GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES

GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES
Peer Review Report Combined: Phase 1 + Phase 2, incorporating Phase 2 ratings

TURKEY
Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: Turkey 2013
COMBINED: PHASE 1 + PHASE 2, INCORPORATING PHASE 2 RATINGS
November 2013 (reflecting the legal and regulatory framework as at January 2013)
This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the OECD or of the governments of its member countries or those of the Global Forum on Transparency and Exchange of Information for Tax Purposes. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
Please cite this publication as: OECD (2013), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: Turkey 2013: Combined: Phase 1 + Phase 2, incorporating Phase 2 ratings, OECD Publishing. http://dx.doi.org/10.1787/9789264205963-en
ISBN 978-92-64-20595-6 (print) ISBN 978-92-64-20596-3 (PDF)
Series: Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews ISSN 2219-4681 (print) ISSN 2219-469X (online)
Corrigenda to OECD publications may be found on line at: www.oecd.org/publishing/corrigenda.
OECD 2013
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TABLE OF CONTENTS 3
Table of Contents
About the Global Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Information and methodology used for the peer review of Turkey . . . . . . . . . . . .11 Overview of Turkey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Recent developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Compliance with the Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 A. Availability of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.1. Ownership and identity information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.2 Accounting records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.3. Banking information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 21 54 67
B. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 B.1. Competent Authoritys ability to obtain and provide information . . . . . . . . 73 B.2. Notification requirements and rights and safeguards. . . . . . . . . . . . . . . . . . 84 C. Exchanging Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 C.1. Exchange of information mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 C.2. Exchange of information mechanisms with all relevant partners . . . . . . . . 96 C.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 C.4. Rights and safeguards of taxpayers and third parties. . . . . . . . . . . . . . . . . . 99 C.5. Timeliness of responses to requests for information . . . . . . . . . . . . . . . . . .101
PEER REVIEW REPORT COMBINED PHASE 1 AND PHASE 2 REPORT TURKEY OECD 2013
4 TABLE OF CONTENTS Summary of Determinations and Factors Underlying Recommendations. . . 109 Annex 1: Jurisdictions Response to the Review Report . . . . . . . . . . . . . . . . . .113 Annex 2: List of All Exchange-of-Information Mechanisms Signed . . . . . . . .115 Annex 3: List Of All Laws, Regulations and Other Material Consulted . . . . .121 Annex 4: People Interviewed During On-Site Visit . . . . . . . . . . . . . . . . . . . . . 123
ABOUT THE GLOBAL FORUM 5
About the Global Forum

The Global Forum on Transparency and Exchange of Information for Tax Purposes is the multilateral framework within which work in the area of tax transparency and exchange of information is carried out by over 120 jurisdictions, which participate in the Global Forum on an equal footing. The Global Forum is charged with in-depth monitoring and peer review of the implementation of the international standards of transparency and exchange of information for tax purposes. These standards are primarily reflected in the 2002 OECD Model Agreement on Exchange of Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax Convention on Income and on Capital and its commentary as updated in 2004. The standards have also been incorporated into the UN Model Tax Convention. The standards provide for international exchange on request of foreseeably relevant information for the administration or enforcement of the domestic tax laws of a requesting party. Fishing expeditions are not authorised but all foreseeably relevant information must be provided, including bank information and information held by fiduciaries, regardless of the existence of a domestic tax interest or the application of a dual criminality standard. All members of the Global Forum, as well as jurisdictions identified by the Global Forum as relevant to its work, are being reviewed. This process is undertaken in two phases. Phase 1 reviews assess the quality of a jurisdictions legal and regulatory framework for the exchange of information, while Phase 2 reviews look at the practical implementation of that framework. Some Global Forum members are undergoing combined Phase 1 and Phase 2 reviews. The ultimate goal is to help jurisdictions to effectively implement the international standards of transparency and exchange of information for tax purposes. All review reports are published once adopted by the Global Forum. For more information on the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes, and for copies of the published review reports, please refer to www.oecd.org/tax/transparency and www.eoi-tax.org.
EXECUTIVE SUMMARY 7
Executive Summary
1. This report summarises the legal and regulatory framework for transparency and exchange of information in Turkey as well as the practical implementation of that framework. The international standard which is set out in the Global Forums Terms of Reference to Monitor and Review Progress Towards Transparency and Exchange of Information, is concerned with the availability of relevant information within a jurisdiction, the competent authoritys ability to gain timely access to that information, and in turn, whether that information can be effectively exchanged with its exchange of information (EOI) partners. 2. Geographically, Turkey forms a natural bridge between the continents of Asia, Africa and Europe. This unique geographical position gives it easy access to strategically important trade areas. Its location and economic relations with various countries is reflected in an extensive network of 82 double taxation treaties and five tax information exchange agreements, which provide for international exchange of information for tax purposes in line with the international standard. In addition, Turkey has also signed the Convention on Mutual Administrative Assistance in Tax Matters. 3. Turkey allows for the formation of companies, partnerships, foundations, associations and cooperatives. Turkeys legal and regulatory framework ensures that information on the owners of these entities and arrangements is available to its competent authority. Sufficient mechanisms are in place that allow identification of the owners of bearer shares issued by publicly held joint stock companies whose shares are traded on the stock exchange. However, availability of information on the owners of bearer shares issued by other joint stock companies is not ensured resulting into determination of the Element A.1 as not in place. 4. Turkeys tax and commercial legislation contain provisions ensuring the maintenance of accounting information to the standard by all relevant entities for at least five years. Underlying documents must also be maintained. The combination of the Banking Law and the AML/CFT legislation ensures that all records pertaining to accounts as well as to related financial and transactional information is required to be kept by banks operating in Turkey.
8 EXECUTIVE SUMMARY
5. The tax administration and tax inspectors are empowered to obtain information from taxpayers and third parties including banks, however, the legislative basis on which they obtain information for EOI purposes should be clarified in Turkish laws. Tax inspectors can also use compulsory powers to enforce compliance in case of non-cooperation. In practice, the competent authority generally obtains information through tax inspectors, who normally conduct tax audits to gather information. 6. Tax inspectors should give greater priority to their EOI work. They have a high workload and historically have not generally provided information to the competent authority before the completion of the tax audit which may take six to 12 months. In most cases, this process of gathering information results in delays and the issue of delayed receipt or non-receipt of information was identified as a problem in the peer input of partner countries. Since 2011, the tax inspectors are required to complete investigations for the purposes of exchange of information in six months and this reduction in time limit is likely to reduce delays in providing information. This should be monitored by Turkey. 7. Turkish tax authorities are authorised to seek information from barristers and solicitors about the names of their client and information relating to their fees and expenses but information that reveal facts and particulars which have been entrusted to them or which they have learnt through their duties cannot be obtained. The protection afforded to professional privilege is very broad and is not consistent with the international standard. 8. During the three year review period ending December 2011, Turkey has received 518 requests for information from 37 different jurisdictions. Turkey has provided the requested information substantially or partially in 260 cases. Information in 11% of the cases was provided within 90 days. In about 41% of the cases information was provided after one year. The competent authority has recently begun to systematically provide status updates to exchange of information partners when requests are not responded to within 90 days. 9. Notwithstanding the need to strengthen various areas of Turkeys system relating to exchange of information, Turkeys peers indicated that Turkey is a very important and valued partner exchanging a significant amount of information in tax matters. 10. Turkey has been assigned a rating 1 for each of the 10 essential elements as well as an overall rating. The ratings for the essential elements are
1. This report reflects the legal and regulatory framework as at the date indicated on page 1 of this publication. Any material changes to the circumstances affecting the ratings may be included in Annex 1 to this report.
EXECUTIVE SUMMARY 9
based on the analysis in the text of the report, taking into account the Phase 1 determinations and any recommendations made in respect of Turkeys legal and regulatory framework and the effectiveness of its exchange of information in practice. On this basis, Turkey has been assigned the following ratings: Compliant for elements A.2, A.3, B.2, C.2, and C.3, Largely Compliant for elements C.1 and C.4, Partially Compliant for elements B.1 and C.5, and Non-compliant for element A.1. In view of the ratings for each of the essential elements taken in their entirety, the overall rating for Turkey is Partially Compliant. 11. A follow-up report on the steps undertaken by Turkey to answer the recommendations made in this report should be provided to the Peer Review Group within six months of the adoption of this report.
INTRODUCTION 11
Introduction
Information and methodology used for the peer review of Turkey

12. The assessment of the legal and regulatory framework of Turkey and the practical implementation and effectiveness of this framework was based on the international standards of transparency and exchange of information as described in the Global Forums Terms of Reference to Monitor and Review Progress Towards Transparency and Exchange of Information for Tax Purposes and was prepared using the Methodology for Peer Reviews and Non-Member Reviews. The assessment was based on the laws, regulations and exchange of information mechanisms in force or effect as at January 2013, other information, explanations and materials supplied by Turkey during and after the on-site visit that took place on 27-29 June 2012, and information supplied by partner jurisdictions. During the on-site visit, the assessment team met with officials and representatives of relevant Turkish government agencies, including the Turkish Presidency of Revenue Administration, the Tax Inspection Board, Capital Market Board of Turkey, MASAK (Financial Crimes Investigation Board) and the Ministry of Customs and Trade (see Annex 4). 13. The Terms of Reference break down the standards of transparency and exchange of information into 10 essential elements and 31 enumerated aspects under three broad categories: (A) availability of information; (B) access to information; and (C) exchanging information. This review assesses Turkeys legal and regulatory framework and the implementation and effectiveness of this framework against these elements and each of the enumerated aspects. In respect of each essential element a determination is made regarding Turkeys legal and regulatory framework that either: (i) the element is in place, (ii) the element is in place but certain aspects of the legal implementation of the element need improvement, or (iii) the element is not in place. These determinations are accompanied by recommendations for improvement where relevant. In addition, to reflect the Phase 2 component, recommendations are made concerning Turkeys practical application of each of the essential elements and a rating of either: (i) compliant, (ii) largely
12 INTRODUCTION
compliant, (iii) partially compliant, or (iv) non-compliant is assigned to each element. An overall rating is also assigned to reflect Turkeys overall level of compliance with the standards. 14. The assessment was conducted by a team which consisted of two expert assessors and representatives of the Global Forum Secretariat: Mrs. Silke Voss, Senior Tax Specialist, Federal Ministry of Finance of Germany; Mr. Rob Gray, Director of Income Tax, Guernsey; Mr. Andrew Auerbach, Mr. Sanjeev Sharma and Mr. David Moussali from the Global Forum Secretariat. 15. The ratings assigned in this report were adopted by the Global Forum in November 2013 as part of a comparative exercise designed to ensure the consistency of the results. An expert team of assessors was selected to propose ratings for a representative subset of 50 jurisdictions. Consequently, the assessment teams that carried out the Phase 1 and Phase 2 reviews were not involved in the assignment of ratings. These ratings have been compared with the ratings assigned to other jurisdictions for each of the essential elements to ensure a consistent and comprehensive approach. The assignment of ratings was also conducted at a different time from those reviews, and the circumstances may have changed in the meantime. Readers should consult Annex 1 for information on changes that have occurred.
Overview of Turkey
16. The Republic of Turkey (Turkey) is a Eurasian country located in Western Asia and in East Thrace in South-eastern Europe with a land area of 783 562 km and a population of about 74.7 million in 2012. Turkey is bordered by the Black Sea, the Aegean Sea and the Mediterranean Sea. It shares land borders with Bulgaria, Greece, Georgia, Armenia, Azerbaijan, Iran, Iraq and Syria. Ankara is Turkeys capital. Turkish is the official language. 17. Turkeys largely free-market economy is increasingly driven by its industry and service sectors, although its traditional agriculture sector accounts for about 25% of employment. Turkeys gross domestic product was USD 774.188 billion (EUR 635.347 billion) in 2011. Global economic conditions and tighter fiscal policy caused Turkeys GDP to contract in 2009, but Turkeys well-regulated financial markets and banking system helped the country weather the global financial crisis and the GDP growth rate rebounded strongly to 8.2% in 2010, as exports returned to normal levels. The Turkish economy is dominated by the services sector which accounts for 62.6% of the economy, while industry and agriculture make up 28.1% and 9.3% respectively. Further economic and judicial reforms and prospective EU membership are expected to boost Turkeys attractiveness to foreign investors. The automotive, construction and electronics industries are rising in
INTRODUCTION 13
importance and have surpassed textiles within Turkeys export mix. Turkeys main trading partners are Germany, the United Kingdom, Italy, Russia and the Peoples Republic of China, with all of which Turkey has Double Taxation Agreements. The official currency in Turkey is the Turkish Lira (TRY) 2.
Legal system
18. The Republic of Turkey is a republican parliamentary democracy organised as a unitary state with 81 provinces. The Constitution recognises a separation of powers between the legislature, the executive and the judiciary. The legislative power lies with the unicameral Turkish Grand National Assembly, of which 550 members are directly elected by popular vote for a four-year term. In Turkey, the President is the Head of State and the Prime Minister is the Head of Government. The President is elected directly by popular vote for a five-year term. The Council of Ministers consists of the Prime Minister and the ministers. Executive power and function is exercised and carried out by the President and the Council of Ministers. 19. Turkey has a civil law system. Turkish law is heavily influenced by Continental European legal systems, notably the Swiss civil code. Today, the sources of law are the Constitution, legislation passed by the Grand National Assembly and subsidiary legislation. In terms of hierarchy, the Constitution is the highest source of law, followed by national laws, regulations and by-laws. The provisions of the Constitution are fundamental legal rules that bind legislative, executive and judicial organs, and administrative authorities and other institutions and individuals. International agreements duly put into effect bear the force of law and no appeal can be made to the Constitutional Court on the ground of unconstitutionality of these agreements. The provisions of international agreements, for example tax treaties, supersede domestic law provisions in case of conflict. 20. Judicial power is exercised by the courts. The Turkish judiciary system is composed of four main areas: (i) Constitutional Justice: the Constitutional Court ensures that the laws are in line with the Constitution; (ii) Judicial Justice: resolves disputes between individuals; (iii) Administrative Justice: resolves disputes between individuals and administrative authorities (Administrative Courts and Tax Courts are included in this group), and (iv) Military Justice: Military Courts, High Military Administrative Court of Appeals. In addition, there is also a Court of Jurisdictional Disputes which is empowered to deliver final judgements in disputes between Courts of Justice, Administrative and Military Courts concerning their jurisdiction and decisions.
2. As at 16 July 2012, TRY 2.21 = EUR 1.
14 INTRODUCTION
Financial sector
21. The financial sector has been growing rapidly over recent years. Turkeys inward foreign direct investment stock amounted to USD 98.98 billion (EUR 81.28 billion) in 2011, while the outward foreign direct investment stock was recorded at USD 18.63 billion (EUR 15.29 billion). 3 22. As of September 2011, total assets of the financial sector (including the Central Bank of Turkey) has been estimated at TRY 1.56 trillion (EUR 0.7 trillion) and banks have the highest share of total assets of the financial sector (77.8%). As of September 2011, when compared with the same period of the previous year, 566 new branches were opened and the number of employees increased by 4 425 in the banking sector. As of September 2011, the total assets of the banking sector increased by 30.9% in comparison to the same period last year. 23. The Banking Regulation and Supervision Agency is responsible for and authorised to regulate, monitor and supervise the establishment and activities of banks, financial holding companies and financial leasing, factoring and consumer financing companies. Asset management companies may be established for the purposes of purchasing, collecting, restructuring and selling receivables and other assets of banks and other financial institutions. As of September 2011, there were 48 banks of which 31 were deposit taking banks, 4 participation banks and 13 development and investment banks. Together, they held assets of TRY 1.2 trillion (EUR 0.54 trillion). 24. The Istanbul Stock Exchange (ISE) 4 has a market capitalisation of TRY 400 billion (EUR 180.99 billion). There are 608 publicly held stock companies in Turkey and 388 companies are traded on the ISE. 25. The financial sector further includes 102 securities intermediary institutions, 76 factoring companies, 58 insurance companies, 33 financial leasing companies and other financial intermediaries. The Capital Markets Board is responsible for regulating and supervising the non-bank part of the financial services industry. These financial service providers are also subject to obligations under AML/CFT legislation and in that regard they must carry out customer due diligence and report any suspicious transactions. The Financial Crimes Investigation Board (MASAK) is the financial intelligence unit in Turkey, which is directly attached to the Ministry of Finance. Banks, insurance companies, financial leasing, consumer finance companies and capital market intermediary institutions etc. are subject to MASAK regulations.
3. 4. www.cia.gov. Istanbul Stock Exchange has been renamed as Exchange Istanbul Incorporation since 30 December 2012.
INTRODUCTION 15
26. MASAK, the Capital Markets Board, the Banking Regulations and Supervisory Agency and the Under Secretariat of Treasury are the regulatory authorities with regard to the financial sector.
Taxation and international cooperation

