Automatic exchange of information between tax authorities regarding assets, income and wealth in Turkey

Since 2017, Germany has participated in the so-called "Automatic Exchange of Information on Financial Accounts in Tax Matters" (AEOI). Turkey joined this system in 2021, initially only by providing data to selected countries. From 2022/2023 onwards, it also began transmitting data to Germany.

Specifically, this means:

Turkish banks transmit data on account balances, interest, dividends, etc. to the Turkish tax authority (Gelir İdaresi Başkanlığı).

This authority automatically forwards the information to the German Federal Central Tax Office (BZSt) if the account holder is a tax resident in Germany.

The German tax authorities then examine this data as part of so-called AIA data checks.

What kind of letter could come from the customs office?

If you have received such a letter, time is of the essence! We will discuss the next steps with you as soon as possible, in particular whether a self-report to avoid prosecution should be filed. 

Here too, speed and the right advice are important! 

It is also possible that criminal proceedings have already been initiated. 

Then the first letter is already a hearing regarding the initial suspicion of tax evasion. 

In practice, this is how it works:

• The tax authorities receive a data set containing account information via the AIA.
• The responsible tax office is reviewing the tax returns from previous years.
• If no explanation for this income is provided, a so-called initial suspicion (§ 152 StPO) is established.
• Then criminal proceedings for tax evasion (§ 370 AO) are initiated – usually in parallel with the subsequent tax assessment.

Important for those affected:

If someone is liable for taxes in Germany and has undeclared income or assets in Turkey, they should act very quickly. Once the tax authorities have access to this information (e.g., through automatic exchange of information), a voluntary disclosure will no longer be exempt from prosecution. Those who react quickly can still achieve immunity or a reduction in penalties through a full voluntary disclosure (§ 371 AO) – provided it is made before the investigations or audits become public.

What is a self-report that grants immunity from prosecution?

The voluntary disclosure under Section 371 of the German Fiscal Code (AO) is a special instrument of German tax law that gives taxpayers the opportunity to subsequently correct tax evasion without being prosecuted – under certain conditions.

With voluntary disclosure, the legislator aims to offer taxpayers a "path back to tax compliance." Anyone who has previously failed to properly declare income, capital gains, or assets—for example, those held abroad—can do so voluntarily and completely. In return, they will be exempt from criminal prosecution.

For a self-report to actually be exempt from punishment, the following conditions must be met:

• Full disclosure:
  All previously undeclared income and tax-relevant facts must be fully disclosed for all periods within the statute of limitations. A partial self-disclosure is not sufficient.
  
• No reason for suspension:
  The voluntary disclosure must not be submitted too late. It is no longer possible if...
  
  • tax evasion has already been discovered,
  • An audit order from the tax office was announced.,
  • the initiation of criminal or administrative fine proceedings is known, or
  • The crime is already partially known.
• Additional tax payment:
  The evaded taxes must be paid in full – including interest and any applicable surcharges. Only then will the prosecution be granted immunity from prosecution.
• For large amounts: tax surcharge:
  If the amount of tax evaded exceeds 25,000 euros per offense, an additional penalty surcharge of between 10 % and 20 % must be paid to obtain immunity from prosecution.

If the voluntary disclosure is validly submitted, criminal prosecution for tax evasion is waived (§ 370 AO). However, financial consequences such as back taxes, interest, and surcharges remain.

Especially in cases of undeclared foreign capital (e.g., assets in Turkey, Switzerland, or other countries), voluntary disclosure plays a crucial role. Due to the international automatic exchange of information, these situations are increasingly being discovered. A timely voluntary disclosure can help avoid criminal proceedings and restore tax compliance.

How does the German tax office become aware of Turkish income?

The German tax authorities receive information on investments and income from Turkey primarily through the automatic exchange of financial information (AEOI), international administrative assistance, bank and control notifications, and digital reconciliations during tax returns. It is not only Ziraat Bank that shares information from its private and corporate clients, but all branches of all Turkish banks, such as Garantie, Vakif, Akbank, etc., participate in the information exchange.                       

Automatic exchange of information

Turkey participates in the OECD Common Reporting Standard (CRS), which requires Turkish banks and financial institutions to transmit account information and certain shareholdings to the German Federal Central Tax Office annually. This applies not only to current accounts but also to fixed-term deposits, overnight deposits, and savings accounts. It is completely independent of whether the accounts are managed via online banking or an app, and regardless of whether the account is newly opened. The information reported includes account balances, capital gains, account holder information, and tax residency.

