Regulatory & Compliance

Turkey Has Introduced A New Regulation on Financial and Banking Informat

Turkey Has Introduced A New Regulation in Turkish Tax Declaration:

Automatic Information Exchange and Application of Financial Account Information Between Countries


As a result of efforts to combat tax loss and evasion, several countries among which Turkey also has signed an international cooperation. Accordingly, as a result of the efforts of the Organization for Economic Cooperation and Development (OECD), the G20 and the EU, the “Mutual Administrative Assistance Agreement on Taxation” was signed by 136 countries such as Switzerland, Norway, Brazil, India alongside EU member countries. Turkey signed this contract in question in 2011 and after a full 6 years from this date, Turkey also signed on 21.04.2017 and approved on 31.12.2019 ”Multilateral Competent Authority Agreement on the Financial Account Information Automatic Change” regulating this practice and to which 107 countries are parties as of today. According to this Agreement, the signatory countries will collect the financial account information of the residents of the respective countries from the financial institutions on the basis of reciprocity and (automatically) share it with the relevant country every year, without the need for a separate request.


By those who are subject to tax in Turkey pursuant to this Agreement, which financial information to what extent will be shared with other countries, the sharing of whom in what way and how often will do, what information and which taxable period of principles to be taken, who the information will be shared, which aims shared outside tax of this information it can be used, its risk, the scope of the term resident has been the subject of scrutiny and scrutiny. For this reason, the Revenue Administration published a Guide on 25.08.2020 to clarify the questions in the minds of taxpayers. According to this:


First, the authority which has competent to gather and share information for automatic information exchange in Turkey is the Revenue Administration under the Ministry of Treasure and Finance. In this way, a comprehensive cooperation between the countries in the conflict with tax loss and evasion is envisaged.Thus, the primary concern of the taxpayers has been resolved and there will be no information flow from any private institution or any other official institution. At this stage, it should be emphasized that this information shared by countries will only be used for tax purposes.


In the agreement, it is foreseen that the financial information that constitutes the tax issue of taxpayers will be subject to automatic change on an annual basis. In accordance with the agreement, notifications to be made by various “financial institutions” including banks, depository institutions, insurance companies and investment banks (including mutual funds) are also included. Notifications will be made in the currency in which the account is kept (Turkish Lira, Euro, British Pound Sterling, US Dollar etc.). Information gathering stage required for notification Turkey-based financial institutions with branches of foreign financial institutions in Turkey Revenue Administration will be performed by sending information to the Presidency. Foreign branches of Turkish financial institutions are subject to the legislation of their country and customer information in these organizations will be out of the question to be sent out the other countries under Turkey (Revenue Administration) under the automatic exchange of information to be sent out to other under Turkish Revenue Administration in the scope of automatic information exchange. In other words, the Garanti Bank branch in Munich, Germany, will report the information to the German finance. 


Information for 2019 will be sent to reciprocating countries in 2020, except for Germany, France, the Netherlands, Austria and Belgium, since they have signed the agreement but are not yet included in the sharing. In other words, the sharing will cover the year 2019, and automatic information exchange for the years before these dates will not be made. The countries within the scope are included in ANNEX-3 of the guide published by the Revenue Administration, and some countries may share temporary information, some countries have different taxation and some countries may have different policies on taxation issues. It is even regulated that some of these countries will provide unilateral information.


The second important issue is whose information will be shared. We would like to state immediately that the financial information of not only real persons but also legal persons that is to say everyone subject to the taxation will be shared.Here, too, beyond the usual, the criterion for the exchange of information is not citizenship but residency for tax purposes (residence). In general, the person or institution that is subject to tax liability due to residence, home, legal center, business center or any other criteria with a similar structure in accordance with the legislation of the related state is considered to be resident (resident) in that country. Under the agreement, residents in the countries concerned (resident) individuals and institutions, as well as in those countries resident individuals they control some institutions resident in Turkey (eg interest, dividends, such as passive earners or that purpose entity holding but not financial institutions institutions ) information will be shared.