27. Under Article 73 of the Turkish Constitution, everyone in Turkey is under the obligation to pay taxes according to his or her financial resources in order to provide for the public expenditure. The term everyone has wide scope and includes legal persons, individuals, citizens, residents and nonresidents for tax purposes. The Income Tax Act and Corporation Tax Act prescribes detailed rules defining the scope of the levy of taxes. Taxation principles are laid out in the Tax Procedure Law No. 213, the provisions of which mostly concern central concepts such as procedural rules, taxpayers, tax assessments, tax audits, payments, accounting, fines and criminal tax matters. 28. The Turkish tax regime can be classified under three main headings: (i) Taxes on income (Income Tax, Corporate Tax); (ii) Taxes on expenditure (Value Added Tax, Special Consumption Tax, Banking and Insurance Transaction Taxes, Stamp Duty, Special Communication Tax, Tax on Customs); and (iii) Taxes on wealth (Inheritance and Gift Taxes, Property Tax, Motor Vehicle Tax). 29. The Turkish direct taxation system consists of two main taxes; income tax and corporation tax. An individual is subject to income tax on his income and earnings, in contrast to a company which is subject to corporation tax on its income and earnings. The rules of taxation for individual income and earnings are provided in the Income Tax Law 193 (ITL). Likewise, the rules concerning the taxation of corporations are contained in the Corporation Tax Law 5520 (CTL). Despite the fact that each is governed by different legislation, many rules and provisions of the Income Tax Law also apply to corporations, especially in terms of income elements and determination of net income. Taxpayers having corporation and income tax liability may also have other tax liabilities such as VAT and withholding tax liability. 30. Turkish residents are liable to income tax on their worldwide income and gains. Companies are considered resident if their legal head office is situated in Turkey or the place of management is in Turkey. A non-resident company that carries on business in Turkey through a permanent establishment in Turkey is liable to pay tax on the profits earned in Turkey. The standard tax rate for both resident and non-resident companies is 20%. The taxpayers of the corporation income tax are: capital stock companies, public
16 INTRODUCTION
economic enterprises, economic enterprises of foundation and associations and joint ventures. The tax rate for individuals (both residents and non-residents) is pro31. gressive, ranging from 15% to 35%. Partnerships are not regarded as separate taxable entities and are considered fiscally transparent. Consequently, partners are taxed individually on their share of the partnerships profit. The tax year ends on 31 December. 32. Withholding taxes apply in respect of payments to residents of wages, professional services income, payment for construction on works extended to years and rent payment. Payments made to non-residents on account of dividends, interest and royalties are also subject to withholding tax. The withholding agents are obliged to file a Withholding Tax return (Form 1003) detailing the information on payments, payees and amount of tax withheld. All legal entities, unincorporated entities and individuals must obtain 33. a tax identification number (TIN) in order to undertake professional or business activities in Turkey. The tax identification number of legal persons denotes back office information on the type of legal entity, type of liability, starting date of business activity, relevant tax office, type of business activity and its address. As of 1 July 2006, the Turkish Identification Number is used as the unique tax identification number for nationals of Turkey. The project for a unique tax identification number was initiated in 1995. Foreigners staying in Turkey more than six months are also required to obtain a TIN. Information on identification and address is associated with TINs of individuals. In the case of partnerships, information on the TIN of each of the partners needs to be submitted. Pursuant to General Communiqu No. 247 and 262 of the TPL and Communiqu No.2 on TINs, a TIN is also required to undertake certain transactions like banking and financial service transactions, loan transactions, purchase and sale of immovable property and motor vehicles and various other financial transactions. 34. As of May 2012, more than 47 million TINs were issued in Turkey. The Turkish tax base has been increasing in the recent years and the total number of taxpayers of 47 018 257 is composed by 4 697 903 active taxpayers, 10 508 327 inactive taxpayers and 31 812 027 potential taxpayers. The active taxpayers number of 4 697 903 5 includes Income Tax: 1 741 128; Corporation Tax: 665 196.
5. Entity wise, active taxpayers are comprised of: individuals (3 863 979); ordinary partnerships (41 020); collective company (2 567); commandite company (193); commandite company with shares (1); limited liability companies (578 466); joint stock companies (78 825); cooperatives (40 241) and others like associations, foundations and apartment building management etc. (98 131).
INTRODUCTION 17
35. Turkey has 19 Free Zones 6. Free Zones are special sites within Turkey but deemed to be outside of the customs territory. Turkish Free Zones are tax free zones. Income generated through activities in the Free Zones is exempt from some kind of taxes including income, corporate and value-added tax. There is no limitation on the proportion of foreign capital participation in investment within Free Zones. Legislative provisions pertaining to customs and foreign exchange obligations are not applicable in free zones. All kinds of activities can be performed in Turkish Free Zones such as manufacturing, storing, packing, general trading, banking and insurance. Every local or foreign real or legal entity must obtain a licence to operate in Turkish Free Zones from the Under Secretary of Foreign Trade. A total of 3205 operating licenses have been issued through 31 December 2011. 36. Turkey has a wide network of double taxation agreements both in terms of geographic range and volume. These agreements cover all major economic partners. In addition to its DTAs with 82 countries (78 in force), it has signed 5 Tax Information Exchange Agreements (TIEAs). 37. The Presidency of Revenue Administration (PRA) is responsible for implementing the tax laws. The PRA has a semi-autonomous legal status and is connected to the Ministry of Finance. It mainly consists of central and provincial departments in Turkey. The head office is located in Ankara. The competent authority for the purposes of exchange of information is located in the head office of the PRA.
Recent developments
38. Turkey signed the Convention on Mutual Administrative Assistance in Tax Matters in November 2011 and this agreement is currently in the process of ratification. 39. The New Turkish Commercial Code No. 6102 (TCC) was promulgated in the Official Gazette on 14 February 2011 and came into effect on the 1st of July 2012. The new law is intended to integrate Turkish commercial law with European law as well as creating an infrastructure based on transparency. The Code of 14 February 2011 has been partially amended through Law No. 6335 dated 26 June 2012, before it came into force on 1 July 2012. The TCC has replaced the Turkish Commercial Code No. 6762 which was adopted on 29 June 1956 and regulated the Turkish commercial life for 55 years.
6. Aegean, Bursa, Mersin, Antalya, Kocaeli, Avrupa, Kayseri, Izmir, Istanbul Thrace, Istanbul Ataturk Airport, Adana-Yumurtalik, Samsun, Gaziantep, Trabzon, Denizli, Mardin, Rize, Tubitak Technology Free Zone and Istanbul Industry and Trade Free Zone.
18 INTRODUCTION
40. The Capital Market Law No. 2499 has been revised by Law No.6362, which came into force on 30 December 2012. The revised law, among other things, provides for the keeping of information on the owners of shares offered to the public by joint-stock companies which previously had been governed by a Communiqu issued by the Capital Market Board.
COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 19
Compliance with the Standards
A. Availability of Information
Overview
41. Effective exchange of information requires the availability of reliable information. In particular, it requires information on the identity of owners and other stakeholders as well as information on the transactions carried out by entities and other organisational structures. Such information may be kept for tax, regulatory, commercial or other reasons. If the information is not kept or it is not maintained for a reasonable period of time, a jurisdictions competent authority may not be able to obtain and provide it when requested. This section of the report describes and assesses Turkeys legal and regulatory framework on availability of information. It also assesses the implementation and effectiveness of this framework. 42. The legal and regulatory framework for the maintenance of ownership and identity information, other than for bearer shares, is generally in place in Turkey. Information on the owners of companies and partnerships is available 43. to authorities of Turkey through a variety of mechanisms. All companies or partnerships incorporated under Turkeys law or foreign companies carrying on business in Turkey must register with the Trade Registry and the ownership and identity information of partnerships and limited liability companies is available with the Trade Registry. Companies, other than publicly held joint stock companies whose shares are traded on a stock exchange, are required to keep a share book containing information on registered shares, which must
20 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

be updated regularly. Shareholder information of publicly held joint stock companies whose shares are traded on a stock exchange is maintained by the Central Registry Agency (CRA). Joint stock companies are allowed to issue bearer shares. Information 44. on the bearer shares issued by joint stock companies whose shares are traded on the stock exchange must be available with the CRA. In the case of bearer shares issued by other joint stock companies, certain mechanisms exist that require the maintenance of information on the holders of such shares, however, these are insufficient to guarantee the availability of information in all cases. 45. Legal and regulatory mechanisms to ensure information identifying the founders and members of foundations, associations, owners of associations of ship owners and cooperatives are in place. 46. Turkeys law does not provide for the creation of trusts, and Turkey has not signed the Hague Convention. While Turkish residents are not prohibited from acting as trustees or administrators of foreign trusts, this activity (i.e. the management of assets) would be considered to come under the oversight of the Banking Regulation and Supervision Agency or Capital Markets Board, as well as anti-money laundering laws, and would have to be conducted through the form of a joint stock company. The combination of commercial, regulatory and tax laws applicable to such arrangements ensure the availability of information regarding the settlors and beneficiaries of trusts which have trustees resident in Turkey. There is a range of sanctions available under the Turkish Commercial 47. Code and other relevant laws and regulations ensuring that the ownership and identity information required to be maintained or disclosed to the administrative authorities is in fact maintained. The combination of commercial and tax laws ensures the availability 48. of full accounting records for all relevant entities. The requirements under commercial and tax laws ensure the keeping of underlying documents by all relevant entities. Accounting records and underlying documentation must be retained for a minimum of 10 years under the commercial code. The requirement to retain accounting records under tax laws is five years. Anti-money laundering law requirements ensure that financial institutions retain transaction records and customer due diligence records for at least eight years. 49. Turkeys international partners requested information on the ownership of companies and partnerships but have not received information in some cases. However, it does not appear that the failure to provide information is due to the non-availability of information in Turkey (see section C.5).
A.1. Ownership and identity information

Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities.
50. The Turkish Commercial Code (TCC) regulates commercial undertakings, commercial companies, negotiable instruments, maritime law and insurance agreements. A total of 882 174 companies are subject to the provisions of the TCC. 51. The TCC is the central piece of legislation governing the establishment of, and further arrangements with respect to, commercial companies (incorporated businesses). Commercial companies include collective, commandite, joint stock, limited and cooperative companies (Art. 124(1) TCC). The legal difference between these company structures mainly concern the allocation of liability and legal form of the entity. The TCC divides commercial companies into two categories: partnership companies (collective and commandite companies) and capital stock companies (joint stock, limited and commandite companies with share capital). Companies of which capital is divided into shares are considered to be capital stock companies. All commercial companies possess legal personality independent from their founders and can make use of all rights and assume debts within the framework of Turkish Civil Law (Art. 125 TCC). Both capital stock as well as partnership companies must register with the local trade registry and by registration they acquire legal personality. Capital stock companies are subject to minimum share capital requirements, whereas partnership companies are not. For the purpose of the report capital companies are analysed under the heading companies whereas partnership companies are discussed under the section on partnerships. The capital companies are: Joint Stock Companies (AS): A company which is a legal entity with a fixed capital divided into shares and liability of which is limited to its assets. Liability of shareholders to the company is limited to capital shares subscribed by them (Art. 329 TCC). A total of 99 965 joint stock companies were registered in Turkey as at 31 July 2012. Commandite Companies limited by Shares: A company whose capital is divided into shares is a commercial association the capital of which is divided into shares and where one or more of partners are responsible against the creditors of the company in the case of a collective company and other partners in the case of a joint stock company (Art. 564 TCC). As at 31 July 2012, 2353 commandite companies were registered in Turkey. Limited Liability Companies (LLCs): Companies founded under a trade name by one or more individuals or legal entities, which have a

known stock capital divided into shares. Shareholders are only liable to pay for the stock capital they committed to and are not liable for the debts of the company (Art. 573 TCC). Number of such companies registered in Turkey as at 31 July 2012 were 763 893. 52. Any person who operates a commercial undertaking is called a merchant (Art. 12 TCC), and this includes by definition each of these entities. Every merchant must register his commercial undertaking and the trade name with the trade register within 15 days of opening the commercial undertaking (Art. 40(1) TCC). 53. The trade register is kept by the Trade Registry Offices established by the Chambers of Commerce and Industry or by the Chambers of Commerce under the supervision of Ministry of Customs and Trade (Art. 24 TCC). The TCC provides for keeping of trade registry records in an electronic environment for which a by-law prescribing the procedures is yet to be issued. Currently, the registration records are maintained by 238 Trade Registry Offices in ledger books in paper form as well as in electronic form. The work of transfer of data from these ledger books into a central and shared database (Central Registry Recording System: MERSIS) is currently under progress. The information on company address, contact information, company partners, companys capital, share of partners and persons representing the company will be available in the MERSIS. This will enable accessing trade register information from a central database. The agencies will be able to share data by using the public key numbering system. The records maintained by trade register offices are open for inspection to the public and users can obtain information on the name, surname, trade name and authorised person of the company. Managers of the company have access to their company information and can make changes in the information available on the system. However, such changes must be validated by the registry official. Furthermore, the registries in the system are kept to the NACE Rev. II (Nomenclature Gnrale des Activits conomiques dans les Communauts Europennes). The Ministry of Customs and Trade is authorised to inspect the operations of the trade registration offices and such offices must comply with the instructions issued by the Ministry (Art. 25(3) TCC). 54. Applications for registrations are made to the authorised trade registry office register manager by the parties concerned, their representatives or their legal heirs (Art. 28 TCC). Application for registration must be made by means of a petition (Art. 29 TCC). The general deadline for application for registration is fifteen days from the date of execution of the instrument or the deed or the date of occurrence of the transaction or the subject matter of registration (Art. 30 TCC). Any change in the registered information must also be registered by means of a petition within 15 days of such a change (Art. 31 TCC).
55. A copy of the application for registration received from a corporate taxpayer is sent to the relevant tax office (Art. 27(2) TCC) by the trade register directorate. 56. If a company is incorporated by a single person, the legal form of the company, the name of the single person, the trade name and its address must be registered with the Trade Registry. 57. The registry office must mark with the date and number of the registry book all the petitions, statements, instruments, documents and trade registry gazettes containing the announcements which constitute the basis of registration and all these documents must be kept by the registry office (Art. 35(1) TCC). Anyone may examine the contents of the trade register and all instruments and documents kept at the registry office and on payment of a fee may obtain certified copies of these documents (Art. 35(2) TCC). Registrations are published in the trade registry gazette (Art. 35(3) TCC). Information on entities registered after 1 October 2003 is accessible, free of charge, to any person, on the website of the Turkish Trade Registry Gazette 7. 58. The TCC establishes that the documents of incorporation are the Articles of Incorporation, the Founders Declaration, assessment reports, all contracts concluded between the company being incorporated and founders and other persons, including contracts in kind and relating to takeovers as well as reports on process auditing. These documents shall be put in the registration file of the company and be kept for five years. These requirements ensure that incorporation documents are secured and published. Information on owners of commandite companies with shares and limited liability companies is required to be mentioned in the Articles of Association which must be filed with the Trade Registry. All amendments to the Articles of Association must also be registered as discussed below.
Joint Stock Companies

59. Specific provisions concerning joint stock companies are contained in Articles 329 through 562 of the TCC. A joint stock company with a specific field of activity like companies engaged in banking or insurance business can only be founded with the prior consent of the Ministry of Customs and Trade and the Ministry also approves the amendments to the Articles of Association (Art. 333 TCC). The Ministry performs a supervision duty to ensure that activities are not contrary to the mandatory provisions of the law. 60. The main capital of the company comprising the shares subscribed in the Articles of Association cannot be less than TRY 50 000 (EUR 22 500).
7. www.ticaretsicil.gov.tr/english.

One or more than one founder can incorporate a joint stock company (Art. 338 TCC). The shareholders can be Turkish or foreign nationals, residents or non-residents in Turkey. Article 16 of the Capital Market Law No. 6362 provides that if the number of shareholders of a Joint Stock Company exceeds 500 then the shares of the company are deemed to be publicly held and such companies will be subject to the provisions applicable to publicly held joint stock companies. 61. The founders of a joint stock company must declare their will to incorporate a company and subscribe to the whole capital in the Articles of Association, which must be in writing, and their signatures must be notarised. Incorporation documents which include the Articles of Association and declarations of the founders must be inserted in the registry file and the company must keep a copy of each document for a period of five years (Arts. 335 and 336 TCC). 62. Articles of Association must contain among other details the following information: business title and place of the head office of the company, whether the shares shall be registered or bearer; number of members of the Board of Directors; the companys capital and nominal value of each share, kinds and amounts of capital shares subscribed by the shareholders (Art. 339 TCC). 63. The registered particulars include, among other things: (i) date of Articles of Association, business title and place of head office of the company; (ii) capital of the company; (iii) the types of shares, whether they are registered or to bearer; (iv) the mode of representation of the company; and (v) the name and surname, title, domicile and nationality of directors and of persons authorised to represent the company and the form of publication of the companys announcement (Art. 354 TCC). The registration and announcement must be made within 30 days from the date of incorporation. The TCC does not require registration of information on all the shareholders of registered shares. However, the information on the founders of the company which must be noted in the Articles of Association is available with the Trade Registry. Amendment of the Articles of Association must be registered by the Board of directors in the Commercial Register (Art. 455 TCC). Internal Commercial Circular No. 3 of 2003, issued in connection with the old TCC, requires that full information on the identification of founders that include national identification numbers for individuals must be submitted to the trade registry. Further, in case there are shareholders with foreign nationality, their nationalities must be stated in the Articles of Association. 64. The subscribed and guaranteed shares can be offered to the public by the subscribers within two months from the date of the registration of the company. Corporations that offer their capital to the public are regarded as public corporations and offering of share certificates to the public is subject
to the provisions of the Capital Market Law (Arts. 344 and 346 TCC). The public issue of shares is subject to the permission of and registration with the Capital Market Council. Investors in joint stock companies which are publicly traded must be 65. registered with the Central Registry Agency (CRA). Article 4 of the CRA Communiqu on Dematerialisation issued on 22 December 2002 requires the CRA to keep records of shares of companies listed on the stock exchange, irrespective of whether the registered or bearer shares are issued by the company. These provisions now form part of the revised CML No. 6362 (Articles 13, 81). The CRA works in close cooperation with the Istanbul Stock Exchange in order to supervise publicly listed companies. Whenever a transfer of a security in a publicly traded company occurs, the intermediary that acts on behalf of the shareholder is required to notify the CRA about the transfer.
Commandite Companies with Shares

66. Provisions in relation to commandite companies with shares are contained in Articles 564 to 572 of the TCC. This type of company is a commercial association whose capital is divided into shares and in which at least one of the partners has unlimited liability towards creditors of the company as in the case of a collective partnership and the other partners have liability similar to the shareholders of a joint stock company. If the capital is separated into portions to indicate the rate of participation of the partners (commanditaire) in the capital without dividing into shares, the provisions relating to commandite companies, discussed below under Partnerships, apply (Art. 564(1) TCC). Partners with unlimited liability are responsible for the management and representation of the company and have the same duties as the board of directors in joint stock companies. According to Article 565(2) of the TCC, the provisions related to joint 67. Stock Companies apply in all matters except when provisions of commandite companies apply. Accordingly. The provisions concerning the maintenance of a share book by joint stock companies also apply to commandite companies. The gap with regard to bearer shares identified in case of joint stock companies does not affect availability of ownership information in the case of commandite companies as these companies cannot issue bearer shares. 68. The Articles of Association must be prepared in writing and signed by the founders and active partners and signatures must be attested by a notary public. The Articles of Association must be similar to those of joint stock companies. All provisions related to incorporation of joint stock companies apply to the foundation and administration of this type of company (Arts. 566 to 570 TCC). A minimum of five founders can form this type

of company and at least one of the founders must be an active partner. The number of shares owned by each silent partner having the title of founder must be registered in the Articles of Association (Art. 568 TCC). The provisions of Article 568 of the TCC provides that the information on number of shares owned by a silent partner who contributes to the capital of the company in cash is not mandatorily required to be registered in the Articles of Association. However, information on identity of all the shareholders of the company must be registered in the share-book (Arts. 498 and 562 TCC).
Limited Liability Companies

69. Rules relating to these companies are contained in Articles 573 through 644 of the TCC. One or more individual(s) and legal person(s) can form a limited liability company which has a determined share capital that is divided into shares. However share certificates cannot be issued. Creditors of the company have recourse only against the companys assets. The shareholders are liable to pay only for the capital shares they have committed to and not for the debts of the company (Art. 573 TCC). Shares of a limited liability company cannot be offered to the public and shares cannot be quoted on a stock exchange. 70. The number of shareholders cannot exceed 50, but if the number of shareholders decreases to one, the managers must register and announce that the company has a single partner together with the name, place of residence, and nationality of the partner within seven days after obtaining the notification from the company (Art. 574 TCC). Directors are liable for the losses that may arise from the non-registration of these changes. 71. As in the case of other companies, the Articles of Association must be in writing and signature of founders must be certified by a notary public and Articles of Association must contain details of the names, surnames, position and nationality of the directors. Articles of Association may contain specific provisions different from legal provisions, for example regulations concerning the limitations on the transfer of shares constituting the capital stock (Arts. 575 to 577 TCC). The TCC prescribes a minimum capital of TRY 10 000 (EUR 4 500) (Art. 580 TCC). 72. Articles 586 and 587 of the TCC set out the rules for registration and announcement of the company. A letter of application signed by all directors must be filed with the commercial register for registration of the company. Along with other documents, a certified copy of the Articles of Association must also be submitted. The petition for registration must also include information on the names, surnames or titles, place of domicile and nationalities of all shareholders and the share of stock capital undertaken by each shareholder and the total amount paid. The whole Articles of Association must
be registered with the commercial register and announced in the Turkish Commercial Registration Newspaper. Information on the name, surname, place of domicile of the shareholders that are individuals and the title and place of head offices of the shareholders that are legal persons and the stock capital shares held by each shareholder must be registered and announced (Art. 587 TCC). 73. Every amendment to the Articles of Association must be registered (Art. 589 TCC). The transfer of a stock capital share must be made in a written agreement and signatures of the respective parties must be verified by a notary public. The approval of the General Assembly of shareholders is required for the transfer of the stock capital shares and will be effective following such approval only (Art. 595 TCC). The company directors must register the transfer of stock capital shares with the commercial register (Art. 598 TCC). The registration of transfer of stock capital shares with the commercial register ensures updated ownership information on the company with the Trade Registry.
Capital Markets Regulations

74. Publicly held stock companies are regulated by the Capital Market Law No. 6362 (CML). The Capital Markets Board (CMB) regulates the public offering procedures of the joint stock companies and prescribes various reporting requirements. Article 16 of the CML determines that the shares of joint stock companies having more than 500 shareholders shall be deemed to be publicly held and such companies shall be subject to the provisions applicable to publicly held joint stock companies. Notification obligations must be met by companies which have issued 75. capital market instruments that are traded in the Istanbul Stock Exchange as regulated in the CMBs Communiqu on the Principles Regarding the Public Disclosure of Material Events Serial: VIII, No. 54 (Communiqu 54). Section 5 of Communiqu 54 which is related to the changes regarding the capital structure and management control of a publicly held company, establishes that a notification to the CMB must be made by: (a) A legal person or individual, or other legal persons or individuals acting in concert with the said person, in case such person directly or indirectly acquires or loses the control of 5%, 10%, 15%, 20%, 25%, 1/3, 50%, 2/3 or 75% of the capital or total voting rights of the company, (b) The founder whose mutual funds directly or indirectly gains or loses the control of 5%, 10%, 15%, 20%, 25%, 1/3, 50%, 2/3 or 75% of the capital or total voting rights of the company.

