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Umurcan Gago |
Emre Akarkarasu |
Turkey is suffering from not having reacted to the FATCA regulations quickly. Where several European countries already took the required actions before 2014 and signed the model intergovernmental agreements (IGAs) before the beginning date of FATCA requirements (June 1 2014), Turkey as a Model 1 IGA country has just been included on the IRS list of jurisdictions that have reached agreements in substance, as of June 3 2014.
US and Turkey infrastructure tests
By the beginning of September 2014, the US and Turkey had started the infrastructure tests but they are still negotiating on the terms of appropriate safeguards and infrastructure to be established and the adequacy tests. There are a couple of points that require further negotiations on certain articles of the IGA. Such negotiations are expected to be finalised soon. Afterwards, the Model 1 IGA will be signed and presented to the Turkish Parliament for approval. Upon approval and finalisation of other Turkish and local legal procedures (for example, publication in the Turkish Official Gazette), the IGA will come into force.
Upcoming election
Turkey has an upcoming election on June 7 2015. With parliament closing in early April, the IGA's entry into force will be delayed at least three months until parliament reopens, unless any extraordinary cases arise in the interim. It seems that due to the busy agenda of the Turkish Parliament and the number of outstanding IGAs to be signed by the US, most probably the signing will not be accomplished before September 2015. If the IGA is not signed before the end of September 2015, this may create problems for 2014 reporting.
In the meantime, Turkish tax authorities are working on the preparation of local legislation which will provide detailed information on FATCA implementation of Turkish financial institutions and abolish the legal barriers of data protection rules which prevent Turkish financial institutions from reporting their customers' information to third parties.
What about Common Reporting Standard (CRS)?
Turkey's 2015 G20 term presidency has helped the country to quickly adapt itself to CRS. This is on the grounds that automatic exchange of information (AEoI) is one of the most important G20 agenda topics in the context of a focus on base erosion and profit shifting (BEPS) and Turkey aims to have made further progress on these issues before its term presidency ends.
The Turkish tax authorities are now translating the text of the CRS to Turkish and are expected to share a draft version soon. They are also working on introducing new articles to the Tax Procedural Law allowing Turkish financial institutions to automatically exchange the required information directly or indirectly (via Turkish tax authorities) with other jurisdiction's authorities. Turkey already committed to be part of the OECD's Standard for Automatic Exchange of Information in tax manners and it is expected to become eligible for automatic exchange of information as of 2017.
Umurcan Gago (umurcan.gago@tr.pwc.com) and Emre Akarkarasu (emre.akarkarasu@tr.pwc.com)
PricewaterhouseCoopers Turkey
Website: www.pwc.com.tr
