A tax offence is a consequence of the acts that induces loss of
tax revenue for the state and the distortion of public order due to
the non-fulfillment or breach of the material or procedural
obligations stated in the law.
In the broad context, tax offences and penalties are set forth
in the Tax Procedure Code ("TPC") numbered 213. Tax
office may identify contradictions to the law when conducting an
examination or investigation. Administrative penalties should be
served to the party/parties through a service of process by the
relevant tax office once an examination or investigation report is
prepared on the subject.
Whom could be the subject of the penalties?
Penalties could be imposed either on real persons or legal
entities. Penalties that could not be collected from the assets of
the legal entity may be directed to the personal wealth of the
legal representatives of the entity who could be the managers of
the limited liability partnership (LLP) or board of directors (BoD)
of the joint stock corporations (JSC). In LLPs, liability even
reaches to the partners in proportion to their capital ratios if
the penalties could not be collected through the assets of the
On the other hand, liability of BoDs in JSCs may be limited with
specific member/members of the board or an employee of the legal
entity whom should be delegated with the powers to represent and
bind the company before the administrative bodies in tax related
transactions. In order to hold the legal representative liable,
non-compliance with the tax obligation should have occurred at the
relevant period, between the appointment date and termination date
of the duty of the legal representative. In other words, only the
legal representative who was on duty when the tax offence occurred
could be hold liable.
Tax offences engendering administrative penalties
Tax offences under Turkish law are classified as a) loss of tax
revenue b) general type of non-compliance with the procedural
obligations and c) specific type of non-compliance with the
Loss of tax revenue may arise on various forms such as
incomplete or late accrual of tax, filing wrong declarations,
giving incorrect information on personal or family status or
receiving return of tax without any legal basis.
Loss of tax revenue offence could only arise at the accrual
phase of the related tax and late payment or non-payment of an
accrued tax does not constitute a loss of tax revenue offence. Acts
inducing loss of tax revenue offence are categorized as material
breaches, less material breaches and non-defined breaches. If the
to give an example on some of the material breaches; fraudulent
acts on accounts, creating fake accounts, keeping illegal copies of
commercial books, production or use of fake documents may be listed
as the pioneering ones among the others. Less material breaches are
defined as filing of the tax declarations regarding loss of tax
revenue on the tax payer's own record after the legal deadline
for the filing is ended. If the tax payer, on his own record, files
the declaration prior to an investigation is initiated or the issue
is brought before the reconciliation committee, then the loss of
tax revenue offence would be categorized as less material breach.
Lastly, if the loss of tax offence is not within the scope of
material or less material breach, it would be deemed to fall in the
category of non-defined breaches. According to article 341 of the
TPC, breaches are fined with one time more of the amount of loss of
tax revenue. Material breaches are fined with three times more
whereas less material breaches are fined with the half of the
amount of loss of tax revenue.
Tax offences engendering Criminal Action
If an administrative tax offence concurrently constitutes a
criminal tax offence according to the law, then a criminal action
may be initiated by the public prosecutor before the relevant
Criminal Court and the accused individuals may be imprisoned, if
the Court decides that a criminal tax offence has been committed.
Some of the noteworthy criminal tax offences are tax evasion, which
consist of the same acts remained within the category of material
breaches engendering loss of tax revenue and the breach of tax
Prosecutor before filing a lawsuit has to inform the relevant
tax office about the offence and would request a conduct of
examination from the relevant tax authority on the matter.
Prosecutor may decide to file a lawsuit if he reaches to an opinion
that a tax offence has been committed based on the facts determined
in the examination report of the tax authority. According to Tax
Procedure Code, tax offences may cause an imprisonment varying from
18 months to 5 years depending on the type of the offence.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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