76. The Central Registry Agency (CRA), which is a legal entity under private law, was established in 2001 to keep in book entry records with respect to issuers, intermediary institutions and owners of rights and conduct the operations concerning dematerialisation of capital market instruments which must be kept in dematerialised form. Pursuant to Articles 13 and 81 of the CML, records on capital market instruments and rights related to them must be kept by the CRA and capital market instruments must be issued in dematerialised form in an electronic environment. Pursuant to the decisions taken by the Capital Market Board in 2005, the CRA must keep information on all shares (whether traded or not on a stock exchange) issued by publicly held joint stock companies whose shares are traded on a stock exchange. These requirements are now part of the revised CML (Arts.13 and 81). The CRA operates as a central storage agency of stocks, mutual funds, private sector debt instruments, the stock market investment funds and warrants currently. 77. The Communiqu on Principles Regarding Book-entry Recording of Dematerialised Capital Market Instruments Serial: IV, No. 28 (Communiqu 28) regulates principles of book-entry recording of capital market instruments and rights related to them by means of relevant records kept by the CRA. Section 5 of the Communiqu stipulates that the opening and recording of, and amendments to, accounts shall be carried out through amendments to the CRA records by members according to instructions of the rightful owners via electronic means. Members of the CRA are issuers, intermediary institutions, authorised clearing and custody institutions and other institutions determined by the CMB. An investor account is opened in the name of the rightful owner to maintain bearer and registered rights (s. 10 Communiqu 28). In order to open an investor account with the CRA, detailed information on the investor must be provided as set forth in the Annex of Communiqu 28 which includes: (a) the general details of the investor such as address and phone number and (b) the special details of the investor such as the particulars of the investor set out in his identity card or the name of the company, his Turkish identity number, tax identity number; and in the case of a legal entity its corporate name, its corresponding trade registry, date and number of registration, relevant tax office and, in the case of a foreign legal entity, the type of liability besides the afore-mentioned requirements. It is compulsory for all companies listed on the Istanbul Stock Exchange to issue their shares in dematerialised form. 78. Investment companies, venture capital investment companies and real estate investment companies must be publicly held companies according to the regulations of the CMB. As a result, these companies are subject to all general regulations applicable to publicly held companies except specific issues regulated by the related Communiqus. Thus shareholder information of these companies is kept by the CRA.
Ownership information held by companies

79. A joint stock company must register the name, surname, title and addresses of the holders of shares and registered share certificates, and usufructuary, in the share book (Art. 499 TCC). Further, for a company, only the persons registered in the share book are considered shareholders and entitled to shareholders rights (see Section A.1.2, on bearer shares). The transfer of registered share certificates takes effect only after approval of the company (Art. 492 TCC). The TCC does not prescribe any procedure for registration of the transfer of shares but Article 498 provides that a transferee must be assumed to have been approved as a holder of shares if the company does not reject the request of the transferee within 20 days as of the date of application. These provisions also apply to commandite companies with shares (Art. 565 (2) TCC). The Board of Directors has a non-transferable duty of orderly keeping of the shareholders log (Art. 375 (1) TCC). 80. Share certificates in joint stock companies may be either registered in the name of the shareholder or issued to bearer (s. 409 TCC). 81. Publicly held joint stock companies whose shares are traded on a stock exchange are not required to hold information regarding the ownership of the company, rather the Central Registry Agency maintains information on owners of shares (see above). The rights related to shares quoted on the stock exchange are assigned to the transferee at the same time as the transfer of shares. In the case of a transfer of quoted shares acquired outside the Stock Exchange, the rights are assigned to the transferee upon application of the transferee to the company requesting acceptance of the proprietorship of such shares (Art. 497 TCC). 82. LLCs are required to keep a share book containing the stock capital shares information indicating the names, surnames, titles, addresses of the shareholders, the number, nominal value and group stock capital shares owned by each shareholder and the usufruct and lien rights on stock capital shares, and the names and addresses of the title holders must also be written in the share book (Art. 594, TCC). The shareholders are entitled to review the share book. 83. The transfer of the stock capital share of a limited liability company must be in writing and the signatures of the respective parties must be approved by a notary public. The transfer of shares is only effective when approved by the General Assembly of shareholders, unless otherwise provided in the Articles of Association (Art. 595 TCC). The Directors of the company have duty and powers in all matters that are not vested to the General Assembly as per the law or the Articles of Association (Art. 625 TCC); therefore, they would have a duty to keep an updated share book.

84. Under the TCC all equity capital companies that are subject to auditing are obliged to set up a website within three months from the date of registration of their establishment in the Trade Registry and to publicise the announcements that are required by law to be made by the company (Art. 1524 TCC).
Ownership information held by the authorities Trade registry

85. All companies are required to register with the Trade Registry as discussed above. The information filed by the companies at the time of registration and afterwards is kept by the Registries. There are a total of 238 Trade Registry offices in Turkey. In the future, the Central Registry System (CRS) will have information on all entities registered in Turkey. Information held by the Trade Registry includes the companys Articles of Association, information on founders and directors, as well as the owners of the limited liability companies. At 31 July 2012, the records of the Trade Registry showed registration of 99 965 joint stock companies which include 318 publicly held companies, 2 353 commandite companies, 763 893 LLCs, 15 962 collective companies and one commandite company limited by shares. 86. In practice, the Turkish authorities obtain ownership information for companies, other than joint stock companies, from the Trade Registry as these companies are obliged to file their Articles of Association containing information on the shareholders within 15 days after the company is created. Modifications in the Articles of Association must also be filed within 15 days of the changes with the Trade Registry in order to keep the information updated. If a company does not register with the Trade Registry, its sharehold87. ers are liable to any third persons for any damages incurred. The recently enacted TCC has added monetary penalties for not updating information with the Trade Registry (see, enforcement provisions below).
Tax law
88. Pursuant to Article 168 of the Tax Procedure Law merchants and artisans liable to tax, members of liberal professions, taxpayers of Corporation Tax, partners of unlimited liability partnerships and ordinary partnerships and active partners of commandite companies must inform the tax office within 10 days of the beginning of business activities. They must also notify the discontinuance of business (Arts. 160 and 168 TPL). If taxpayers do not notify the tax authorities within the prescribed term of the start or discontinuance of a business, they are liable to a penalty ranging from TRY 4.30 (EUR 1.92) to TRY 110 (EUR 49.40) in accordance with their tax liability (Art. 352(I-7) TPL).
89. For tax purposes, capital stock companies are considered as distinct taxpayers and taxable under the provisions of the Corporation Tax Law, but the income in case of partnership companies is taxed in the hands of partners. Earnings of incorporated companies, cooperatives, public economic enterprises, economic enterprises of associations and foundations and business partnerships are subject to Corporation Tax (Art. 1 CTL). Incorporated companies comprise joint stock and limited companies as well as commandite companies with issued capital shares. Companies with their registered or business head offices in Turkey are subject to full tax liability (tax resident) and are taxed on their earnings acquired in and outside Turkey (Arts. 3 CTL). All companies incorporated in Turkey must register with the tax authorities. Once a company has registered with the Trade Registry, the Trade Registry is required to convey to the relevant tax office one copy of the documents filed with the Trade Registry for incorporation (Art. 153 TPL). In this way, corporate taxpayers are regarded to have fulfilled their obligation to inform the tax authorities they have started a business. The taxpayers are obliged to mention their Tax Identification Number and Corporate Register Number in the Corporate Tax Return. 90. According to Article 14 of the Corporation Tax Law, every taxpayer is required to submit a tax return for all of its income during the tax year. Corporate taxpayers must use a Corporation Tax Return (Form No.1010) and indicate their legal structure and must submit certain attachments as set forth by the Ministry of Finance (Art. 14 CTL). Form No. 1010 indicates that a list of domicile addresses, titles and names of partners of the limited liability taxpayer, partners present at the establishment of partnership and a notice about establishment partners and board of director members must be submitted. Subparagraph (k) of the 3rd section of Circular-1 KVK-6/2007-1/ Corporation Tax Return (Circular-1) stipulates that statements concerning Partners and Members of the Board of Directors must be attached to the Corporation Tax Return. In this attachment, sections are included to provide information regarding the name/surname, corporate name, citizen identity number, tax identity number, residential address and percentages of share holdings of members of the board of directors, general managers in case of LLCs, legal representatives and partners of the legal entity that must be informed (Circular-1). The Circular refers to identity information on partners, members of the board of directors and shareholding by the board of directors.
Database of the PRA

91. The PRA has set up a database of information on various specific transactions undertaken in Turkey. It receives information from banks (on time deposits, money transfers, and swift payments), insurance companies, brokerage houses, land registry and cadastre directorate, exchange offices,

airline companies, the general directorate of accounting, financial leasing/ rent companies and some other ministries on specific transactions in agreed formats through web-transfer or in storage devices (CD/DVD). Frequency of receipt of data varies from daily to annually depending on the type of transactions and agreements with supplying agencies. These agencies must obtain from the customers their tax identification numbers (TIN) at the time of undertaking the transactions and these transactions are associated with the TIN. The data sent have a TIN as one of the fields and, based on the TIN, all the data received can be processed to meet the specific needs. Processed data are shared with the audit departments and/or Court of Justice, through encrypted CDs, on request.
Central Data Base

92. The Turkish tax administration has undertaken a massive computerisation project. The authorities store data in a central database with the Tax Office Full Automation Project, which contains information on assessment, collection, tax debt, e-declaration, property, personal registry information and vehicle enquiry. The information in all cases is correlated to the TIN. This data is shared with Presidency of Revenue Administration central units, auditing units of Ministry of Finance, Directorate of Tax Administration, revenue offices, tax offices and fiscal directorates via a management information system or correspondence in the framework of their authorisation. The management information system has over 1000 menus helping to generate reports on the basis of taxpayer, tax office, province or for the full country and provide statistical data to the authorities. All the records, provided by tax offices, concerning tax laws are kept in the database. Information collected in the central database is shared with more than 60 public institutions and organisations simultaneously in the framework of subjects and authorisation included in the Web Service protocol.
Electronic filing of tax returns

93. Electronic filing of tax returns was started in the year 2004. It is now compulsory for companies, commercial enterprises of associations, foundations and cooperatives. Individuals must also file returns electronically. Partners of a partnership should indicate the name of the partnership. The PRA as well as auditors have access to e-filed tax returns. In accordance with the Tax Procedures Law General Communiqu No. 340, members of profession submit the declaration of taxpayers which they sign under agency and responsibility contract; profession chambers submit declarations of their member taxpayers and taxpayers (companies, foundations, notaries and public institutions) which have their own accountants must also submit their declarations in electronic form. Turkish authorities have advised that for
the year 2011, 48 926 611 (97%) declarations were submitted electronically, whereas, only 3% (1 588 308) were filed in paper form. In respect of tax declarations, 99% of income tax (1 731 330) and 98% (602 832) of corporate tax declarations were filed electronically. Tax inspectors, tax offices and authorised personnel of Presidency of Revenue Administration (including the EoI Unit) can make inquiries about submitted declarations, notifications, balance sheet and financial tables. Taxpayers submitting their own declarations and members of profession submitting a taxpayers declaration can also make inquiries about the declarations. Taxpayers can also make inquiries covering declarations submitted by members of professions who represent them. 94. There are 39 types of tax returns and statements that are filed electronically in Turkey including tax returns for corporate tax, income tax, value added tax, special consumption tax and stamp tax amongst others. Paper based declarations are transferred to electronic media by tax offices and delivered to Presidency of Revenue Administration. 95. In accordance with the Corporation Tax 6/2007/Corporation Tax Declaration, companies are required to submit Notification related to Company Partners and Members of Board of Directors and annexure. The documents to be attached to the tax return form include: a) a detailed balance-sheet and income statement or operation account statement; b) documents related to withheld taxes; c) documents related to taxes paid abroad; d) information of the five major owners of the company and its board of directors with their names, titles and domiciles e) additional lists prepared due to insufficient space in the tax return. If there is a non-resident person(s) among shareholders, a list concerning the names, titles and residential address of partners of the companies having non-resident shareholders is also required to be submitted. The Turkish tax authorities have indicated that 10 918 447 electronic income tax returns and 4 054 385 corporate tax returns were filed in the period of 2004 to 2012. 96. The non-compliance with the provisions concerning the form of tax returns, the contents of the tax return, notices and documents prescribed by law and annexes thereto are considered as second degree irregularity and fine varies with the type of taxpayers (see Section A.1.6).
Free zones entities

97. Turkey has 19 Free Zones and income earned by entities operating in Free Zones is exempt from taxation. Free Zones Law No. 3218 of 1985 and the Free Zones Regulations of 1993 with amendments form the framework for operations and practices in the Free Zones. Free Zones Law do not provide for the incorporation of entities but any entity established in Turkey or a foreign country can operate in any Turkish Free Zone after obtaining

an operating licence from the Under Secretariat of Foreign Trade. The provisions of the Turkish Commercial Code in relation to incorporation and keeping identity information are applied to operators during the process to obtain an operating license. The procedure for obtaining an operating license is outlined in Article 11 of the Free Zone Regulations and also explained in the official website of the Ministry of Economy. In this procedure, applicants are required to complete an operating license application form attaching a copy of the Turkish Trade Registry Gazette in which the establishment announcement and the last capital and partnership structure of the company was published, documents obtained from Chamber of Commerce and/or Industry and the copies of the last three years balance sheets and income statements must be submitted to the Under Secretariat of Foreign Trade Regional Directorate of the relevant Free Zone. Foreign companies also must ratify their establishment documents with the Turkish Consulates in the relevant country. Since all real and legal entities who wish to operate in Free Zones have the obligation to submit a Trade Registry record to the relevant Regional Directorate, they must first be incorporated and registered with the Turkish Trade Registry. The non-fulfilment or making of false declarations in the Operating License Application Form may lead to cancellation of the Operating License (Article 14 Free Zones Regulation). The failure to notify the changes to the issues disclosed in the Operating License Application Form may result in suspension of activities of the Users and cancellation of the Operating License. These entities are also subject to other provisions of the TCC, as discussed above. Accordingly, ownership and identity information on all entities operating in the Free Zones is ensured.
Foreign companies
98. Foreign companies with a business head office in Turkey are considered to be tax resident in Turkey (Art. 3 CTL) and are liable to be taxed on their worldwide earnings. Companies not having their registered or business head office in Turkey but earning income from sources in Turkey are liable to pay tax on income earned in Turkey (limited liability taxpayers). Foreign companies, whether resident or not, use the same tax return form (Form No. 1010) as used by the Turkish Companies, but indicate whether they are full or limited liability taxpayer. As a foreign company files the same tax returns as filed by a resident company, it must submit all of the same information including information on all non-resident shareholders and the five major shareholders with the tax return. As at December 2012, there are 477 active foreign companies subject to Corporation Tax in Turkey. 99. In addition, Turkish branches of commercial undertakings with head offices outside of Turkey are obliged to register their trade name and name of the commercial undertaking with the Trade Register similar to domestic
commercial undertakings. These branches can use the name of the parent company as a title for their branch name (Art. 40/4 TCC). A commercial representative having his domicile in Turkey and invested with full powers must be appointed for such branches (Art. 40(4) TCC). The trade name of a Turkish branch of commercial undertaking with a head office abroad must indicate location of its head office and the fact that it is a branch (Art. 48(3) TCC). The application for registration is made by means of a petition. Article 12 of the Law Related to the Enforcement and Practices of Turkish Commercial Code prescribes the registration requirements for foreign entities in Turkey. It requires that a branch of a commercial company or enterprise of which head offices are abroad must comply with the conditions of the country where the head office is situated. Moreover; certified copies of all documents that are necessary to be registered in the country of origin and the Articles of Association are given to the Trade Registry Office which will keep the records in Turkey. Furthermore, the name, address, allocated capital of the branch, the names of the persons who are fully-entitled to represent the branch in the private and public institutions including courts, type of the head office, field of operation, the type and amount of the capital, registration number, the website of and governing law of the branch, the information whether the country of origin is a member of EU are declared to the relevant Trade Registry Office along with essential documents. The issues that are to be registered and detailed issues related with registration of the branch are included in the Trade Registry Regulation.
Nominees
100. Turkish laws do not provide for the holding of shares by nominees. Courts do not recognise ownership by nominees and there are no indications of nominee activity in Turkey. In any event, the provisions of the AML Law and Regulations (discussed below) require obliged parties to undertake CDD including also in cases where customers act on behalf of others (Art. 14 AML Regulations), and this would include the situation where a person purports to hold shares on behalf of a third party. Article 17 of the AML Regulations requires obliged parties to identify the beneficial owner of the transaction, when a transaction is being carried out for the benefit of another person. Therefore, when the legal owner of shares acts on behalf of any other person (nominee) or under a similar arrangement, then the person on behalf of whom shares are legally owned will be identified. 101. Article 349(1) of the TCC obliges the founders to sign a declaration relating to incorporation of a joint stock company which must be prepared accurately and without deficiency and must contain correct information. The founders are liable to a judicial fine of not less than 300 days for violating these provisions. The fine of sum payable per day is determined by the court.

Therefore, as founders are personally liable for information in the incorporation document, they may not allow holding of shares by any person on behalf of others which is not provided in the law. The Turkish financial system allows the operation of collective invest102. ment schemes which can be established either as contractual based investment funds or close-ended investment companies. Portfolio management companies manage the portfolios of these collective investment schemes as well as their other customers. These companies are subject to regulation of the Capital Markets Board. Amongst other requirements, a portfolio management company must be incorporated as a joint stock company. According to Article 17 of the Communiqu on the Principles Regarding the Portfolio Management Activity issued by the CMB (Serial:V,59), a portfolio management company is not allowed to hold the assets of the clients in its own accounts or in its accounts at other institutions and must not associate such assets with its own assets. The custody of clients assets is provided by depository institutions who are obliged to ensure the safekeeping of the assets of customers in separate accounts which clearly indicate ownership by the client.
Conclusion
103. There are comprehensive provisions in the commercial law, the capital market law and the tax law requiring companies incorporated in Turkey to keep information on shareholders. Keeping of a share book by joint stock companies and commandite companies with shares ensures availability of information on the owners of registered shares of such companies. Shareholder information on all publicly held companies whose shares are traded on a stock exchange is kept by the Central Registry Agency. Obligations on limited liability companies to keep a share book and the registration of original shareholders and subsequent transfer of shares with the Trade Registry legally ensure updated information on the owners of the limited liability company. Trade Registries must have identity information on all merchants that include companies. Registration for tax purposes also ensures availability of identity information on companies. 104. Commercial law sufficiently ensures the availability of ownership information on foreign companies that are considered as tax resident in Turkey. Identity information on all the non-resident shareholders and the five major shareholders of a foreign company must also be filed with the tax returns. 105. Some of Turkeys EOI partners reported to have not received ownership information of companies in some cases. Turkey submits that apart from some cases which are still pending with the auditors and thus are still in progress, there are others which have actually taken a very long time due to the
delays in providing a clarification or additional information or lacking documents by the requesting jurisdiction. Turkey clarifies that there has not been any instance that can be termed as ownership information not provided by it (see section C.5).
Bearer shares (ToR A.1.2)