International administrative assistance and exchange between authorities

In cases of suspicion or need for investigation, the German tax office can directly request administrative assistance from the Turkish authorities and will then also receive relevant information on company holdings, real estate ownership and transactions.

As part of tax audits, German and Turkish authorities also exchange targeted information, for example about large money movements, real estate sales or irregularities in the tax return.

Control notifications and banks

Banks report larger transfers to Germany to the German tax authorities. Suspicious money flows or real estate income can trigger a compliance audit. German banks are also obligated to report foreign assets and related income if any irregularities are detected.

What information is reported as part of the automatic exchange of information?

The report is not broken down by type of income, but rather by standardized categories relating to the nature of the capital gains. Interest, dividends, and capital gains from securities are reported explicitly. Income from certain insurance and pension contracts (excluding state pensions) is also included.

The report is submitted in aggregated form, i.e., as a total amount, without specifying the exact source. Income from property rentals, wages, or salaries is not directly reported, but only when it is credited to the account as investment income (transfer). However, the source of the payments is not automatically reported.

DANGER: 

The German tax office receives the aggregated income and, in case of discrepancies or suspicion of undeclared income, can make targeted inquiries and request further documents (e.g., bank statements). This is the only way to verify the specific nature of the income.

In their tax return, taxpayers must disclose all foreign investments and income; the tax office can digitally compare this information with data received through international exchange and specifically check for irregularities.

Missing or incomplete information is increasingly being detected through data matching, leading to investigations, audits, and potentially criminal proceedings. In short: The German tax office receives – often automatically – detailed information about foreign investments and income of its taxpayers, particularly from Turkey, and can thus effectively uncover violations of reporting and tax obligations. Call us if you receive any correspondence from the tax office.

Many affected individuals believe that they do not need to include their Turkish income in their German tax return, as the tax has already been paid in Turkey. Is this correct?

The Double Taxation Agreements (DTAs) The relationship between Germany and Turkey actually plays a central role in this context.

What is a double taxation agreement (DTA)?

The double taxation agreement between the Federal Republic of Germany and the Republic of Turkey (in its current version in force since 2011) regulates which state may tax certain income if a person has taxable income in both states — e.g. residence in Germany, income or assets in Turkey.

The purpose:

• Avoidance of double taxation
• Prevention of tax evasion

That means: 

Income should only be taxed once, not twice in both countries. 

But: 

That does not mean that one is allowed to conceal income earned abroad.

Which types of income are specifically affected by the double taxation agreement?

The agreement distinguishes between different types of income, e.g.:

• Income from dependent employment Generally, in the country where the work is performed (exception: short-term postings)
• Interest and dividends – generally in both countries, but crediting method
• Rental income from real estate – exclusively in the country where the property is located, i.e., in Turkey
• Business profits (e.g., shareholdings) – in the state of residence, provided there is no permanent establishment in the other state
• Pensions and retirement benefits Regulations vary depending on the type (partly in the country of origin, partly in the country of residence).

A distinction is made between the Exemption with progression clause (This means that income remains tax-free in Germany, but affects the tax rate), applies in particular to rental income, real estate, employment income in Turkey, and the Credit method (Tax paid in Turkey is credited against German income tax); this applies in particular to interest, dividends, and capital gains.

What specific impact does this have on taxpayers in Germany?

If you are subject to unlimited tax liability in Germany (i.e., you have your residence or habitual abode here), then you must declare your worldwide income to the German tax office – including income from Turkey.

Then the DBA applies as follows:

• Turkish income must be disclosed. It must be declared in the German tax return.
• The German tax office then checks, based on the double taxation agreement, whether and how you are taxed in Germany.

Double taxation is avoided through "credit" or "exemption":

creditTax paid in Turkey is credited against German tax (e.g., on capital gains).

Exemption with progression clauseThe income is tax-exempt in Germany, but increases the tax rate for other income (e.g., from renting in Turkey).

How are Turkish capital gains taxed in Germany?

According to the double taxation agreement between Germany and Turkey (Articles 10 and 11), both countries are permitted to tax capital gains. However, to prevent you from paying double tax, German tax law provides for the so-called tax credit method in Section 34c of the Income Tax Act (EStG).

This means: You declare the foreign capital gains in your tax return, and the tax paid abroad (e.g., withholding tax in Turkey) is credited against the German tax.

