Since 2014, 100 countries have committed themselves to exchange information from account holders among themselves in the framework of the Automatic Information Exchange (AIA). This OECD measure ensures greater transparency in international money transactions and, as seen in the example with Switzerland, has also resulted in numerous cases of voluntary disclosure to the tax authorities.
At the beginning of July, the Federal Ministry of Finance announced which other countries are now participating in the exchange. Turkey is also participating for the first time.
In view of this development, Dr. Andreas Hofner, lawyer, tax consultant and board member of ACCONSIS in Munich, explains why this expansion will not remain without consequences.
Self-disclosure to the tax office
Dr Hofner, is Turkey the new Switzerland?
Many people with Turkish roots live in Germany and also have a bank account in Turkey. If the data is compared in this country and it turns out that someone had an account in Turkey and this income was not declared in his tax return, this can be considered tax evasion.
German tax investigators could get to the bottom of black money transactions on a large scale by looking into Turkish accounts. Untaxed income, especially from “black money-prone” industries such as taxi, catering or construction could come to light. Tax evaders would be threatened with enormous additional demands from the tax offices.
Who does the AIA between Turkey and the FRG concern?
The automatic information exchange concerns all persons who are resident in the FRG and have an account in Turkey. The same applies to the opposite case. The nationality is irrelevant.
How many taxpayers are actually affected is difficult to estimate in my opinion. But if we know that the number of people of Turkish origin in Germany is around three million, then it will certainly be a considerable number who are affected by this development.
Just a reminder: when Germany bought the Swiss CDs, almost all German citizens with a bank account in Switzerland filed a voluntary declaration with the tax office. After all, the authorities have a special focus on wealthy private individuals.
What information is exchanged?
In addition to the information required to identify the account holder (name, address, date of birth, tax identification number, etc.), the following information is exchanged
- the account number
- the account balance at the end of the calendar year and
- Investment income including dividends and
- Gains from the sale of securities
or the calendar year concerned.
As a result, the recipient State should be enabled to tax the transferred information. This may have consequences: For example, for facts that are no longer remembered. For example, if someone in Germany has filed for insolvency in the past. In doing so, they have stated that they have no other assets. Then it turns out that he still has an account in Turkey. For larger sums, data could then be passed on to the public prosecutor’s office.
And we are already dealing with an insolvency offence, provided the investment income in question is subject to taxation in Germany and has not yet been taxed. In this case, the responsible tax office will make a subsequent taxation for the year 2019. The tax office will also expect to be notified of where the capital assets come from and, if necessary, to make corresponding estimates in the context of the subsequent taxation for previous years.
Furthermore, there is the possibility that criminal tax proceedings may be initiated. If the known investment income exceeds a certain level, the tax office or the public prosecutor’s office may initiate search measures to locate account documents or other information.
So are you expecting the next wave of voluntary disclosure to the tax office?
If the above-mentioned information has not yet been provided, there is always the possibility of making a voluntary disclosure to the tax office. In this case, however, the investment income for all years (depending on the case) from around 2008 onwards must be disclosed in full retroactively. It is important to check whether this income was taxable in Germany and has not been taxed so far. In addition, the taxes and evasion interest determined within the scope of the subsequent taxation must be paid in full.
Dr. Andreas Hofner
+ 49 89 547143
or by e-mail email@example.com
An effective voluntary declaration to the tax office leads to an obstacle to prosecution, i.e. one can no longer be punished for the tax evasion in question.
However, in view of the complex legal requirements, whether a voluntary disclosure is possible must be examined in detail in each individual case.
After the information has been communicated, i.e. from 01.01.2021, a voluntary disclosure will probably no longer have an exonerating effect. So you should use the autumn to get an overview and act quickly and contact our experts.
Please do not hesitate to get in touch with me.
I will be happy to advise you.
Execution of the Common Reporting Standard
According to the OECD list, Status of Commitments,
Status: 16.09.2020, the intended exchange of information should take place by September 2020 at the latest for the following countries:
Anguilla, Argentina, Belgium, Bermuda, British Virgin Islands, Bulgaria, Cayman Islands, Colombia, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mexico, Montserrat, Netherlands, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Turks and Caicos Islands, United Kingdom, Andorra, Antigua and Barbuda, Aruba, Australia, Austria, Azerbaijan, Bahamas, Bahrain, Barbados, Belize, Brazil, Brunei Darussalam, Canada, Chile, China Cook Islands, Costa Rica, Curaçao, Dominica, Greenland, Grenada, Hong Kong (China), Indonesia, Israel, Japan, Lebanon, Macao (China), Malaysia, Marshall Islands, Mauritius, Monaco, Nauru, New Zealand, Niue, Pakistan, Panama, Qatar, Russia, St. Petersburg, St. Petersburg, St. Petersburg, St. Petersburg, St. Petersburg. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Samoa, Saudi Arabia, Singapore, Sint Maarten, Switzerland, Trinidad and Tobago, Turkey, United Arab Emirates, Uruguay, Vanuatu, Ghana, Kuwait, Kazakhstan, Nigeria, Oman, Peru