106. The Turkish Commercial Code allows for the issue of bearer shares by joint stock companies. There are two types of share certificates: registered and bearer (Art. 484 TCC). The type of share certificates issued by the joint stock company must be mentioned in its Articles of Association (Arts. 339 and 354 TCC). 107. The share certificates state the title of the company, amount of capital, the ratio of share certificates to the capital, registration date of the issued share certificate, type and nominal value of the share certificate. With regard to the company and third parties, transfer of bearer share 108. certificates is possible only by delivery of possession (Art. 489 TCC). There is no provision in the law that stipulates the obligation to notify the company of the transfer of bearer shares or the registration thereof. 109. The shareholders, including bearer shareholders, are eligible to exercise their rights related to company affairs in the General Assembly (Art. 407 TCC). Owners of bearer certificates are entitled to attend the General Assembly. Article 415(3) of the TCC provides that bearer shareholders must obtain their entrance cards by proving that they possess bearer shares at least a day before the General Assembly meeting. They can attend the General Assembly by submitting these cards. Article 426(2) of the TCC provides that any person who proves possession of a bearer share must be authorised to exercise the rights arising from proprietorship against the company. 110. Joint stock companies which offer shares to the public are regulated by Capital Market Law No. 6362 (CML). The CML defines publicly held companies as companies whose shares are traded on the stock exchange and/ or that have more than 500 shareholders. Article 13 of this law requires that records on capital market instruments and rights related to them must be kept and monitored by the Central Registry Agency. Capital market instruments must be issued in dematerialised form and these dematerialised instruments must be kept in accounts created according to the name whether they are registered or bearer shareholders (Art. 13). Prior to the enactment of revised CML, the requirement of keeping the ownership information (including holders of bearer shares) of joint stock companies whose shares are traded on a stock exchange were regulated through a Communiqu issued by the Capital Market Board. Therefore, identity information of individuals and

legal status of legal persons holding bearer shares (whether traded on a stock exchange or not), issued by publicly held joint stock companies whose shares are traded on a stock exchange is available with the Central Registration Agency. Article 16 of the CML provides that joint stock companies of which shares are not traded on the stock exchange are obliged to apply to the stock exchange within two years after gaining the status of the publicly-held corporation for having their shares traded on the stock exchange. This provision would ensure availability of information on all shareholders including those holding bearer shares of publicly held companies with the CRA. The failure to apply to the stock exchange may result in the company losing the status of a publicly-held company. The Turkish authorities have indicated that 318 publicly held joint stock companies which are traded on the stock exchange have issued bearer shares. The total amount of bearer shares issued by publicly held joint stock companies are of TRY 38 076 932 303 (EUR 17 229 381 000). Bearer shares of TRY 19 219 056 669 (EUR 8 687 013 497) are issued by companies which are traded on the Istanbul Stock Exchange. Theoretically any of 99 965 joint stock companies registered in Turkey, can potentially issue bearer shares. However, information on the number of bearer shares issued by such companies, other than set out above is not readily available and Turkish authorities advise that it would require searching the archive of all Trade Registry Offices in Turkey. 111. Brokerage houses, banks and other intermediary institutions are not allowed to issue bearer shares (Art. 33(b) CML and Art. 7(b) Banking Law). 112. In practice, the identity of shareholders of bearer shares can be discovered when they want to participate in shareholders meetings since they must identify themselves and obtain entrance cards for attending the shareholders meeting. 113. Dividends paid by Turkish companies are considered to be income from movable property and subject to withholding tax at the rate of 15%. Turkey has issued a circular on 02.05.2012 Declaration of Payments Subject to Withholding Tax in Withholding Tax Returns requiring submission of information on the payees in the withholding tax returns. This information in case of income from movable property must include name, surname, address, identification number or tax identification number, tax office of the payee, gross amount, type of document issued for the payment, date and amount of tax deducted. This information should include information on the bearer shareholders also, if a company distributes dividends. Companies must also include information on the major shareholders in their corporate tax returns. Turkey has not confirmed whether this information is in fact being filed or compliance is being ensured. 114. The Turkish authorities have advised that currently immobilisation of bearer shares is not on the agenda of the Ministry of Customs and Trade.
Ownership information held by service providers

115. Any person who is considered to be an obliged party under the Prevention of Laundering Proceeds of Crime Law No. 5549 dated October 2006 (AML Law) is required to identify its customers and the persons on behalf of whom the transactions are conducted within or through obliged parties before the transactions are conducted (Art. 3 AML Law). A list of obliged parties is given in Article 4 of the Regulation on Measures Regarding Prevention of Laundering Proceeds of Crime and Financing of Terrorism (AML Regulations). The obliged parties include those who operate in the field of banking, insurance, individual pensions, capital markets, money lending and other financial services, notaries, the postal service and transportation (Art. 2 AML Law). Based on Article 5 of the Regulations, identification of the customer is required when the amount of a single transaction or the total amount of multiple linked transactions is equal to more than TRY 20 000 (EUR 9 000). 116. Service providers relevant for ownership information on companies, as per provisions of Article 4 of the AML Regulations, are: Public notaries; Freelance lawyers performing functions within the scope of paragraph 2 in Article 35 of Law No. 1136 on Lawyers which include activities of establishing, managing and transferring companies, foundations and associations, provided that these functions do not violate the right of defense given by other laws; Certified general accountants, certified public accountants and sworn-in certified public accountants operating otherwise than as an employee; Independent audit institutions authorised to conduct audit in financial markets.
117. The Regulation on Measures Regarding Prevention of Laundering Proceeds of Crime and Financing of Terrorism (AML Regulations) stipulates that service providers that are considered obliged parties under the AML Law must identify the persons carrying out transactions and the persons on behalf or account of whom the transactions are conducted within or through obliged parties before the transactions are conducted. The obliged parties are obliged to undertake customer due diligence (Art. 5 AML Regulations). 118. Article 5 of the AML Regulations prescribes that customer identification must be completed before the business relationship is established or the transaction is conducted. Obliged parties must identify customers and those who act on behalf of or for the benefit of their customer, and to verify their

identity. In addition, when the service provider is establishing a permanent business relationship, information on the purpose and intended nature of the business relationship must be received (Art. 5 AML Regulations). 119. The service providers that are required to carry out customer due diligence (CDD) must obtain and verify, among other details, the following information in respect of a company (Art. 7 AML Regulations): (i) the title of the legal entity; (ii) its trade registry number; (iii) tax identity number; (iv) full address; (v) contact details;(vi) field of activity; (vii) the name, surname, place and date of birth, nationality, type and number of his/her identity card, and a sample signature of the person authorised to represent the legal entity. 120. Articles 7 to 13 of the AML Regulations set out the verification process for legal persons registered in the Trade Registry, associations and foundations, non-resident legal persons and unincorporated organisations, trade union and confederations, political parties and public institutions. 121. Article 17 of the AML Regulations require the obliged parties to take necessary measures in order to detect whether a transaction is carried out for the benefit of another person and to identify the beneficial owner of the transaction. Obliged parties having a permanent business relationship with a legal person registered in the Trade Registry must identify the individuals and legal persons holding more than 25% shares of that legal person. 122. In the case of companies that have issued bearer shares, holders of such shares owning more than 25% of the shares of the company will be identified by the obliged parties in case of establishment of a permanent business relationship.
Conclusion
123. Out of a total of 99 965 joint stock companies, which can potentially issue bearer shares, information on bearer shares issued by 318 publicly held companies listed on the Istanbul Stock Exchange must be available with the CRA. The Turkish Commercial Law, AML Law and tax laws provide some mechanisms to identify the holders of bearer shares, but do not sufficiently ensure availability of identification information on holders of all bearer shares issued by joint stock companies other than those for which ownership information is kept by the CRA.
Partnerships (ToR A.1.3)

124. The Turkish Commercial Code (TCC) and the Law of Obligations (LOB) recognise three types of partnerships:
Collective Company (general partnership): A company which is founded by individuals in order to operate a commercial enterprise under a trade name and where the liability of the shareholders is unlimited against the creditors of the company (Art. 211 TCC). The shareholders are jointly and severally liable for the debts of the partnership with their personal assets (Art. 236 TCC). Commandite Company (limited partnership): A company that is established in order to operate a commercial enterprise under a trade name and where at least one partner has unlimited liability against the creditors of the company and the liability of the other partner or partners is limited by a certain capital (Art. 243 TCC). Partners with unlimited liability are called active partners which must be physical persons, and partners with limited liability are called silent partners and can also be legal persons. Ordinary Partnership: An ordinary partnership is a contract whereby two or more persons undertake to join their labour and goods in order to achieve a common objective (s. 520 LBO).
Collective company
125. Provisions concerning collective companies are contained in Articles 211 to 303 of the TCC. A collective company is a legal entity and its trade name must contain the names and surnames of all partners or at least one of the partners name and surname and a reference to the partnership and its legal form (Art. 42(1) TCC). The Articles of Association of a collective company must be in writing and signatures on the Articles of Association must be approved by a notary public (Art. 212 TCC). There is no minimum capital requirement. 126. The Articles of Association of collective companies must contain the names, surnames, place of domicile and nationalities of the partners, the amount of capital contributed in money or in kind by them, trade name and registered office of the company, field of activity of the company and the names and surnames of the persons that are authorised to represent the company (Art. 213 TCC). Each member has one voting right (Art. 226 TCC). 127. Pursuant to Article 215 of the TCC, the founders of a collective company are obliged to submit a notarised copy of the Articles of Association to the Trade Registry within 15 days from the date of approval and request the registration of the company. A copy is kept at the registry office and the information that must be stated in the Articles of Association including information on partners is registered and announced. If a shareholder leaves or is dismissed from the company, the other shareholders are obliged to register and announce this event to the Trade Registry (Art. 259 TCC). The

shareholders are also obliged to register and announce the termination of the collective company (Art. 250 TCC). A new partner can join a commandite or collective company but this must be recorded as amendments to the Articles of Association and the change must also be notified to the Registry within 15 days of such a change. A collective company acquires legal personality upon its registration 128. with the Trade Registry (Art. 232 TCC). 129. A collective company, whose Articles of Association are not drawn up in compliance with the law or the provisions which are required to be included in the Articles of Association are not valid, is regarded as an ordinary partnership and the provisions of the Law of Obligations concerning ordinary partnership apply (Art. 214 TCC).
Commandite Company
130. Articles 304 through 328 of the TCC contain rules for commandite companies. The trade name of a commandite company must contain the name and surname of at least one of the active partners and a reference to the partnership and its type. The names of silent partners cannot be inserted in the partnerships trade name (Art. 42(2) TCC). Each partner, whether active or silent, has one voting right (Art. 309 TCC). There is no capital requirement for this partnership. 131. Provisions concerning collective companies in relation to Articles of Association and registration also apply to a commandite company (Art. 305 TCC). The names, surnames or titles of silent partners and the type and amount of the capital contributed or subscribed by them must be registered and announced in the Articles of Association of a commandite company (Art. 307 TCC). A silent partner can transfer his share in the company to a third person with the consent of other partners(Art. 315 TCC). The retirement or expulsion of a partner from the partnership must be entered in the Trade Register and announced by the remaining partners (Art. 259 TCC). Further, a transfer of shares by a silent partner requires a registration and announcement in the Articles of Association and any change occurring in the matters registered must also be registered with the Trade Registry (Art. 31 TCC).This requirement ensures updated information on the partners of the commandite company with the Trade Registry.
Ordinary partnership
132. Provisions concerning ordinary partnerships are contained in Articles 520 through 541 of the Code of Obligations (Law No. 818 of 1926). However, this law has been revised by the New Code of Obligations (Law
No. 6098) which was adopted on 11 January 2011 and entered into force on 1 July 2012. Provisions concerning ordinary partnerships are now dealt with in Articles 620 through 645 of this new law. All entities that do not bear the distinctive features of the company type defined in the Commercial Code are considered to be ordinary partnerships. These partnerships do not have legal personality. 133. Ordinary partnerships are unincorporated entities and accordingly not required to register. More than one natural person or legal entity which is legally and economically independent can join to carry out certain activity. Pursuant to Article 621 of the COB, the partners can contribute their shares as cash money, credit, and labour or as another good. Terms and conditions of the partnership are decided through a contract. The administrator is obliged to render accounts each year and the share of profit/loss is specified in the contract. A bank account cannot be opened in the name of an ordinary partnership and credit can be obtained in the name of one or more partners only. The Code of Obligations prescribes rules for change of partners, expiration of partnerships and liquidation of partnerships. 134. The Communiqu (Domestic Trade: 2009/2) requires that commercial enterprises that are run through non-legal entity partnerships established by commercial companies in order to achieve a common and specific goal and to gain profit and are managed by these companies may be registered collectively in the Trade Register on request. In that case, a partnership contract must be made in writing and be certified by a notary public, however, registration in the Trade Register is optional (see also paragraph 138, below). 135. Article 12(2) of the AML Regulations specifically concerns identification of an unincorporated joint venture. The obliged parties must identify the customer based on a notarised partnership agreement and a tax identification number. As notaries public are obliged parties they would have information on the partners of the unincorporated partnership.
Tax law
136. Collective companies, commandite companies and ordinary partnerships are not liable to Corporation Tax, but partners are liable to Income Tax and obliged to declare the beginning of business and submit annual tax returns. Every partner (both Turkish citizens and foreign natural persons and entities) is registered as a taxpayer in Turkey. The partners are not obliged to provide information on the ownership of partnerships of which they are a partner but information on the partnership such as its name, subject of its activities and share from the partnership must be submitted as an attachment to the tax return. It is obligatory on a partner of a partnership to apply to a tax office with a certificate of commencing business/certificate of quitting

business and be registered with the tax office. In that declaration information on partners of the partnership must be submitted. Foreign partnerships carrying on business in Turkey are also consid137. ered transparent for tax purposes. If foreign partnerships do not appear as a business or ordinary partnership, then there are two mechanisms providing ownership information. First, since they are considered transparent for tax purposes their partners have income tax liability and each partner has to declare in his/her income tax return the name of the partnership of which he/ she is a partner. Secondly, a partnership carrying on business in Turkey has to submit a Declaration of Beginning of Business Form to the tax authority since it has other tax liabilities such as VAT etc. In that declaration the partnership has to give information on its partners. The information obtained from partners and the partnership are all recorded in databases of the tax administration and can be searched for full information if any of the parameters, like the name of the partnership, is known. 138. Provisions of the Corporate Tax Law apply to business partnerships that are formed by incorporated companies between themselves or with individuals or ordinary partnerships in order to jointly undertake a business and share its profits. These partnerships must be evidenced by a written agreement. Business partnerships are corporate taxpayers. The information on partners must be included in a tax return filed by them.
Conclusion
139. Information on partners of a collective company and commandite company is ensured with the Trade Registry. Information on the partners of an ordinary partnership or foreign partnership must be available in the tax records with the tax administration. Peer inputs received by the Global Forum do not indicate Turkeys peers requesting information on partnerships from Turkey.
Trusts (ToR A.1.4)

140. The Turkish legal system does not allow the creation of trusts and the legal concept of trust does not exist under Turkish law. Turkey has not ratified the 1985 Hague Convention on the Law Applicable to Trusts. However, there are no restrictions on a Turkish resident to act as trustee of a foreign trust. 141. The role of a trustee would be considered to be the administration of assets for a third party, which is an activity that falls under the Banking Regulation and Supervision Agency or the Capital Markets Board. Such activity can only be performed by a Joint Stock Company. Consequently, an individual is not able to act as a professional trustee in Turkey. Furthermore, the administration of assets is also an activity that is subject to AML law.
Article 3 of the Law No. 5549 (AML law) requires obliged parties to undertake CDD measures. Investment fund managers and asset management companies are defined as obliged parties under Article 4 of the AML Regulation and must undertake CDD measures and identify their customers. The CDD rules generally require that the service provider identify the beneficial owner of the customer, though no specific rules are provided regarding the CDD requirements for clients that are trusts. 142. Trustees of a foreign trust, being a joint stock company or persons other than a joint stock companies, who are resident in Turkey are income tax payers and so are taxed on their worldwide income, including income of the trust. A trustee may assert that the income of the trust is for the benefit of another person, in which case that person would have to be identified (and assigned a TIN). Article 2 of Law No. 4358, On Generalizing The Usage of Taxpayer Identification Number would oblige a trustee to obtain a TIN in the case of a foreign trust for which he/she acts as a trustee. A TIN must also be obtained for opening a bank account and therefore if the resident trustee carries out any activity of a foreign trust requiring transactions through a bank account, such a trustee must furnish information to the bank to enable it carry out CDD. As described below under Availability of Accounting Information, Joint Stock Companies must maintain documentation regarding relations and transactions with third persons. Where a JSC acts as a trustee, this documentation would include the trust deed, as well as documents relating to any transactions involving the settlor or beneficiaries. Moreover, distributions of income to beneficiaries will be subject to withholding tax requirements, including the identification of payees.
Conclusion
143. Trust activities do not have any special legal status in Turkey, as its legal system does not recognise the concept of trusts or similar arrangements. Nevertheless, the application of capital market laws, AML law and tax law sufficiently ensures that information on the trust arrangements will be available, if Turkish residents act as trustees of foreign trusts or foreign trusts are administered in Turkey. Turkey has not received any information request in relation to trusts.
Foundations (ToR A.1.5)

144. Foundations are used in Turkey for charitable and non-charitable purposes. Article 101 of the Civil Code defines the foundation as groups of assets having the status of a legal entity, formed by individuals or legal entities dedicating their private property and rights for a specific and permanent purpose.

145. Article 3 of the Foundation Regulation defines five types of foundations. These are: Fused Foundations: Foundations which are managed and represented by the Directorate General of Foundations (DGF) in accordance with the FL and other foundations which are managed by the DGF in accordance with the Foundations Law No. 2762. Annexed Foundations: Foundations that were established before the entrance into force of the abolished Turkish Civil Code No. 743 and management of which is left to descendants of the endower. Community Foundations: Foundations which obtained their legal entity status according to the Foundations Law No. 2762 irrespective of whether they have a charter, and which belong to non-Muslim societies and members of which are citizens of Turkey. Tradesmen Foundations: Foundations which were established before the enforcement date of the Foundations Law No. 2762 and are managed by the Board of Directors elected by tradesmen. New Foundations: Foundations which were established in accordance with provisions of the abolished Turkish Civil Code No. 743 and the current Turkish Civil Code No. 4721.
146. In addition, Article 372 of the Turkish Civil Code provides for the establishment of family foundations under the provisions of the Law of Persons and the Inheritance Law for the purpose of meeting the expenditures of education and training of family members, providing them with equipment or support or for similar purposes. 147. All foundations are supervised by the General Directorate of Foundations and its higher institutions to ensure that they carry out the provisions of their charter, operate the assets of the foundation in accordance with the purpose of the foundation, and expend the income of the foundation in accordance with its purpose (Art. 111 Civil Code). Foundations are governed by the provisions of the Turkish Civil Code, 148. the Foundation Law and the Regulation on Foundations. The Regulations set out the procedures and principles dealing with the establishment, management and supervision of the foundations. 149. All foundations, whether established through a formal deed or by a testamentary disposition, must be registered with the registry kept in the court of the residential place of the foundation. The foundation must also be recorded with the Central Registry kept by the Directorate General of Foundations. According to Article 7 of the Regulation, the names of endower and foundation, place of residence, managing bodies, the purpose and the
assets and rights dedicated for the purpose must be indicated in the registry book. The authorities have confirmed that all changes to a foundation deed must be reported to the Registry. 150. The foundation charter must have the information on the name of the foundation, the names of the founders, the purpose, the assets and rights dedicated for this purpose, and the organisation and management of the foundation (Art. 106 Turkish Civil Code). It is also obligatory for all foundations to have a management body. Turkish authorities have confirmed that the Statement of Purpose of foundations contains information on the beneficiaries. 151. Article 32 of the Foundation Law and Article 34 of the Regulation of Foundations require submission of a declaration to the Regional Directorate of Foundations within six months of the end of every calendar year. Information on all donations received must also be filed with the regional office of the General Directorate of Foundations The information about fused, community and new foundations (founders, names of the managers and members of the board of directors, the activity report of the previous year, the budget and balance sheet, financial statements etc.) has been monitored since 1 July 2010 through a web based Information Management System of Foundations (VBYS). The foundations are also obliged to file annual declarations electronically. 152. In general, foundations are created for charitable, private wealth reasons and for specific purposes. Whenever a foundation has an economic activity that derives income it is liable to corporation tax in the same way as companies in Turkey and must file a Corporate Tax Return.
Conclusion
153. Registration of foundations and web based information in the VBYS ensure the availability of information on the founders and members of the foundation council (board) and this must be kept even if the foundation is wound up.
Other relevant entities and arrangements

154. Turkish laws also provide for the establishment of associations, association of ship owners and co-operatives.
Associations
155. Rules for associations are mentioned in the Constitution, Turkish Civil Code and also in Associations Laws and Regulations. These are legal entities founded by at least seven natural or legal persons to pursue specific and common purposes except for sharing profits. Associations are generally created for non-profit purposes but can own profit making enterprises to realise their goals, however, they cannot distribute these profits to the members of the association. Associations carrying on a business are subject to corporation tax. 156. Associations are regarded as a legal entity only after they submit their by-laws, establishment notifications and other required documents to the civilian administrative authorities namely governors in provinces and district governors in districts. The association by-laws include information on the founder members and supervisory boards. The Establishment notification includes identity details and place of residence and signatory information of the founder members. The registration of the association is recorded in the Associations Registry Book maintained by the Directorates of Associations as per provisions of Article 85 of the Regulation on Associations. Associations are obliged to notify changes of bodies of associations (board members) to the administrative authority within 30 days following such changes in accordance with Article 92 of the Associations Regulations. Information on the founders and board members is available with the Registry Office. There are 91 721 associations registered in the system of the Department of Associations and 406 of them are public-interest associations.
Associations of ship owners