The exact information that will be shared in this information sharing is as follows;


Financial institutions in Turkey, such as banks, will notify the Ministry of Treasury and Finance Revenue Administration about the information about the accounts they have determined and the Presidency will send this information to the relevant countries via a secure electronic network. Likewise, respectively (the basis of reciprocity principle) Information on accounts in countries with Turkey’s agreement will be sent to our country by the tax authorities of the countries concerned. Exchange of information between the two countries can be made until the end of September of the following year regarding the status of the account on December 31 and the information collected. Only the information of residents of that country will be sent to a covered country. It is not possible for a financial institution to send information abroad directly. In this context; before deposit, custody and investment institutions and certain insurance companies;


      • Deposit account,
      • Custodian account,
      • Interest of partnership and obligatio,
      • Cash value insurance contract

Financial information regarding regular payment contracts will be shared.


Information to be changed;

      • Name and surname of the person concerned,
      • Address,
      • Country of residence and tax identification number (Tin),
      • Birth place and date,
      • Account number, account balance or value,
      • It consists of information such as the total gross amount of income such as interest, dividends paid to the account during the year or the revenues obtained from assets kept in the account, real estate and vehicle information are not within the scope of automatic information exchange.

Account activity details will not be taken from financial institutions and will not be shared. That is, rental income is not included in real estate and vehicle information. 


The records regarding this information are made by obtaining the declarations from the customers showing which country they are resident (resident) for the newly opened accounts. In addition, financial institutions check records for accounts opened before 1/7/2017. If one of the following indicators is found in their records, a notification is sent to the Presidency regarding the country in which the indicator is located and the necessary information of the persons for this exchange system is requested. For example, in accordance with the regulations of the Banking Regulation and Supervision Agency in our country, this information must be obtained before each account opening and banking transaction. For this reason, there will be no problems in obtaining up-to-date information in countries that act in accordance with international rules. However, the same guarantee will not be provided in countries that do not comply with international standards. 


What happens for instance if the person who trade and have companies in Turkey despite being operated abroad in other words “resident”? What country’s notification will this person be subject to?


First, a company established in Turkey dealing with active commercial activities such as production or merchandise, although its partner resident in abroad, no matter how many partnership shares, corporate account is not included in the scope of automatic information exchange. However, that the notice of accounts opened in Turkey on behalf of the companies established in abroad by Turkish citizens can be in question have indicated by the Revenue Administration. 


If the income of the account holder company is mainly composed of passive income such as interest (more than 50%) and the share of the foreign country resident in the company partnership is more than 25%, the account information of this company may be included in the scope of automatic information exchange.


At this stage, a question arises as to whether double taxation will be experienced or not, and residents are concerned. In this regard, the Revenue Administration relieves all residents who will be included in this taxation. There will be no double taxation due to automatic exchange of information. The resulting income, either just in the country where the income is earned (in Turkey) will be taxed, or paid taxes in the country where the income is earned (in Turkey) can be deducted from taxes payable in other countries in other words, the tax paid in Turkey, will be able to be deducted from the amount payable in the country concerned. The provisions of the Double Taxation Agreements in force have been implemented in this manner for years, and after automatic information exchange, the taxation provisions of the said Agreements will continue to be applied as before.


It is explained in the Guide how the closed, active or passive accounts and joint-joint accounts will be subject to information, and it is understood that they will not be subject to a very different standard than the notifications in the standard Banking Regulation and Supervision Agency regulations. The balance or value of the financial accounts within the scope of the agreement as of December 31st and the income paid to this account during the year (such as interest, dividends, dividends, revenues from sales of financial assets, etc.) are within the scope of the notification. However, account transactions such as real estate lease payments and debt payments that are deposited into a deposit account during the year are not within the scope of automatic information exchange. If the account is closed during the year, the information that it has been closed will be notified in the year following the account closure. Notification will only be made for the year the account was closed. The account balance or value for closed accounts will be reported as zero “0”. However, even if the account has been closed, information such as interest accrued until the closing date is subject to notification. In jointly held accounts, each partner is appreciated as the account holder and the entire account balance is reported. It is not possible to divide the balance of the account by the number of partners in the notification. 


Finally, within the framework of the Law No. 6698 on the Protection of Personal Data, which is also applicable in various countries and subject to high administrative fines, the status of personal data is also among those wondering. We can state that automatic information exchange does not constitute a violation of the Personal Data Protection Law, since it is carried out under the international agreement (on the basis of reciprocity principle). However, at this stage, it is not possible to prevent automatic information exchange by petitioning that the taxpayer residents do not consent to the transfer of data abroad within the scope of the Law on Protection of Personal Data No.6698. Because, although there is a doubt in this direction, it is claimed that the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information was signed, the agreement covers only financial accounts and the transactions made are in accordance with the legislation.


Best Regards,

Çukur&Partners Law Firm

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