Dear Fortune readers, I previously shared my views on the automatic exchange of financial information with you. In this article, I would like to inform you about the latest developments on this subject.
As is known, a "Convention on Mutual Administrative Assistance in Tax Matters" was issued as a result of the global efforts of the OECD, G20, and EU to combat tax loss and evasion, and the Convention has been signed by 136 countries, including our country, as of today.
"Law on the Ratification of the Convention on Mutual Administrative Assistance in Tax Matters" was enacted and enforced by the GNAT in 2017. The Convention provides for mutual co-operation and assistance among the contracting parties on matters regarding exchange of information, simultaneous tax audits, foreign tax audits, collection, and notification. As for the Convention's section on the automatic information exchange, the "Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information", which has 107 signatory countries as of today, was approved and enforced by the President.
According to the agreement, signatory countries shall collect the financial account information of the residents of the respective countries from financial institutions on the basis of reciprocity and (automatically) share them with the relevant country each year without any need for a separate request. In Turkey, the power to collect and share information for automatic information exchange rests with the Revenue Administration. As such, financial information kept by deposit, custody and investment institutions as well as certain insurance companies on deposit accounts, custody accounts, partnership and debt relationship interest, cash value insurance contracts, annuity contracts, and regular payment agreements shall be shared with the relevant countries. The information to be exchanged shall concern data such as the person's name and surname, address, country of residence and tax identification number (TIN), place and date of birth, account number, account balance or value, and the total gross amount of income such as interest and dividends paid to the account during the year, or revenue from assets held in the account. I find it particularly useful to specify that information on real estate and vehicles shall not be subject to automatic information exchange. Whether the exchanged information belongs to real persons (personal accounts) or legal persons (corporate accounts) shall not change the scope of the exchange.
Information pertaining to 2019 shall be exchanged with the countries with which reciprocity is in place in 2020. It is not possible to automatically exchange information about the years before these dates. Turkey will receive information from 71 countries and send information to 54 countries. As part of the principle of reciprocity, countries such as Germany, France, Netherlands, Belgium, Austria, and Switzerland, in which Turkish citizens reside in large numbers or have financial accounts, are not among the countries with which information shall be exchanged (yet). Therefore, financial information pertaining to 2019 shall not be automatically exchanged with these countries in 2020. As for Switzerland, a reputed financial center, financial information of 2021 shall be exchanged for the first time in 2022. It is also clear that information exchange shall be performed with more countries in the coming years.
I recommend following closely developments on the matter, and find it crucial to take necessary measures on time in order to avoid any problems.
Leon Aslan Coşkun