157. An association of ship owners exists where a ship is owned by more than one person in joint ownership and it is used for maritime trade on behalf and account of all owners in accordance with the agreement concluded by them (Art. 951 TCC). 158. Article 17 of the Turkish Commercial Code provides that provisions concerning merchants apply to an association of ship owners. Merchants are obliged to choose and use a trade name, registering their undertaking with the Trade Registry and keeping commercial books. They are also subject to bankruptcy for their debts of any kind (Art. 18 TCC). 159. At present only one association of ship owners exists in Turkey. Generally, joint stock companies are used to own ships. Associations of ship owners are eligible for a special tax regime that grants tax exemptions. Article 1065 of the TCC obligates associations of ship owners to register and the Ship and Trade Registry must include information on names, residential places and nationalities of ship owners.
Cooperatives
160. Cooperatives in Turkey are governed by the Cooperative Law No. 1163. These are legal bodies with variable members, variable capital and are established to cater to the needs of the members. The Rules (Articles of Association) must be submitted to the Ministry of Customs and Trade in accordance with Article 3 of the Cooperative Law. The Articles of Association must be signed by a minimum of seven members. It is registered with the local Trade Registry Office. Particulars to be registered include the fact that the membership share documents are prepared in names of the members of the Board of Directors and the people authorised to represent the cooperative. There are 54 908 cooperatives registered in Turkey. 161. Pursuant to Article 2 of the Regulations on the Accounting of Cooperatives, Cooperative Associations, Central Cooperative Associations and the Turkish National Cooperative Associations all cooperatives must keep a Book of Partnership which contains entries of names and surnames of the partners, their addresses and date of participation in and leaving the cooperative and the number and amount of capital shares. Cooperatives are generally used in agricultural and construction sectors. Turkey has not received any request for information relating to associations or foundations.
Enforcement provisions to ensure availability of information (ToR A.1.6)

162. Jurisdictions should have in place effective enforcement provisions to ensure the availability of ownership and identity information, one possibility among others being sufficiently strong compulsory powers to access the information. This subsection of the report assesses whether the provisions requiring the availability of information with the public authorities or within the entities reviewed in section A.1 are enforceable and failures are punishable. Issues concerning accounting information are dealt with in Section A.2.
Commercial law
163. Article 553(1) of the TCC provides that the founders, board members, managers and liquidation officers shall be deemed responsible for the loss they cause against the company, shareholders and company creditors due to their default which caused a breach of their liability defined by the law and Articles of Association. 164. Pursuant to Article 33(2) of the TCC, anyone not applying for registration and not giving the reasons of abstention within the time granted by the Director of the Registry shall be liable to an administrative fine of TRY 1 000 (EUR 450). Making of false declarations for registration and enrolment is punishable by an administrative fine of TRY 2 000 (EUR 900)

(Art. 38(1)). Similarly, non-compliance with the obligation to report the alteration or removal of a registration following the alteration, termination or ceasing to exist of a matter which was registered shall be liable to compensation for the damages incurred (Art. 38(2)2). 165. Violation of the provisions relating to registration of commercial undertakings and trade names is liable to an administrative fine of TRY 2 000 (EUR 900) (Art. 51 TCC). 166. The founders of a joint stock company that make false declarations regarding the incorporation of a joint stock company are subject to a judicial fine 8 of not less than 300 days (Art. 562 TCC). The fine of an amount payable per day is determined by the court. 167. Article 64(1) obliges all merchants to keep commercial books. Article 64(4) provides that books such as the share register, documents of decisions and general assembly meeting and discussion books which are not related with the undertakings accounting are also commercial books. The failure to fulfill the obligations contained in Article 64 attracts an administrative fine of TRY 4 000 (EUR 1 800) and in cases where commercial books do not exist or contain no records or are not preserved in accordance with the TCC, the responsible persons are sentenced to a judicial fine of not less than 300 days (Art. 562 TCC). The administrative fines are issued by the highest local administrative authority. Information on the levy of judicial fines is not readily available. 168. The Board of Directors is responsible for orderly keeping of the shareholders log and these duties cannot be assigned to any other person (Art. 375 TCC). Sanctions for non-compliance with these provisions are not explicitly prescribed, but as the share registers are considered as books of the company under Article 64 of the TCC, sanctions provisions discussed above will apply. Information on the levy of sanctions are not readily available. 169. The founders, members of Board of Directors, managers and liquidators are responsible against the shareholders and companys creditors for damages caused on account of their breach of contractual obligations (Art. 553 TCC). 170. A law suit for the dissolution of commercial companies that are determined to have been involved in transactions in violation of the public order or the subject of business or in preparations in this direction or fictitious business and activities, can be brought before the court by the Ministry of Customs and Commerce (Art. 210 TCC).
8. According to Article 52 of the Law of 5237 Turkish Criminal Code a judicial fine is payment due by a violator to the State Treasury of an amount that is calculated by multiplying the number of days, subject to a minimum of 5days and maximum of 730, by the sum determined per day.
171. In case of a collective company, if the activities on behalf of a company are commenced without registration, the shareholders are liable to third parties owing to the activities commenced (Art. 216 TCC). Non-registration of trade names by partnerships attract administrative fine of TRY 2 000 (EUR 900). Turkey should monitor compliance relating to registration by partnerships with the Trade Registry and specify fines for non-registration or violations of provisions concerning registration of changed Articles of Associations. 172. Proceedings of administrative fines can be initiated against the managers of foundations, which fail to submit declarations, information and documents with the Regional Directorate of Foundations. 173. The failure to notify changes in the bodies of associations, as per provisions of Article 92 of Associations Regulations, attracts an administrative fine (Art. 32 Associations Law). Public-interest associations are audited by the auditors employed by the Ministry of Interior. Governorships carry out audits for associations. A total of 5409 associations were audited in 2011. The Department of Associations also carries out different education programs aimed at civil awareness. 174. The new Commercial Code requires the keeping of a central and shared database in an electronic environment that will store Trade Registry records and matters that are registered and announced. This database will be maintained by the Ministry of Customs and Trade and the Turkish Union of Chambers and Commodity Exchanges. The State and the relevant Chamber of Commerce will be responsible for damages resulting from not maintaining the Trade Registry. 175. The Ministry of Customs and Commerce is the regulatory and supervisory authority for commercial companies. Article 210 of the TCC authorises the Ministry to issue communiqus for the implementation of the TCC provisions by commercial companies. Trade Registry Offices and companies must comply with these communiqus. The TCC refers to preparation of principles and procedure for control of commercial transactions by the auditing staff of the Ministry of Customs and Trade. 176. There are about 145 inspectors in the Guidance and Inspection Board of the Ministry of Customs and Commerce to audit the Chamber of Commerce, companies and cooperatives etc. During the year 2011, audits in 342 cases were carried out which resulted in the issue of 533 reports. These audits included: Commercial Registry Office (8), trading companies (29), agricultural sales cooperative union (4), other types of cooperatives (consumption, insurance, operation, motor carriers, tourism development),168. However, statistical information about sanctions applied is not readily available.

177. According to Article 407(3) of the TCC, a representative of the Ministry of Customs and Commerce is required to be present in the General Assembly meetings of the companies as notified by the Ministry. 178. The Trade Registry is kept by the Trade Registry Offices established by the Chambers of Commerce and Industry and supervised by the Ministry of Customs and Trade. The TCC provides for the issuance of a by-law with regard to procedures of keeping a Centralised Trade Registry by the Council of Ministers. 179. Foundations are subject to audit by the Directorate General of Foundations and 74 auditors are working in the Directorate. The Directorate also organises training seminars for the managers of fused and artisans society and new foundations. The filing of stipulated declarations and notifications by the foundations to the Regional Directorate of Foundations are monitored through the system of Foundation Information Administration. The Regional Directorate levy fines for non-compliance. During the last three years fines were imposed in 599 cases.
Capital Market Law

180. Section 28 of the Communiqu on Principles Regarding Book-entry Recording of Dematerialised Capital Market Instruments Serial: IV, No. 28 (Communiqu 28) establishes that the CRA, members, and clearing and custody institutions which maintain records shall be liable to the owners for the damages attributable to inaccurate records to the extent of their defaults in maintaining the correct records. Sanctions regarding acting in violation or imperfect execution of notification obligations are not specifically regulated, however section 103 of the CML provides for imposition of an administrative fine in the range of TRY 20 000 (EUR 9 050) and TRY 250 000 (EUR 113 000) by the Capital Market Board for violations of the regulations.
Tax law
181. Non-compliance with the requirement of determining the tax identification number and indicating it on the documents and records, as specified by the Ministry of Finance, is liable to special irregularity fine in amount of TRY 230 (EUR 103) per transaction (Article 353(7) TPL). 182. According to Article 352 of the TPL, non-compliance with the provisions concerning the form of tax returns, contents of tax returns, notices and documents prescribed by law and annexes may be punished with fines according to the second degree irregularities and varies with the type of taxpayer. In case action of irregularity require assessment ex-officio the fines are doubled. These fines are: capital companies and first class merchants (TRY 60
(EUR 27)); second class merchants (TRY 17 (EUR 8)) and those subject to tax on simple method (TRY 4.30 (EUR 2)) as applicable for the year 2013. Tax authorities can determine defaults by correspondence with the Trade Registry Offices and other related organisations. Turkey has submitted that total fines of TRY 1 005 954 (EUR 454 691), TRY 946 648 (EUR 427 884) and TRY 1 515 258 (EUR 684 896) have been levied in the years 2009, 2010 and 2011 respectively for failure to submit the tax and charge statements in time. However, information on penalties levied in the years 2009 to 2011 for failure to submit ownership information is not separately available to the PRA.
AML law
183. Article 13 of the Law No. 5549 provides that the obliged parties violating the customer identification obligation shall be punished with an administrative fine of TRY 5000 (EUR 2 350) imposed by MASAK.
Conclusion
184. Enforcement provisions are in place in respect of the relevant obligations to maintain ownership and identity information for all relevant entities and arrangements. The commercial law, the tax law, the capital market law and the AML law provide for sanctions to punish the non-compliance of laws and regulations. 185. Information on investigations carried out, prepared reports and amounts of fine levied by MASAK, the Ministry of Customs and Trade have been provided by Turkey and have been discussed in Section A.3 below. While this data does not indicate that the enforcement measures were necessarily directed towards ensuring availability of ownership information, it appears that the quantum of applicable penalties is proportionate and dissuasive enough to ensure compliance. Turkey submits that, in practice, although there has been no instance where requested information on ownership was not available, information might have been provided late or not provided yet to partner jurisdictions as investigations may still be in progress, either resulting from delays caused by requesting jurisdictions in providing a clarification or additional information or lacking documents or caused by Turkey because of long time taken by tax auditors in completing the investigations. Issues relating to the provision of late responses have been discussed in Section C.5 below. Peer inputs received do not suggest non-availability of ownership information in Turkey. However, as Turkey has not always provided information to its EOI partners in time, Turkey is encouraged to monitor the cases where the timely availability of ownership information has impacted effective exchange of information.

Determination and factors underlying recommendations
Phase 1 determination The element is not in place. Factors underlying recommendations Joint stock companies are allowed to issue bearer shares. The Central Registry Agency maintains information on all shares, including bearer shares, issued by publicly held joint stock companies whose shares are traded on the stock exchange. However, there are insufficient mechanisms in place that ensure the availability of information allowing for identification of owners of bearer shares issued by other joint stock companies. Recommendations Turkey should take necessary measure to ensure that appropriate mechanisms are in place to identify owners of bearer shares in all instances.
Phase 2 rating Non-Compliant.
A.2 Accounting records

Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements.
General requirements (ToR A.2.1)

186. The Terms of Reference sets out the standards for the maintenance of reliable accounting records and the necessary accounting record retention period. It provides that reliable accounting records should be kept for all relevant entities and arrangements. To be reliable, accounting records should: (i) correctly explain all transactions, (ii) enable the financial position of the entity or arrangement to be determined with reasonable accuracy at any time; and (iii) allow financial statements to be prepared. Accounting records should further include underlying documentation, such as invoices, contracts, etc. Accounting records need to be kept for a minimum of five years. 187. The obligations to keep accounting records arise under the Turkish Commercial Code and Tax Procedure Law. Chapter V of Book I of the Turkish Commercial Code, which applies to all commercial undertakings, deals with obligations relating to the maintenance of commercial books.
Pursuant to Article 64 of the TCC, every merchant must keep commercial books and record in these books all commercial transactions, the economic and financial status of the commercial business, as well as the merchants debt and credit relationship. According to the TCC, the annual results of each accounting year must be clearly established. The books are required to be kept in a manner so as to provide third-party experts with an understanding of the activities and the financial status of the business during an examination made within a reasonable period of time. Books must be such that the creation and development of business activities could also be monitored through them. Article 12 of the TCC defines a merchant as a person operating a commercial undertaking under his or her name. 188. In the matter of detailed requirements concerning accounting records, the TCC relies on the provisions of the Tax Procedure Law. Article 65(4) of the TCC provides that natural and legal persons subject to the provisions of the TCC are obliged to comply with the provisions of the Tax Procedure Law No. 213 dated 4 January 1961(TPL) for keeping books and the time of making records and the arrangements that have been made on the basis of the authority contained in Article 175 and duplicate Article 257 of the same law. It further provides that the provisions of the TCC for keeping books, inventory, preparation of financial statements, capitalisation, provisions, accounts, valuation, savings, and submission do not hamper the implementation of the provisions of the Law No. 213 and other tax laws that set out the same matters and determination of the tax base in accordance with the taxation laws and the preparation of the financial statements. 189. Every merchant is obliged to prepare an inventory of assets and debts at the opening of his commercial undertaking and at the end of each fiscal year (Art. 66 TCC). Any records that appear in the commercial books must be adequate and true and must be made on a timely and regular basis (Art. 65(2)). 190. Provisions concerning the financial statements are set out in Articles 68 and 69 of the TCC. Merchants are obliged to prepare an opening balance sheet and year-end financial tables which consist of a balance sheet and an income statement. The year-end financial tables must be prepared in accordance with Turkish Accounting Standards and must be clear and understandable. Articles 71 through 81 of the TCC describe the principles regarding items in financial tables. 191. Individuals and legal persons, while preparing their financial statements, are obliged to comply with and implement Turkish Accounting Standards (TAS) published by the Agency for Public Oversight, Accounting and Auditing Standards. TAS issued and published by the Agency comply with international accounting standards but the Agency is also authorised

to set special and exceptional standards and make different regulations for various business sizes, sectors and non-profit organisations (Art. 88 TCC). 192. The Turkish Accounting Standards Board adopted the International Financial Reporting Standards as the Turkish Financial Reporting Standard (TFRS) in 2005. The Capital Market Board adopted the TFRS in 2005 for all publicly held companies. International accounting standards have been implemented for banks pursuant to the Communiqu published by Banking Regulation and Supervision Agency in July 2002.
Companies
193. The Board of Directors of a joint stock company is responsible for the preparation of financial tables and an annual activity report within the first three months of the accounting period following the date of the balance sheet as stipulated by the Turkish Accounting Standards and these must be submitted to the General Assembly (Art. 514 TCC). Joint stock companies must apply Turkish Accounting Standards for preparing the financial tables. According to the TAS, these financial tables must be prepared in such a way as to reflect the actual results related to assets, liabilities and obligations, net worth and activities of the company in full compliance with transparency principles (Art. 515 TCC), meaning that all transactions should be shown in the financial tables clearly and in a way to reflect reality. 194. Companies with capital that are subject to audit requirements pursuant to Article 397 of the TCC are obliged to set up a website and publish their financial statements and related reports. The sections of the website providing information on the announcements that are required by law are accessible by the general public (Art. 1524 TCC). 195. The directors of LLCs have a duty to draw up the financial statements and annual activity report of the company (Art. 625 TCC). The provisions concerning financial statements contained in the spe196. cial laws of the agencies, boards, and institutions which regulate and oversee the banks and other lending institutions, financial firms such as financial leasing and factoring, insurance and reinsurance firms and all institutions covered by the Capital Market Law, apply to cases that are not covered by provisions in the TAS or the administrative regulations laid out by the Agency for Public Oversight, Accounting and Auditing Standards (Art. 528 TCC). Therefore, the above mentioned provisions introduced by various regulating agencies serve as an additional layer of requirements which ensure that regulated entities keep records that are consistent with the standard. 197. Article 64(3) of the TCC requires opening as well as closing certifications of journal, ledger, and inventory books that are physically kept.
These certifications can be made by a notary public. The Law provides that the Ministry of Customs and Trade and Ministry of Finance will issue a communiqu to state the format and procedures of keeping the commercial books that are kept physically or electronically, time of entry into the books, the procedure and principles of certification renewal and opening and closing certifications. 198. All provisions concerning joint stock companies equally apply to commandite companies. Article 610 of the TCC stipulates that LLCs are subject to the regulations prescribed for joint stock companies in respect of the financial tables and reserve funds (balance sheet and income statements) and accounting records. Each shareholder is entitled to request from the directors information about all affairs and accounts of the company (Art. 614 TCC).
Partnerships
199. General provisions contained in Articles 64 and 65 of the Turkish Commercial Code obliging all merchants to keep books apply to all partnerships governed by the TCC. A shareholder of a collective company is entitled to get information about the transactions of the company, to review the documents and books of the company and to prepare himself an accounting table indicating the financial position of the company according to such records. Any part of the Articles of Association drawn up contrary to these provisions shall be invalid (Art. 225). 200. The executive shareholder of a collective company is obliged to draw up and sign financial statements in accordance with the provisions of Articles 64 through 88 of the TCC (as described above for companies) and the statements must be submitted to the board of shareholders for approval (Art. 227 TCC). The distribution of profit or loss must be determined as per the Articles of Association or based on a resolution between the partners which must not be contrary to the law. In the case of liquidation of a collective company, the liquidators are obliged to keep the necessary books and prepare a final balance sheet (Art. 288 TCC). These provisions also apply to a commandite company (Art. 328 TCC). 201. A silent partner of a commandite company is authorised to inspect the inventories, balance sheet and other financial statements of the company and their accuracy at the end of the fiscal year (Arts. 310 and 312 TCC). 202. Foreign partnerships carrying on business in Turkey are obliged to keep accounting records as per the provisions of the TPL. Ordinary partnerships are not subject to income or corporation taxes, but partners of an ordinary partnership are liable to keep accounting records in accordance with the provisions of the TPL, as they are considered to be merchants. Further, partners are liable to income tax and therefore, even on a purely practical

level, for determining the correct share of income of partners it would be necessary to keep accounting records. Further, the VAT Act obliges all registered entities to keep statutory books and adequate accounts to justify the supplies declared in the VAT return. Statutory books must be kept for a period of five years for VAT purposes. There is no turnover threshold for VAT registration in Turkey.
Trusts
203. Trusts are not recognised under Turkish law and therefore there are no specific requirements for them to keep accounts when they are administered in Turkey. Activities of trustees to manage assets of third parties on a professional basis would be regulated by the Banking Regulation and Supervision Agency or the Capital Market Board and such activities could only be performed by a joint stock company. Joint stock companies are obliged to keep accounting records consistent with the standard (as described above). These accounting records kept by the joint stock company include records of all the assets of customers managed by them. However, if a person resident in Turkey acts as a trustee of a foreign trust and such activities are not subject to regulation under banking or capital market laws (i.e. because the person acts in a non-professional capacity), then the obligations under tax laws would require trustees to keep accounts of a trust which they administer so as to avoid the attribution of assets and income of the trust to their account. 204. Article 171 of the Tax Procedure Law requires taxpayers to keep books which among other things, must serve the purpose of control and look into position of third parties (including the value in fiduciary capacity) with regard to taxation. The Turkish authorities have confirmed that these specific obligations applying to taxpayers ensure the keeping of accounting records of a foreign trust for which a trustee is resident in Turkey such that the tax position of the third party (trust) can be ascertained.
Foundations
205. According to Article 50 of the Foundation Regulation, New foundations and Annexed, Community and Tradesmens Foundations must record their accounts pursuant to Foundations Uniform Chart of Accounts which is published on the official website of the Directorate General and they must prepare their balance sheets and income statements according to the sample statements attached to the Chart. Further, Article 51 outlines the type of books and accounts that must be kept by the foundations which follow either the account method or balance sheet method.
Associations
206. Rules and procedures concerning keeping of records and books by associations are stated in the Regulation on Associations. They are obliged to keep their books on the basis of the operation account method; however, they must follow the balance sheet method if their annual gross income exceeds a certain threshold (Art. 31 Association Regulation). Income of associations must be evidenced by receipt documents and expenditure must be supported by vouchers (Art. 11 Association Law). 207. Associations and foundations are not subject to Corporation Tax but if they carry on commercial activities then their economic enterprises are subject to tax (Article 1 Corporation Tax Law). Commercial enterprises are defined to mean economic, industrial and agricultural enterprises which are operated continuously and owned by the associations or foundations. However, pursuant to the provisions of Article 173 of the TPL, economic enterprises of associations and foundations are exempt from the compulsion to keep books.
Association of ship owners