For the credit to work, the following must be necessary:

• These are „income from capital assets“ (Section 20 of the German Income Tax Act), e.g.:
  Interest from bank accounts, dividends from shares, returns from funds or savings accounts;

• The tax paid abroad must be proven, e.g. by:
  Tax certificate from the Turkish bank;

• A statement of account showing withholding tax must be available;
  Translation/confirmation by a tax consultancy may be required.

How does the crediting process work technically?

Germany uses the so-called tax credit system. This means that in total you will pay no more than the German tax rate, and no more. 

The following is regulated in the double taxation agreement:

• Dividends (Art. 10):
  Turkey is allowed to levy up to 15 % withholding tax on dividends from Turkish shares.

• Interest (Art. 11):
  Turkey may levy a maximum of 10 % withholding tax.

• License revenues (Art. 12):
  Turkish withholding tax may also apply here (usually up to 10 %).

Germany cannot simply ignore these amounts – they will be credited against German tax. 

This is how the crediting process works in Germany:

Germany generally taxes capital gains with a withholding tax of 25 % (plus solidarity surcharge and, if applicable, church tax).

If you have Turkish capital gains, this is how it works:

Turkey withholds withholding tax (e.g., 15 % on dividends). In Germany, you still have to declare the income in your tax return.

The German tax office will credit the Turkish tax, but only up to the amount of German tax due on this income. If the Turkish withholding tax is higher than the German tax, only the amount of German tax that can be credited is eligible. Any excess tax paid will not be refunded.

If the Turkish bank has not withheld any tax (e.g., because the account is held in the name of a Turkish citizen), then there is nothing to credit. In Germany, the income is fully taxable in this case – the entire withholding tax is due.

Where in the tax return are the earnings entered?

• Schedule KAP: for income from capital assets
• Annex AUS: for foreign income

Capital gains from abroad → Lines 15–18 (depending on the type of income)

Credit for foreign tax → Line 51 ff.

Special cases:

• If the Turkish withholding tax was levied at a rate higher than the DTA rate (e.g. 20 % instead of 15 %), only the maximum DTA rate is credited – the remainder is not creditable.
• Special rules may apply to investment funds (depending on the type of income).
• Interest from Turkish bank accounts is often not subject to withholding tax in Turkey – so there is nothing to offset.

How are other Turkish incomes taxed?

The relevant agreement is the

„Agreement between the Federal Republic of Germany and the Republic of Türkiye for the avoidance of double taxation“ (DTA Germany–Türkiye).

The double taxation agreement (DTA) regulates in each article which state may tax which type of income.

„Other income“ within the meaning of German tax law is usually covered in Article 21 of the Double Taxation Agreement (Other income).

According to the double taxation agreement between Germany and Türkiye, the following generally applies:

Other income not covered by Articles 6 to 20 may only be taxed in the state of residence.

What about rental income in Turkey?

Türkiye: levies the actual tax on rents.
Germany: exempts it from tax, but increases the tax rate on your other income.
No double taxation, but you must declare your income in both countries.
In Turkey, you generally have to declare your rental income in a Turkish tax return by the end of March of the following year – even as a foreigner.
There is a tax-free allowance (adjusted annually, e.g. approx. 12,000–15,000 TRY).
In addition, a progressive Turkish income tax applies, usually between 15 % – 40 %.
Certain advertising expenses (e.g., maintenance, insurance) may be deductible.

When selling a property?

No direct credit for Turkish tax.
Your German tax rate on other income increases minimally (e.g. 28 % → 29 %).

Conclusion:

• No double taxation
• Türkiye: full taxation
• Germany: only progression effect

Danger: Sale after more than 10 years of holding (private assets)

Under German law (§ 23 EStG), private property sales are tax-free after a holding period of more than 10 years.

If, therefore:

• They have been owners for more than 10 years,
• and it concerns private assets

Then the sale is tax-free in Germany, even if Turkey continues to tax it.

Germany still takes the profit into account in the progression clause, but no German tax is levied.

What happens when selling a stake in a Turkish limited company?
If you hold shares in a Turkish company, a distinction is made:

• • Less than 10 % holdings („portfolio shareholding“) →
    This constitutes capital assets within the meaning of Article 10 / 13 paragraph 5 of the Double Taxation Agreement.
  • Taxation in Germany
    More than 10 % holdings („substantial holdings“) →
    Even then, the right to tax remains in Germany, unless the investment belongs to a Turkish permanent establishment.

ResultIf a German taxpayer sells his company shares in Turkey, the profit is generally only taxed in Germany.