Turkish tax authorities will take place by 31st December 2020. In some cases, this may result in prosecution for tax evasion by the German investigating authorities.

I. What is the Automatic Exchange of Information?

The Automatic Exchange of Information (AEOI) is a central instrument for combating cross-border tax evasion. The basis for the AEOI is an annual reporting standard developed by the Organization for Economic Cooperation and Development (OECD), according to which the signatory states of the agreement have been exchanging tax information with each other since 2017. Up to now, more than 100 countries worldwide participate in this data exchange.

Germany implemented this agreement in national law trough the German Act on Financial Accounts Information Exchange (FAIE-A).

II. Exchange of information with Turkey on 31st December 2020

In July 2020, the German Federal Ministry of Finance announced that Turkey will for the first time participate in the automatic exchange of information to combat cross-border tax evasion this year.

Therefore, Turkish financial institutions are obliged to transmit tax-relevant information once a year to a central office in Turkey, which then passes the data on to the German Federal Central Tax Office (“Bundezentralamt für Steuern”). The transmitted data is filtered by software, assigned according to the tax identification number and then transmitted to the relevant tax offices. The relevant tax office then assesses whether Turkish income has been correctly declared and taxed in the annual tax return.

The exchange of information pursuant to Sec. 27 Para. 1 FAIE-A shall always take place on September 30th of each year for the preceding calendar year. However, due to the current corona pandemic, the participating countries have decided to postpone this exchange date for the 2019 data until 31st December 2020.

III. Who is affected and what data will be transmitted?

This affects all existing bank accounts at Turkish financial institutions whose account holders (natural and legal persons) reside and are subject to tax in Germany.

Information on accounts in Turkey will be transmitted to the German tax authorities. This exchange includes information on account holders, account balances and income such as interest, dividends, capital gains and income from certain insurance contracts.

IV.  What are the consequences in Germany?

Anyone who has so far not declared the corresponding income from Turkey in their German tax return should take swift action, as there is a risk of being accused of tax evasion. An initiation of corresponding criminal tax proceedings is therefore possible.

On 31st December 2020, only data for the tax year 2019 will be transmitted. Data from previous years are not included. However, this does not mean that there is no risk of criminal prosecution for previous years, as the information for the year 2019 may allow conclusions to be drawn about corresponding income from previous years and the tax office may request information in this respect and, if necessary, estimate investment income.

V. Remedy

This can be remedied by a subsequent declaration or a voluntary self-disclosure. However, a voluntary self-disclosure must be filed before the tax offence is considered to be “discovered” in the meaning of the law. Although the discovery of the tax evasion does not necessarily coincide with the transmission of information on 31st December 2020, it is strongly recommended to file a voluntary self-disclosure before the transmission. In this context, special requirements and conditions must be met in order for a voluntary self-disclosure to be effective and thus exempt from criminal charges.

The experts at PwC Legal have many years of experience in the field of commercial and tax criminal law and are happy to assist you.

Experts

Dr. Thorsten Zumwinkel

Tax criminal and white collar criminal law

Tel: +49 211 981-4843

Christina Hüschemenger

Tax criminal and white collar criminal law

Tel: +49 69 9585-2164

Ismael Ott

Tax criminal and white collar criminal law

Tel: +49 211 981-4367

Dr. Jan-Lieven Stöcklein

Tax criminal and white collar criminal law

Tel: +49 69 9585-6005