208. An association of ship owners is considered to be a merchant and so must keep commercial books (Arts.17, 18 TCC) and the provisions of Articles 64 to 66 of the TCC discussed above also apply to such associations. 209. The ship manager is obliged to keep a separate book related to shipping operations of the association and properly store the copies of relevant documents received and given (Art. 1074 TCC). The ship manager is also obliged to provide information and show documents and records with regard to the operations of the association to each joint ship owner on their request (Art. 1075 TCC).
Cooperatives
210. The obligations to keep books and accounts are prescribed by the Ministry of Customs and Trade in accordance with Article 89 of the Cooperative Law. Provisions of Article 176 of the Tax Procedure Law also apply to cooperatives.
Tax law obligations

211. The Tax Procedure Law (TPL) contains detailed provisions concerning Bookkeeping (Part II), Vouchers (Part III), Showing and Telling Statements (Part IV), Tax Book (Part V) and Conservation and Production of records (Part VI). Article 215 of the TPL requires that books and records

must be kept in Turkish, but those can also be kept in other languages provided that Turkish records are present. 212. Provisions in relation to book keeping are described in Chapters I through X of Part II. According to Article 172 of the TPL individuals and legal entities namely merchants 9 and artisans, trading companies, public establishments having an economic purpose, economical enterprises of associations and foundations, members of the liberal profession and farmers are obliged to keep books. The accounting period is generally the calendar year (Art. 174 TPL). First class merchants must keep books on the basis of the balance sheet, while merchants of the second class keep their books according to an operation account (Art. 176 TPL). Article 177 concerns first class merchants and to be classified as a first class merchant specific thresholds related to the annual amount of sales or gross income have to be exceeded. Commercial companies are always classified as first class merchants (Art. 177(4) TPL). 213. Bookkeeping on a balance sheet basis requires keeping of a journal, a ledger and a balance sheet book (Art. 182). The TPL describes a Journal, in which operations have to be entered in chronological order and in the form of Articles (Art. 183). The inventories and balance sheets must be drawn at the beginning and at the end of the accounting period and these are recorded in the balance-sheet book (Art. 185). Drawing up inventory includes establishing in a final and detailed form the assets and liabilities on the balance sheet day (Art. 186). Legal persons subject to Corporation Tax must keep accounts on a balance sheet basis. 214. Merchants of the second class must keep an Operation Account Book, containing the accounts of operation, which includes all receipts and expenses. Amortisation of assets is treated as an expense (Art. 194). Entries must indicate details: serial number, date of entry, kind of operation and amount. Taxpayers keeping books according to an operating account and trading goods must keep an inventory of their stock (Art. 195). Such taxpayers must also draw up at the end of each accounting year an extract of the operating account in which information on the expenses and receipts must be shown separately (Art. 196). Merchants whose annual sales do not exceed thresholds determined each year by the Ministry of Finance can opt for the simple method for determining their income and in that case they have no obligations of bookkeeping or withholding of tax. 215. Entities that keep accounting records on a balance sheet basis must also comply with the General Communiqu No 1 on Accounting System
9. Article 12(1) of the TCC defines merchant as a person who operates a commercial undertaking even only in part under his own name.
Application that describes the procedures and principles of accounting in five sections as follows: Basic concept of accounts; Explanations on accounting policies; Principal of Financial Statements; Preparation and presentation of financial statements; The framework of uniform chart of accounts, the chart of accounts and explanations
216. The above regulations ensure that enterprises, companies and legal entities provide a true and fair accounting of their operations. Article 219 of the TPL requires that entries in the books must be made in due time. Transactions must be entered daily in the daily cash book, daily retail sales and proceeds book and independent professionals income book. 217. All business entities and individuals subject to tax in Turkey are required to file tax returns. They must attach detailed balance sheet and detailed income statement or operating account summary with the Corporate Tax Return.
Exceptions
218. Article 173 of the TPL provides exceptions for certain individuals and legal entities from record keeping obligations. These are: Artisans who are free from income tax levy; Members of the liberal profession whose profits are estimated on a lump sum basis in accordance with the Income Tax Law; and Establishments which are exempt from Corporation Tax: Public establishments having an economic purpose and economical enterprises of Associations and Foundations.
219. Article 173 further provides that, the exception from keeping accounting books to taxpayers who are exempt from Income Tax and Corporation Tax liability does not extend to books to be kept for another tax not assessed on lump sum basis. Turkish authorities advise that accounting liability for such exempted entities arise under the provisions of Turkish Commercial Code. The VAT Act also obliges all registered entities to keep statutory books and adequate accounts to justify the supplies declared in the VAT return. Statutory books must be kept for a period of five years for VAT purposes.

220. General Communiqu Number 345 issued on 28 February 2005 in regard to Free Zone Law 3218 obliges all natural and legal persons carrying out business in Free Zones to keep their books in accordance with the balance sheet basis coherent with the provisions of the Tax Procedure Law. Further, provisions of Article 64 of the TCC also apply to Free Zone entities.
Filing of financial statements with Turkish authorities

221. Pursuant to the Communiqu on Principles of Financial Reporting in Capital Market Serial: XI, No. 29, capital market institutions including rating agencies, independent auditing agencies and publicly held companies are obliged to submit their financial statements to the Capital Market Board. Publicly held joint stock companies whose shares are traded on a stock exchange do not submit their financial tables to the Capital Market Board, since these are disclosed to the public through the public disclosure platform (KAP). Partnerships that issue securities market instruments which are traded on the stock exchange, financial intermediaries, portfolio management companies, and the subsidiaries, associates and joint ventures of these enterprises are also obliged to submit their interim financial reports, annual financial reports and related independent audit reports to the CMB. Similar provisions apply to all other entities such as intermediary institutions, investment companies, mutual funds, independent audit agencies, rating agencies, brokerage houses, venture capital investment companies regulated by the CMB. Publicly held joint companies which are not traded on a stock exchange must also submit their annual balance sheets and income statements to the CMB within one month following their ordinary general assembly. All entities subject to supervision and monitoring by the Banking Regulation and Supervision Agency (BRSA) are also obliged to submit financial reports to the regulatory authority (Art. 39 Banking Law). Article 14 of Law No. 6361 obliges financial leasing, factoring and financing companies to submit independent audit reports to the BRSA.
Underlying documentation (ToR A.2.2)

222. According to the TCC, every entity covered by the provision of that Code is obliged to keep all books of account, inventories, opening balances, annual accounts as well as further organisational documents. Similar requirements are stipulated in the TPL. The basic concepts of accounting according to the General Communiqu No 1 on Accounting System Application include amongst others the objectivity and documentation concept (Chapter II, No 2). This concept requires that accounting records must be based on appropriately prepared objective documents reflecting reality.
223. A merchant is obliged to keep a copy of each document sent out in connection with his undertaking in a written, visual or electronic environment (Art. 64/2 TCC). It is compulsory to issue/obtain an invoice when the cost of goods sold or service provided exceeds TRY 800 (EUR 348), however, the seller must issue an invoice if requested by the purchaser for smaller amounts (Art. 232 TPL). It is now possible to issue invoices in the form of electronic documents (e-invoices) to registered users willing to receive such invoices. First and second class merchants must keep an expenses note (Art. 234 TPL). 224. Joint stock companies, that have to undergo an audit as specified by the Council of Ministers, must be audited by the auditor according to the Turkish Accounting Standard which comply with the international auditing standards that are published by the agency for Public Oversight, Accounting and Auditing Standards. The financial statements and the annual report by the Board of Directors that have not been audited, although required to be audited, are considered to have not been prepared (Art. 397 TCC). Article 398 of the TCC prescribes the scope of financial auditing which encompasses the auditing of the financial tables of the company or group and cover the internal auditing of the accounting records. Auditing must be carried out in such a way to determine the compliance of the companys financial tables and annual activity report prepared by the Board of Directors with the information obtained during the audit process. The Board of Directors must ensure access for the auditor to the statutory books of the company, correspondence, documents, assets, debts, cashier, valuable papers and inventory for auditing process (Art. 401 TCC). The auditor must sign and submit his report to the Board of Directors (Art. 402 TCC). Auditors are elected by the General Assembly (Art. 408 TCC). Similar provisions apply to LLCs (Art. 635 TCC). 225. Part III of the TPL prescribes rules concerning vouchers. Chapter I refers to documentation of entries and all entries made in accordance with the TPL regarding relations and transactions with third persons must be documented. The Law also prescribes the form of the invoices and the information that must be recorded on such invoices. Letters written and received by merchants in connection with their commercial operations must be kept in files according to the requirements of the business (Art. 241). 226. Merchants are obliged to keep in files all legal documents such as agreements, letters of commitment, guarantees, court judgements as well as fiscal documents (Art. 242). According to the same Article, taxpayers are required to keep vouchers of their expenses (Art. 242). Turkeys taxation laws contain detailed transfer pricing provisions which are based on arms length principle. Documentation requirements ensure that all documents in relation to related party transactions are maintained.

227. Provisions concerning the books, records and other documents in the TPL or other tax laws also apply to electronic books, records and documents.
Document retention (ToR A.2.3)

228. Merchants must retain commercial books and documents for 10 years (Art. 82(5) TCC). The time period for record retention starts with the end of the calendar year in which the latest records have been entered in the commercial books and consolidated financial statements have been prepared. These books and documents include commercial books, inventories, the opening balance sheets, interim balance sheets, financial statements, annual reports, consolidated financial statements, all commercial letters and all correspondence related to commercial business. Foundations must retain all books and documentation for 10 years beginning from the calendar year following the relevant fiscal year (Regulation of the Foundation Law, Art. 52). 229. Merchants are obliged to keep their books following closure of business activities. In case of official liquidation or ending of the status of the legal entity, the books and papers are stored by the Court of Peace for ten years (Art. 82(8) TCC). These provisions apply to all commercial entities governed by the TCC. 230. Records can be kept in a computerised environment but must be kept in line with the Turkish Accounting Standards and must be available and made legible in a reasonable period of time throughout the term of storage. Heirs of a merchant in case of his or her death, and the merchant if business activities are closed, must also keep the books. In case of official liquidation or succession or the legal entity status is ended, the books are stored by the Court of Peace for ten years (Art. 82 TCC). 231. In addition, Article 253 of the TPL obliges all persons, who are obliged to keep books in accordance with the TPL, to conserve their accounting books and records for a period of five years as from the calendar year following the year to which they refer.
Sanctions
232. Merchants who do not fulfil the obligations of keeping books and do not hold the necessary certifications, as prescribed in Article 64 of the TCC, are sanctionable to an administrative fine of TRY 4 000 (EUR 1 800) (Art. 562(1) TCC). A similar fine is stipulated for failure to keep the books as required by Article 65 of the TCC or take inventory pursuant to Article 66 of the TCC. The failure to prepare financial statements in accordance with the provisions of Turkish Accounting Standards attracts a similar penalty of TRY 4 000 (EUR 1 800) (Art. 562(2) TCC). In cases where commercial books
do not exist or contain no records or are not preserved in accordance with the TCC, the responsible persons are liable to a judicial fine of not less than 300 days (Art. 562(6) TCC). 233. The auditors who audit financial statements, reports, accounts of companies and company groups are liable for damages they cause against both the company and shareholders and the companys creditors for the faults committed in fulfilling their statutory duties (Art. 554 TCC). 234. Tax authorities are empowered to exercise control procedures to determine whether the books required to be kept daily are available at the place of business and have been certified and entries are being made properly (Art. 127 TPL) (see paragraph 265, below). 235. Managers of associations who fail to maintain the books and keep records on uncertified books may be punished with a prison sentence from three months to one year or a judicial fine. The managers of associations and other persons responsible for keeping records are liable to an administrative fine if the books and records are kept contrary to the prescribed procedure (Art. 32 Association Law). 236. The Tax Procedure Law provides that failure to keep books or keeping them incompletely or in such a way that it is impossible to conduct a tax examination based on them is considered an infraction of the provisions of fiscal laws and the taxpayer is liable to the fines as prescribed in the law, depending on the type of taxpayer (Art. 352). 237. Article 352 of the TPL prescribes degree of irregularities and fines. Failure to keep any one of the books required to be kept by the TPL or keeping the books and documents irregularly or keeping in books a confusing way so as to make tax examination impossible are considered irregularity of first degree fine (see paragraph 176 above). In addition, failure to comply with the procedure and principles of accounting standards prescribed by the tax law may result in imposition of special irregularity fine of TRY 4 300 (EUR 1 943)(Art. 353/6 TPL). 238. Preparing fraudulent books and records, altering or concealing the books, records and documents and preparing or using documents with misleading contents may result in imprisonment from 18 months to three years (Art. 359 TPL). 239. The act of destruction of the books, records and documents that are required to be kept also attracts a penalty of imprisonment from three to five years (Art. 359 TPL). Non-fulfilment of duties in connection with taxation or fulfilling the 240. same in an incomplete manner which results in tax loss can also be subject to a fine equal to the amount of tax lost (Art. 344).

241. Turkey has a very well established tax system and a large number of tax inspectors in the provinces of Turkey audit the tax files of various types of taxpayers. Tax audit in particular establishes whether the income disclosed by taxpayers is correct or not. Taxpayers can only justify the correctness of receipts and expenses based on properly kept accounting records and underlying documents. In practice tax authorities check the availability of accounting records kept by the taxpayers and Turkey has levied fines of TRY 1 024 379 (EUR 463 019) and TRY 2 859 805 (EUR 1 292 631) during the years 2009 and 2010 respectively on account of irregularities in keeping accounting records.
Conclusion
242. The Turkish Commercial Code and Tax Procedure Law ensure the keeping of reliable accounting records and underlying documentation for all relevant entities and arrangements, except for foreign trusts. The laws also impose obligations to maintain these accounting records for a minimum period of at least five years. 243. The laws of Turkey do not prescribe clear requirements for keeping of accounting records in respect of foreign trusts for which a trustee is resident in Turkey or the trust is administered in Turkey. 244. Turkeys EOI partners have requested accounting information of companies. Some of Turkeys EOI partners have indicated that they did not receive accounting information in some cases. Peer inputs indicate that Turkey does not refuse to provide the requested information but does not provide in good time. Peers consider that completion of ongoing investigations take time in Turkey and that leads to delayed receipt of information. Turkey has explained that information could not be provided for the reason that investigation is still ongoing (see Section C.5). The peer inputs do not indicate that the accounting information was not available. Turkish authorities advise that there has been no instance where accounting information was not available to satisfy the information requirements of partner countries.
Phase 1 determination The element is in place. Phase 2 rating Compliant.
A.3. Banking information

Banking information should be available for all account-holders.
245. Access to banking information is of interest to the tax administration when the bank has useful and reliable information about its customer identity and the nature and amount of financial transactions. 246. Banks and financial institutions are defined as obliged parties under the Law No. 5549 on Prevention of Laundering Proceeds of Crime (Art. 2) and the Regulation on Measures Regarding Prevention of Laundering Proceeds of Crime and Financing of Terrorism (Art. 4 RoM). Article 3 of Law No. 5549 stipulates that obliged parties must identify the persons carrying out transactions and the persons on behalf or account of whom the transactions are conducted within or through obliged parties before the transactions are conducted. The obliged parties must apply extensive customer due diligence measures in order to be able to identify a customer or a third party if a customer is acting for someone else. Detailed provisions in relation to CDD are set out in the Regulation which entered into force on 1 April 2008. This includes depending on the category of client the identification of natural and legal persons and verification of their identity (Arts. 6 to 12); customer identification and verification of the identity of the persons acting on behalf of a natural person and the verification of the identity of the representation authority of that person (Art. 14); measures on identification of the beneficial owner and verification of its identity. (Art. 17); obligation to obtain information on the purpose of the business relationship and to conduct ongoing due diligence (Art. 18 and 19). Article 5 clearly states that identification is required when the amount of a single transaction or the total amount of multiple linked transactions is equal to or more than TRY 20 000 (EUR 9 000). Transactions involving payments of amounts over TRY 8000 (EUR 3620) must be made through banking channels instead of cash (Communiqu 332, TPL). 247. Article 22 of the RoM prohibits anonymous accounts and accounts with fictitious names. The RoM requires obliged parties to take necessary measures in order to obtain adequate information on the purpose of the requested transaction (Art. 18) and requires them to follow-up on a continuing basis on the transactions conducted by their customers, in particular using the knowledge the obliged parties have of them and to keeping up-to-date and accurate information, documents and records (Art. 19). 248. A bank that fails to meet those requirements shall be punished with administrative fines up to TRY 10 000 (EUR 4 500) (Art. 13 Law No 5549). 249. Article 7 of the Banking Law No. 5411 requires that any bank establishing itself in Turkey must take the form of a joint stock company and therefore the duty to record and retain documents by the banks also follows

from the general duties contained in Article 64 of the Turkish Commercial Code. This requires all entities covered by these provisions to keep accounting books and a photocopy, carbon copy, microfiche, computer record etc. of every document that had been issued with regard to the business, on a written, visual or digital media. Banks and financial institutions are subject to the provisions of the tax 250. laws. Therefore, pursuant to the Article 253 of the Tax Procedure Law No. 213, all books and documents must be retained by them for five years. 251. Pursuant to Article 8 of the AML Law No. 5549, obliged parties must retain all documents, books and records, and identification documents in whatever format they are kept regarding their transactions and related obligations for eight years starting from the date they were drawn-up, the last record date or the last transaction date respectively. Violations of provisions of Article 8 of the AML Law are sanctionable with a judicial penalty of imprisonment from one year to three years, and a judicial fine of up to five thousand days. The fine of sum payable per day is determined by the Court and the fine is in the range of TRY 100 (EUR 45) and TRY 500 000 (EUR 2 250) (Art. 14). 252. Article 37 of the Banking Law obliges all the banks to ensure uniformity in their accounting systems; correctly record all their transactions; and timely and correctly prepare their financial reports in a style and format that will meet the requirements of providing information that is clear, reliable and comparable and that is suitable for auditing, analysis and interpretation. Article 42 of the same Law further obliges banks to keep for a period of ten years the original letters received and activity-related documents, or proper copies where the original ones are not available, as well as photocopies of letters written in order of their number and dates. According to Law 3167 on the Arrangement of Payments by Cheques and Protection of Cheque Holders, all documents related to financial transactions must be kept for five years following completion of the transactions by banks and other banks that participated in completion of the transaction. 253. The Banking Regulation and Supervision Agency (BRSA) is responsible for regulation, supervision, and monitoring of banks and other financial institutions. Accordingly, it supervises implementation of the Banking Law 5411. In addition to various enforcement and supervisory measures, it conducts monitoring and onsite audit of implementation by banks of the provisions of the Banking Law. The BRSA can review ledgers of banks, records and documents including those related to taxation. Their supervisory activities and compliance programs ensure that banks maintain records in accordance with provisions of the Banking Law. The BRSA imposed administrative fines on three banks in 2009, six banks in 2010 and one bank in 2011 concerning record keeping violations.
254. The violations of obligations with regard to customer identification are punishable with an administrative fine (Art. 13) or a judicial fine (Art. 14) of the Law No. 5549. Turkeys financial intelligence unit is called MASAK, and it is responsible for the implementation of AML obligations. MASAK is a member of the Egmont Group. On the request of MASAK, inspection of AML obligations is carried out by Tax Inspectors, Customs and Trade Inspectors, Sworn-in Bank Auditors, Treasury Comptrollers, Banking Regulation and Supervision Agency Experts and Capital Market Experts and Insurance Audit Experts and Actuaries. Ninety-four examiners were responsible for money laundering investigations in the year 2011. Examiners report AML violations detected during examinations to MASAK. During the period 2007 to 2011, money laundering investigations were carried out in 1092 cases and referrals have been made for 1236 persons. Violations in relation to customer identification were detected in 210 cases during the three year period ending in 2011. A total fine of TRY 3 085 729 (EUR 1 240 292) was levied for these violations as well as violations concerning suspicious transaction reporting. MASAK also carries out supervision of compliance programs of the intermediary institutions as part of its ongoing supervisions program and 43 intermediary institutions were supervised in 2011. The compliance activities of several groups of examiners such as bank auditors, tax inspectors, treasury controllers, capital market authorities, Ministry of Customs and Commerce and banking authorities ensure that information to be kept by the banks in relation to account holders is in fact kept. 255. MASAK conducts sector wide compliance programs. In 2009-11, they inspected banks (investment and development banks excluded), financial leasing companies, precious metal dealers, asset management companies, betting companies, and portfolio management companies, capital markets brokerage houses, insurance and pension companies, factoring companies, finance companies, money lenders and Istanbul Gold Exchange. MASAK carried out programmed inspections of 299 obliged parties for compliance with AML/CFT obligations during the period 2009 to 2011. In 2011, 108 examiners were involved in the inspections. They applied fines of TRY 1 292 284 (EUR 4 88 000) in 2011 which related to violations of CDD measures and obligations to report suspicious transactions.
Conclusion
256. The provisions of the Banking Law, the Turkish Commercial Code and the AML Law oblige banks and financial institutions to keep and retain information in relation to all accounts including financial and transactional information. 257. Turkeys exchange of information partners reported that in some cases, banking information was not received as investigations were in

progress in Turkey. In practice, although there has been no instance where requested banking information was not available, information might have been provided late or not provided as investigations take time or are still in progress. Issues relating to the provision of late responses have been discussed in Section C.5 below.
COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION 71
B. Access to Information
Overview
258. A variety of information may be needed in a tax enquiry and jurisdictions should have the authority to obtain all such information. This includes information held by banks and other financial institutions as well as information concerning the ownership of companies or the identity of interest holders in other persons or entities, such as partnerships and trusts, as well as accounting information in respect of all such entities. This section of the report examines whether Turkeys legal and regulatory framework gives the authorities access powers that cover all relevant persons and information and whether rights and safeguards are compatible with effective exchange of information. It also assesses the effectiveness of this framework in practice. The procedure followed by the Turkish competent authority in order to 259. access information to respond to incoming requests for information depends on the source of the information needed. Requests are responded to directly, though in very limited cases, when it is not necessary to seek assistance from other areas of the tax administration or other authorities and if the information is available in the authoritys own data base. In about 10 percent of the cases, information is obtained from the local Tax Office Directorate which uses the database of the tax administration. For the other cases, the competent authority obtains in practice the required information through the Tax Inspection Board, which in turn relies on tax inspectors. 260. Turkeys tax laws provide sufficient powers, including compulsory powers, to its officers to obtain information from various sources. When the information requested by a foreign authority is not already in the possession of the tax administration, tax inspectors normally conduct tax audits to obtain the information and during such an audit, they are empowered to request required information from the taxpayer or third parties. Tax inspectors may also visit business premises and in case of non-compliance, may impose irregularity fines and search the premises after obtaining an order from the court.
72 COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION

261. Domestic tax laws of Turkey do not explicitly empower the tax authorities to obtain information for implementing the provisions of tax treaties or for foreign tax purposes. Turkish authorities take the view that the constitutional status of the EOI agreements in conjunction with the domestic tax powers allow the domestic powers to be used to respond to EOI requests. To remove legal uncertainties, it is recommended that powers of tax authorities to obtain information for EOI purposes be clarified. In practice, tax authorities have been successfully obtaining information for the purposes of EOI and they have never faced any legal problems. It appears that, in practice, in all cases where information is required from the taxpayer or third parties, tax inspectors undertake tax audits, the findings of which are also used in tax assessments for domestic purposes. These audits must be completed in 6 months to 12 months depending on whether those involve limited or full investigations. Full investigations cover all transactions of a taxpayer in one year. On the other hand, in limited investigations, only one or some of the transactions of the taxpayer are examined. There is no difference in procedures between limited or full investigations. The time allowed for the audit can also be extended administratively if not completed in time. These new time limits are in force since 2011. Turkish authorities advise that almost all of the requests in the scope of exchange of information are subject to limited investigations. Due to the introduction of new time limits for the completion of investigations, it is expected that delays in collecting information at the level of tax inspectors will now be less frequent. 262. There are no limitations on the competent authoritys powers to obtain information from banks, other financial institutions and third parties. They can also obtain and provide accounting records for all relevant entities and arrangements. 263. Barristers and solicitors are not obliged to provide information to the Ministry of Finance and tax authorities other than the names of their client and information relating to their fees and expenses. Information on facts which are entrusted to them or which they have learnt through their duties cannot be requested by tax authorities. The scope of protection afforded to professional privilege is broad, and is not consistent with the international standard. 264. Persons performing a fiscal examination are required to clearly explain the object of the examination to the person who is subject to it. This is a requirement also in cases of examination carried out for exchange of information purposes. There is no right of appeal against this explanation; therefore, this requirement does not prevent or delay effective exchange of information.
B.1. Competent Authoritys ability to obtain and provide information

Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information).
265. The Minister of Finance or a representative authorised by the Minister is the competent authority for the purposes of exchange of information for tax purposes. The Commissioner of the Presidency of Revenue Administration (PRA) is authorised to function as the competent authority of Turkey with regard to international exchange of information pursuant to DTCs and TIEAs signed by Turkey. The Deputy Commissioner of the PRA is responsible for European Union matters. 266. The Revenue Administration Organisation and Duties Law No. 5345 established the PRA under the umbrella of the Ministry of Finance. The PRA is in charge of tasks related to state revenue policies. In particular, international tax relations and work related to bilateral and multilateral tax agreements fall within the responsibilities of the PRA. In addition, the PRA is also responsible for cooperating with the EU, international organisations and other countries in the field of taxation. The Tax Inspection Board (TIB) is also attached to and works under the Ministry of Finance and is responsible for tax inspections and audits in the country. Tax Inspection Directorates are located in 30 provinces of Turkey. 267. The EOI Section is located within the central organisation of the Turkish Revenue Administration in Ankara and is responsible for both incoming and outgoing requests. The EOI Section either obtains information from the tax administration data base or forwards information requests to auditing units in order to obtain the information. The auditing units (tax inspectors) working under the TIB gather information directly from different sources including the Land Registry, Police Organisations, banks or taxpayers.
Bank, ownership, and identity information (ToR B.1.1)

268. Turkeys tax authorities powers to obtain information for tax purposes are derived from the Tax Procedure Law (TPL). The taxation office is the authorised department to assess and collect taxes (Art. 4 TPL). 269. Decree No. 646 issued in 2011 established the Tax Inspection Board (TIB). All audit functions of the tax administration are now centralised with this Board which were hitherto carried out by four different auditing units. There are 4 635 tax inspectors and assistant tax inspectors for carrying out

coordinated and effective tax audits. Some of the main functions of the TIB are: Carrying out tax investigations under the provisions of the TPL and other income tax laws; Ensuring necessary cooperation on tax investigations with the Revenue Administration; Evaluating denunciations and complaints about tax evasion; Devising methods for prevention of tax evasion and avoidance.
270. All the higher officials of the civil administration, the chiefs and officers of the police, mayors, alderman of villages and public institutions are obliged to provide within their powers facilities and give their assistance to the officials entrusted with the enforcement of fiscal laws (Art. 7 TPL). 271. Different types of powers in relation to control and examination are prescribed under Part VII of the TPL. These deal with control, fiscal examination, search, and gathering information. The object of control is to investigate and determine the taxpayers, and the physical events, records and subjects related with the obligation to pay tax (Art. 127). The fiscal examination is carried out for the purposes of investigation, assessment and ensuring the accuracy of taxes that must be paid (Article 134). 272. Under the Tax Procedure Law, fiscal examination means a tax audit which is carried out by tax officers listed in Article 135 of the TPL. The object of the examination is to investigate, assess and ensure the exact amount of the taxes that must be paid. A fiscal examination involves examination of books and documents and the examination may extend to the actual inventory of economic assets. A tax examination is carried out by tax inspectors, assistant tax inspectors, the highest provincial treasurer or tax office managers. Managers, who work at the central and provincial organisations of the Revenue Administration, have the authority to undertake a tax audit under any circumstances. The persons that can be subjected to fiscal examination are specified in Article 137 of the TPL and these can only be individuals or legal persons that are obliged to keep books and accounts and to keep and produce documents and vouchers under the TPL or other tax laws. 273. Examinations are in principle carried out at the workplace of the person subject to examination but can also be conducted at the Taxation Office in the prescribed circumstances (Art. 139 TPL). 274. Provisions concerning search are contained in Chapter III of part VII of the TPL. A Justice of Peace is empowered to authorise search in cases involving fiscal fraud. Persons that are authorised to conduct searches can
take books and documents found during the search to the tax office. The provisions of Criminal Procedure Law apply during such a search. Powers to gather information from the public administration, institu275. tions, taxpayers or other individuals and legal entities that are connected with the taxpayer are provided to the Ministry of Finance and the persons having powers to carry out the fiscal examination (Art 148 TPL). Information can be requested in writing or verbally. Where informa276. tion is requested in writing the request must be confirmed in writing and the person requested to provide information is granted a time of not less than 15 days to respond (see also paragraph 287, below). 277. The powers of fiscal examination concern payment of Turkish tax, whereas, powers under Article 148 are broader in scope and are not limited only to fiscal examination and can be used independent of or prior to fiscal examination. The Ministry of Finance or persons having the power to carry out fiscal examination may obtain information from taxpayers and other persons that have a relationship with taxpayers. These provisions clearly enable authorities to obtain information from third parties, but there has to be a relationship or connection between the third party and a taxpayer. 278. The access power in Article 148 is also used as a basis for obtaining information on a periodic basis from a wide range of persons in Turkey. Article 149 of the TPL obliges public administrations and establishments, individuals and legal entities to submit information to the Ministry of Finance and tax offices on the events giving rise to taxation, both at given intervals and regularly. This provision enables the tax administration to receive information on prescribed matters from specified agencies on a periodical basis and allows the tax department to create a database of information. This data base assists and will form the basis of automatic exchange of information by Turkey. 279. Only the persons authorised by the Ministry of Finance can use the information that is collected (Art. 152 TPL). 280. Individuals and legal entities cannot refrain from providing information by citing special secrecy laws (Art. 151 TPL) (subject to certain exceptions, see section B.1.5 below). 281. The persons authorised to conduct controls (Article 128 TPL) are empowered to perform various procedures in relation to investigation and determination of the taxpayers, and the physical events, records and subjects related with the obligation (Article 127 TPL). 282. Accordingly, tax auditors are empowered to obtain information from taxpayers and third parties, including any person who holds information in an agency or fiduciary capacity and nominees and trustees. These powers are

exercised by the tax inspectors of the Tax Inspection Board who can make inquiries as well as inspecting documents, and conducting search and seizure. Turkey has clarified that tax inspectors can also obtain information from nontaxpayers, and/or real persons or legal persons carrying on business in Free Zones as well as non-residents subject to tax in Turkey by virtue of powers available to them under Article 148 of the TPL (however, see analysis under section B.1.3 Domestic Tax Interest). 283. A fiscal examination can be carried out at any time within the five year period of prescription for assessment of taxes (Art 138 TPL). A period of five years is prescribed for conserving the accounting books and records and these must be produced and made available for examination during the period of retention (Arts 253, 256 TPL). A previous examination of the taxable amount determined ex-officio does not prevent a second examination and, if necessary, supplementary examination (Art 138 TPL). If the required information pertains to an earlier period the local office can provide information as available in the tax file but cannot force the taxpayer to provide the information. The Turkish authorities are of the view that, the power under Article 148 to obtain information is not subject to such a time limit (however, see analysis under section B.1.3 Domestic Tax Interest).
Bank information
284. Article 148 of the Tax Procedure Law obliges the public administration and institutions, taxpayers or other individuals and legal entities that have a relationship with the taxpayer to give all the information required by the Ministry of Finance or by persons having the power to carry out fiscal examinations. Banks submit information on time deposits, money transfers and SWIFT payments on a routine and regular basis (Art. 149 TPL). 282. The provisions of the Tax Procedure Law are very explicit and institutions and legal persons cannot rely on banking secrecy in order to refuse a request for information (Arts. 148, 151 TPL). 285. Turkey has indicated that there are no limitations on the tax authoritys power to obtain information held by a bank or other financial institutions. Application of domestic law and administrative practices does not create any obstacle for obtaining information from banks. The authorities further indicate that access to information held by banks and other financial institutions is one of the routine powers of the Ministry of Finance and no special procedure is required. In practice, tax inspectors conducting a tax investigation request information from banks pursuant to Article 148 of the TPL. The information request may, upon the approval of the tax inspector, be made with a branch of the related bank in Turkey or with the Directorate General of the bank. The Turkish Revenue Administration also requests information
from banks on a regular basis within the context of obtaining continuous information as per provisions of Article 149 of the TPL. 286. The requesting jurisdiction must provide information to enable Turkey to identify the information required and who holds it. As a matter of practice, the name of the bank and either of the information such as namesurname, birth date and birth place or account number of the account holder or tax number (which identifies the account holder) is generally sufficient.
Criminal matters
287. The procedure for obtaining information in criminal tax matters is no different than in civil tax matters. Pursuant to Article 367 of the TPL, the tax inspectors who uncover offences of a criminal nature set out in Article 359 during their inspections must directly notify the chief public prosecutor. There is no separate information gathering procedure in a case involving an information request from a foreign competent authority concerning a criminal tax matter. Turkey obtains and provides information in respect of a criminal matter within the framework of the EOI agreement to foreign authority.
Accounting records (ToR B.1.2)

288. The powers described above can be equally used for obtaining accounting information. Obligations to produce books, documents and other records are set out in Article 256 of the TPL, which reads as follows: The individuals and legal entities mentioned in the preceding Articles and those subject to the obligations introduced by Article 257 are obliged to produce and make available for examination by the competent authorities and officials at their request all books, documents, tax book and entries on all microfiches, microfilm, magnetic tapes diskettes and similar medium and all information, cipher necessary to have access to and read them within the period they are obliged to keep them. Pursuant to Articles 253 and 254 all persons who are under obligation to conserve books must produce the books.
Gathering information in practice

289. In a very limited number of cases, the EOI Section of the competent authority responds directly to requests for which it can easily access information in the tax administration database (name and address of taxpayer, TIN, etc) and for which an investigation is not necessary by the tax inspectors. Turkish authorities advise that information such as address, ownership,

identity and matrimony information has been provided to the EOI partners without conducting tax audit. However, in most cases, the EOI Section forwards the requests after translation to the Tax Inspection Board (TIB). 290. In most cases, the TIB accepts the requests but in about 10% of the cases, they may ask the PRA to directly send the request for information to the local Tax Office Directorates, which has information contained in tax returns. The local Tax Office Directorates generally respond within a month and in that case, the reply to the requesting country is sent soon afterwards. In these cases, the required information is available in the database of the tax administration The Turkish authorities indicate that requests for information received 291. from foreign jurisdictions often require ownership information together with the examination of records and books of the taxpayer in order to verify the requested operation or transaction such as examination of invoices, contracts, loan agreements, and in some cases customs documents. Sometimes it is necessary to interview persons. Therefore, in all these cases, which are about 90% of the total requests, the EOI Section forwards the translated request to the TIB. The TIB assigns the case to an official in the Ankara office, who in turn requests the information from the tax auditor of the province. 292. In 2011 Turkey published Regulation on Procedures and Principles for carrying out a Fiscal Investigation in the Official Gazette setting out a detailed procedure in the matter of fiscal investigations. The Tax Inspector needs to launch an investigation within 10 days after being appointed to carry out an investigation (Art. 7 Regulation). There are no special auditors to deal with EOI cases. Article 140(6) of the TPL prescribes a time-limit for the completion of investigations of one year for full investigations, and six months for partial investigations. However, if the investigations cannot be completed within these prescribed time limits, additional time up to six months may be granted by the Tax Inspection Board upon request. The Turkish authorities advise that almost all EOI request cases involve partial investigations and must be completed in six months. These new time limits have been in force since 2011 and are likely to substantially reduce delays in providing information by tax inspectors. The holder of information is required to provide information within the time limit set by the tax authorities which is not less than 15 days (Art. 14 TPL). In practice, tax inspectors allow 15 days to the taxpayer for submitting the requested information. This time limit can be extended subject to some conditions (Art. 17 TPL). 293. The workload of tax auditors is high and they generally prioritise cases which may soon be barred by time limitation, and the Turkish authorities report that tax auditors do not give priority to EOI cases.
Use of information gathering measures absent domestic tax interest (ToR B.1.3)
294. The concept of domestic tax interest describes a situation where a contracting party can only provide information to another contracting party if it has an interest in the requested information for its own tax purposes. 295. The Turkish authorities have confirmed that all kind of information can be obtained by conducting audits into the persons concerned through the Tax Inspection Board. 296. Article 134 of the TPL provides for carrying out fiscal examinations for the purposes of investigation, assessment and ensuring the accuracy of taxes that must be paid by the taxpayers. Pursuant to Article 148 of TPL, the public administration and institutions, taxpayers or other real and legal entities that have a relationship with the taxpayer must give all the information required by the Ministry of Finance or by persons having the power to carry out fiscal examinations. Article 149 of the TPL obliges the public administration and establishments (including the institutions and organisations performing public services) as well as real and legal entities to submit the information requested from them in writing by the Ministry of Finance and the tax office on the events giving rise to taxation both at given intervals and regularly. The powers of the tax inspectors to request information apply for the 297. purpose of carrying out a fiscal examination of a taxpayer. A fiscal examination can be carried out on taxpayers and information can also be obtained from third parties that have a relationship with the taxpayer. It appears that information cannot be obtained from a third party unless such information has a nexus with another taxpayer. The term taxpayer is defined as the real person or the legal entity liable for the debt in accordance with fiscal laws, and the person responsible for the tax is the person who is responsible towards the taxation office for the payment of the tax (Art. 8 TPL). The TPL applies to the taxes, levies and charges included in general budget that belong to provincial special administration and municipalities (Art. 1 TPL). Therefore, the provisions of the TPL apply to income and corporate taxes and all other taxes included in general budget, except customs duties. Taxes of foreign countries are not explicitly included in the scope of the tax law. 298. As the powers can be used in the context of tax prescribed in Article 1 of the TPL and the taxation laws or rules themselves do not specifically refer to foreign tax or use of powers for the purpose of exchange of information, they appear to require that such powers can be used only when authorities have an interest in the information for their own tax purposes. The Turkish authorities take the view that information obtaining powers must be construed in a wider scope than the one described in Article 1 of the TPL and

accordingly the powers granted to officials under Article 148 of the TPL can also be exercised to carry out examinations with respect to taxes, operations or real and legal persons that are not within the scope of the TPL. 299. The Turkish authorities take the view that DTAs and the TIEAs themselves give the necessary powers to make investigations. The authorities have further submitted that the information gathering article (Article 148) of the TPL is being used for foreign tax purposes in accordance with the Exchange of Information article of DTAs signed by Turkey. There are references in the tax law to international agreements or foreign taxes in other contexts (e.g. credit for foreign taxes paid (Art. 33 CTL) or the reduction of withholding rates pursuant to an international agreement (Art. 35 CTL). However, there is no specific reference in respect of exchange of information or access powers. The Turkish authorities indicate that, whilst, in their view, tax inspectors have the capacity to obtain information within the scope of the DTAs and the TIEAs without conducting a fiscal examination, a request for information is generally dealt with through a fiscal examination since they usually have an aspect affecting Turkish tax revenue also. 300. Turkish authorities have indicated that there has not been a single case in which their tax authorities could not obtain the information within the framework of its information collecting powers from persons within their jurisdiction. They submit that all information can be obtained by conducting audits into persons concerned through the Tax Inspection Board. 301. To summarise, the tax authorities have very broad powers to obtain information for the purposes of Turkish taxes and the Turkish authorities take the view that international agreements (DTCs/TIEAs) have the force of law in Turkey and powers under Article 148 of the TPL are being used to obtain information for the purposes of exchange of information. However, as discussed above, on the face of the legislation, the access powers of the authorities are restricted to cases involving a Turkish taxpayer or Turkish taxes. While this may be interpreted broadly by Turkish authorities, and in practice not yet been challenged, Turkey should clarify its laws in this regard to ensure effective exchange of information.
Compulsory powers (ToR B.1.4)

302. The tax administration has very wide information gathering powers and, in case of non-compliance, it is empowered to conduct fiscal examinations. During such an examination, it may visit the business premises of the taxpayers and, where necessary, can obtain a search warrant from the court and conduct a search of the premises of the persons concerned. Therefore, non-compliance with an information request may lead to use of compulsory powers by the tax administration.
303. Pursuant to Articles 148, 149, 150, 256 and 257 of Tax Procedure Law, the failure to provide information to the tax authorities results in a liability to a special irregularity fine, as provided in duplicate 10 Article 355 of TPL. These fines vary depending on the category of the merchant. A fine of TRY 1 200 (EUR 526.) can be imposed on first class merchants and members of independent professions, whereas fines of TRY 600 (EUR 247) and TRY 300 (EUR 121) apply to second class merchants and other persons respectively. The irregularity fine can be increased by one hundred percent, if the persons notified do not fulfil the obligation to provide information within the additional time allowed. In addition, those concealing their books during an inspection are considered to have committed tax evasion. Refraining from submitting the books and documents to the authorised persons during a tax inspection can result in imprisonment from 18 months to three years (Article 359 TPL). 304. The Turkish authorities have indicated that there has not been any case where they could not provide information requested by EOI partners because the information holder disputed the obligation to keep information, or information was held outside Turkey or the record retention period had expired or the information holder refused to comply with the request.
Use of compulsory powers in practice

305. The Turkish authorities confirmed that they have never faced a situation when a taxpayer refused to provide information. For domestic purposes, information is usually collected through fiscal investigations. If the information provided is incomplete or wrong or not provided, the related taxpayer is fined in accordance with the Article 355 (Special Irregularity Fine) of the TPL. In principle, fiscal investigations are carried out in accordance with the Article 139 of TPL. Occasionally, investigations are carried out at the tax office upon the request of the taxpayer or in circumstances where the premises are not suitable. On the condition that the terms mentioned in Article 127 of TPL occurs during an investigation, an enquiry or a search in the premises in accordance with the Article 142 of TPL by court decision can be carried out. Statistics relating to enforcement of compulsory powers by levy of penalties or a visit of premises or a search of premises were not provided by the Turkish authorities. 306. Turkeys international partners indicate that in some cases information has not been received, however, it appears that this is due to the slow process of investigations in Turkey. Turkish authorities have advised that tax
10. A duplicate (or repeating) Article in Turkish laws refer to an Article that is to be added to a Law and is related to another Article of the same Law.

inspectors generally wait for the completion of the investigation before providing the requested information to the EOI section (see section C.5).
Secrecy provisions (ToR B.1.5) Banking secrecy

307. Confidentiality of customer information is regulated by Article 73 of the Banking Law. The Chairman and Board members and Agency personnel as well as other personnel who by virtue of their position or in the course of performance of their duties, have access to confidential information about banks or clients are prohibited from disclosing this confidential information to any person or entity other than authorised by the Banking Law and those who are authorised by their private law. These persons must also not use such information in their own or others benefit. 308. Persons violating the provisions of Article 73 may be sanctioned by a sentence of imprisonment from one year to three years and a judicial fine from 1000 days up to 2000 days. The fine of sum payable per day is determined by the court. 309. Article 73(2) of the Banking Law however provides that disclosure of confidential information and documents to equivalent foreign supervisory authorities under a memorandum of understanding signed by the Agency is not covered by the provisions of confidentiality. The confidential information and documents obtained by the Agency may be used for the purposes of issuing establishment and operating permissions, supervising activities, monitoring compliance with the legislation, and for administrative law suits to be filed against the decisions of the Board. Disclosure of information for tax purposes is authorised for monitoring compliance with tax laws. Further, banks cannot refrain from giving information required for the purposes of the TPL due to laws concerning secrecy (Article 151 TPL). Turkish authorities have confirmed that the tax authorities use provisions of Article 148 of the TPL to obtain information from the banks.
Secrecy concerning capital market

310. The Communiqu on Principles regarding Intermediary Activities and Intermediary Institution prohibits disclosure of confidential information about brokerage houses and customers by shareholders, managers, expert personnel, inspectors and auditors. However, disclosure of information is permitted to the authorities dealing with crime and all judiciary authorities and for administrative inspections and investigations, as authorised by the legislation. Provisions of secrecy do not apply to disclosure of information to tax authorities, as the disclosed information is used for the investigations
authorised by the legislation. Similar secrecy provisions are applicable in respect of investment advisory activities and portfolio management activities.
Professional secrecy
311. Tax authorities are not authorised to seek information from barristers and solicitors which reveal facts and particulars entrusted to them or which they have learnt through their duties, however, they can be asked for information regarding the names (but not the addresses) of their clients as well as their fees and expenses (Art. 151 TPL). 312. Accordingly, the TPL affords protection to the information held by barristers and solicitors and such a protection is not restricted to information that constitutes confidential communication between a client and attorney, solicitor or other admitted legal representative, if such communication is produced for the purpose of seeking or providing legal advice or is produced for the purpose of use in existing or contemplated legal proceedings (see Paragraph 19.3 of the commentary on Article 26 of the OECD Model Tax Convention on Income and on Capital and the Commentary to Article 7(3) of the 2002 Model Agreement on Exchange of Information on Tax Matters). 313. The Turkish authorities indicate that this limitation is of an exceptional nature and cannot be overcome absent a superior law to the contrary. Since Turkeys DTAs and TIEAs do not contain a definition of legal privilege that applies for the purposes of exchange of information, the rules in Turkeys domestic laws govern. Therefore, the tax authorities are prohibited from obtaining information from a barrister or a solicitor even if they act in another capacity, for instance as administrator or trustee. The scope of legal privilege is broader than the standard. 314. The privilege under Article 151 of the Tax Procedure Law does not apply to accountants or tax advisers.
Phase 1 determination The element is in place, but certain aspects of the legal implementation of the element need improvement. Factors underlying recommendations Legal provisions enabling tax authorities to gather information for exchange of information purposes are not clearly provided in Turkish Law Recommendations It is recommended that Turkey establishes clear legal mechanisms empowering its authorities to obtain information for EOI purposes.

Phase 1 determination The element is in place, but certain aspects of the legal implementation of the element need improvement. Factors underlying recommendations The scope of professional privilege in tax matters is broader and extends beyond that provided for in the international standards. Recommendations It is recommended that Turkey ensures that the scope of attorney-client privileges afforded to professionals in tax matters is consistent with the international standard.
Phase 2 rating Partially Compliant. Factors underlying recommendations In most of the cases, tax audits are conducted to obtain the required information to meet the information requests from the foreign competent authorities. Information is generally not provided until the tax audit is complete which on an average takes 12 months. Tax auditors do not give priority to EOI requests. This process unduly delays effective exchange of information. Recommendations The entire process of obtaining information for EOI purposes should be reviewed with a view to ensuring that it is compatible with the effective international exchange of information in tax matters.
B.2. Notification requirements and rights and safeguards

The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information.
Not unduly prevent or delay exchange of information (ToR B.2.1)

315. The Terms of Reference provides that rights and safeguards should not unduly prevent or delay effective exchange of information. For instance, notification rules should permit exceptions from prior notification (e.g. in cases in which the information request is of a very urgent nature or the notification is likely to undermine the chance of success of the investigation conducted by the requesting jurisdiction). 316. According to Article 140 of the TPL taxpayers must be informed about the reason for the examination. The Turkish authorities indicate that
tax inspectors provide a very general explanation for the examination, such as stating that the investigation is for general control purposes without providing any details regarding the request for information. There are no provisions in Turkish law obliging the tax authorities to provide the holder of information with the identity of the person in respect of whom information has been requested, although this may, in any event, be evident from the request for information. Further, there are no appeal rights against this procedure of explaining the purpose of examination. Further, this procedure of explaining the purpose of examination does not also provide the holder of information of any appeal right against the use of the access powers. In absence of appeal rights, the holder of information cannot delay or stop the process of investigation and accordingly there are no chances of unduly preventing or delaying effective exchange of information. Finally, it is not necessary to inform the holder of information the time when the examination will be made (Art. 138 TPL). Tax authorities have not met any objection from taxpayers to the right to perform a tax audit and explanations provided to taxpayers do not impede investigation of the taxpayers documents, nor have peer inputs suggested any difficulty in this regard. Turkish authorities have advised that they are able to comply a request by an EOI partner not to inform the taxpayer (holder of information in Turkey) about the purpose of investigations. Further, the taxpayer would need not be informed if the requested information is already available with the tax administration.
COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION 87
C. Exchanging Information
Overview
317. Jurisdictions generally cannot exchange information for tax purposes unless they have a legal basis or mechanism for doing so. A jurisdictions practical capacity to effectively exchange information relies both on having adequate mechanisms in place as well as an adequate institutional framework. This section of the report examines whether Turkey has a network of information exchange agreements that would allow it to achieve effective exchange of information in practice. 318. Turkey has a network of information exchange mechanisms that covers 94 jurisdictions, including all relevant partners. Information can be exchanged under DTCs and TIEAs. In addition, Turkey has signed the Convention on Mutual Administrative Assistance in Tax Matters, although it is not yet ratified. The Convention is signed by 43 countries including Argentina, Columbia, Costa Rica, Ghana, Guatemala, Iceland and Mexico with whom Turkey does not have a bilateral EOI agreement. Turkey is also actively (re) negotiating agreements and expanding its network. As it is Turkeys policy to incorporate provisions on the exchange of information to the international standard in all of its information exchange agreements, these generally contain sufficient provisions to enable Turkey to exchange all relevant information. 319. Of the 87 bilateral EOI agreements signed by Turkey, three (DTCs with Austria, Lebanon, and the United Arab Emirates) do not provide for effective exchange of information as a result of limitations in the domestic laws of the partner jurisdictions. 320. The confidentiality of information exchanged with Turkey is protected by obligations implemented in the information exchange agreements, complemented by domestic legislation which provides for tax officers to keep information secret and confidential. Breach of this confidentiality obligation may lead to the tax officer(s) concerned being fined or imprisoned.
88 COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION

321. Turkeys agreements ensure that the contracting parties are not obliged to provide information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information the disclosure of which would be contrary to public policy. 322. In many cases, Turkey has not been able to respond to information exchange requests in a timely manner. Turkey has provided information within 90 days in only 11% of the cases and information within 180 days in 30% of the cases. In addition, Turkey has provided updates and interim responses in only 15 % of the cases where the provision of information was delayed. It is therefore recommended that Turkey ensures timely exchange of information by taking all the necessary measures including those suggested in this report. 323. Turkey also receives information under spontaneous and automatic mechanisms from some European countries and it has on occasions provided information spontaneously and efforts are being made to provide information on an automatic basis.
C.1. Exchange of information mechanisms

Exchange of information mechanisms should allow for effective exchange of information.
324. The Presidency of Revenue Administration (PRA) is generally responsible for the implementation of tax treaties. The General Directorate of Revenue Policy (GDRP) is in charge of negotiations and signing of tax treaties. In practice, treaty negotiations are conducted by the GDRP and Revenue Administration together, and the Deputy Commissioner of the PRA or the Head of International Department of EU and Foreign Affairs chair these negotiations. The TIEAs are negotiated and signed by the Presidency of Revenue Administration. The Minister of Finance or his authorised representative is the competent authority for EOI purposes in Turkey. 325. Turkey uses the OECD Model Tax Convention as the basis for negotiating its treaties. Inclusion of exchange of information provisions consistent with the international standard is a high priority in DTC negotiations and Turkish policy does not to allow it to conclude a DTC without an article on exchange of information. 326. More recently, Turkey also started negotiating TIEAs. As Turkey closely follows the wording of the OECD Model TIEA and its treaty partners do as well, these negotiations are usually conducted by e-mail without major difficulties. Turkey has signed five TIEAs (Bermuda, Gibraltar, Guernsey, the Isle of Man and Jersey) and another five TIEAs are in various stages of negotiation.
327. Turkeys network of information exchange agreements consists of 82 DTCs and 5 TIEAs (see Annex 2). In addition to its DTCs and the TIEAs, Turkey signed the Convention on Mutual Administrative Assistance in Tax Matters on 3 November 2011. The Convention is signed by 43 countries which include Argentina, Columbia, Costa Rica, Ghana, Guatemala, Iceland and Mexico with which Turkey does not otherwise have a bilateral agreement that provides for exchange of information. Therefore, Turkey has EOI relationship with 94 jurisdictions. Whilst this report is focused on the terms of its EOI agreements and practices concerning the exchange of information on request, it is noted that the updated Multilateral Convention explicitly allows spontaneous and automatic exchange of information as well. When two or more arrangements for the exchange of information for tax purposes exist between Turkey and a treaty partner, the parties may choose the most appropriate agreement under which to exchange the information.
Other forms of information exchange

328. In addition to exchanging information on request, Turkey also exchanges information spontaneously with treaty partners. Turkey receives spontaneous information mostly from Germany, the Netherlands, the United Kingdom, Belgium, Denmark, the Czech Republic, Sweden and Finland. Turkey provided information spontaneously to other jurisdictions on some occasions. 329. Turkey receives automatic information mostly from the United Kingdom, Denmark, Japan, Finland and Norway. Turkey cannot provide automatic information for the time being but is in the process of establishing its systems to provide information automatically.
Foreseeably relevant standard (ToR C.1.1)

330. The international standard for exchange of information envisages information exchange to the widest possible extent. Nevertheless, it does not allow fishing expeditions, i.e. speculative requests for information that have no apparent nexus to an open inquiry or investigation. The balance between these two competing considerations is captured in the standard of foreseeable relevance which is included in Article 26(1) of the OECD Model Tax Convention, set out below: The competent authorities of the Contracting States shall exchange such information as is foreseeably relevant for carrying out the provisions of this Convention or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the Contracting States, or of their political subdivisions or local authorities, insofar as

the taxation there under is not contrary to the Convention. The exchange of information is not restricted by Articles 1 and 2. 331. Thirteen of Turkeys DTCs (Australia, Bahrain, Brazil, Finland, Germany, Ireland, Kosovo, Luxembourg, Malaysia, Malta, New Zealand, Norway and Switzerland) and all of Turkeys TIEAs use this or similar language and therefore clearly meet the foreseeably relevant standard. 332. Turkeys older DTCs usually use the term necessary in lieu of foreseeably relevant. This is the case for 69 out of the 82 DTCs signed by Turkey. The term necessary is recognised in the commentary to Article 26 of the OECD Model Tax Convention to allow for the same scope of exchange as does the term foreseeably relevant. In addition, all DTCs signed by Turkey refer to both application of the treaty and domestic laws. Turkeys authorities state that they interpret the alternative formulation as equivalent to the term foreseeably relevant. Therefore, all these 69 DTCs meet the foreseeably relevant standard.
In respect of all persons (ToR C.1.2)

333. For EOI to be effective it is necessary that a jurisdictions obligations to provide information are not restricted by the residence or nationality of the person to whom the information relates or by the residence or nationality of the person in possession or control of the information requested. For this reason the international standard for EOI envisages that EOI mechanisms will provide for exchange of information in respect of all persons. 334. Of Turkeys DTCs and TIEAs, forty-four provide for exchange of information with respect to all persons. The exchange of information is not restricted by Article 1 (personal scope) of the DTC. None of these agreements restrict the jurisdictional scope of the exchange of information provisions to certain persons, for example those considered resident in one of the contracting parties. 335. The scope of the DTCs signed with 38 other jurisdictions is limited to persons covered by the Agreement. However, all these treaties provide for the exchange of information as is necessary for carrying out the provisions of the domestic laws of the Contracting States concerning taxes covered by the Agreement. To the extent that domestic laws are applicable to residents and non-residents, information under these agreements can also be exchanged in respect of all persons, including non-residents.
Obligation to exchange all types of information (ToR C.1.3)

336. Jurisdictions cannot engage in effective exchange of information if they cannot exchange information held by financial institutions, nominees or persons acting in an agency or a fiduciary capacity, as well as ownership information. Both the OECD Model Tax Convention (Article 26(5)) and the OECD Model TIEA (Article 5(4)), which are primary authoritative sources of the standards, stipulate that bank secrecy cannot form the basis for declining a request to provide information and that a request for information cannot be declined solely because the information is held by nominees or persons acting in an agency or fiduciary capacity or because the information relates to an ownership interest. 337. As most of Turkeys DTCs were concluded before the update of the OECD Model Tax Convention in 2005, they generally do not contain a provision akin to Article 26(5), which was introduced in that update. Only the DTCs with Australia, Brazil, Finland, Germany, Ireland, Kosovo, Malta, New Zealand, Norway and Switzerland, and Protocols to the DTCs with Luxembourg, Malaysia and Singapore contain such a provision, as well as all TIEAs concluded by Turkey. However, the absence of this provision in the other treaties does not automatically create restrictions on the exchange of information held by banks, other financial institutions, nominees, agents and fiduciaries, as well as ownership information. The Commentary to Article 26(5) indicates that while paragraph 5 represents a change in the structure of the Article, it should not be interpreted as suggesting that the previous version of the Article did not authorise the exchange of such information. 338. Turkeys domestic laws allow it to access and exchange the information covered by Article 26(5) even in the absence of such provision in the information exchange agreement. Accordingly, no requests for bank information have been declined by Turkey. Restrictions in access to bank information may however exist for some of Turkeys treaty partners. The peer reviews 11 of countries with agreements with Turkey that do not contain provisions corresponding to Article 26(5) of the Model Convention indicate that the domestic laws of Austria, Lebanon, and the UAE contain restrictions on access to bank information. It is recommended that Turkey renegotiate its older DTCs, with priorities in respect of these three partners, to incorporate wording in line with Article 26(5) of the OECD Model Tax Convention.
11. Global Forum has completed peer reviews of Turkeys EOI partners namely: Austria, Bahrain, Belgium, Canada, Czech Republic, Denmark, Estonia, Former Yugoslav Republic of Macedonia, France, Greece, Hungary, India, Indonesia, Ireland, Italy, Japan, Lebanon, the Netherlands, New Zealand, Peoples Republic of China, Philippines, Qatar, Russian Federation, Singapore, Slovakia, Slovenia, South Africa, South Korea, Spain, the United Kingdom, The UAE and the USA,
Absence of domestic tax interest (ToR C.1.4)

339. The concept of domestic tax interest describes a situation where a contracting party can only provide information to another contracting party if it has an interest in the requested information for its own tax purposes. A refusal to provide information based on a domestic tax interest requirement is not consistent with the international standard. Jurisdictions must be able to use their information gathering measures even though invoked solely to obtain and provide information to the requesting jurisdiction. 340. As most of Turkeys DTCs were concluded before the update of the OECD Model Tax Convention in 2005, they generally do not contain a provision corresponding to Article 26(4), which was introduced at the time of that update and which stipulates that a domestic tax interest may not be a reason to decline an information request. Only the DTCs with Australia, Brazil, Finland, Germany, Ireland, Kosovo, Malta, New Zealand, Norway and Switzerland, and the Protocols to the DTCs with Luxembourg, Malaysia and Singapore contain such a provision, as well as all TIEAs concluded by Turkey. The DTC with the USA also provides that the other Contracting State shall obtain the information to which the request relates in the same manner and to the same extent as if the tax of the first-mentioned State were the tax of that other State and were being imposed by that other State. Similarly, the DTC with Canada mentions that the other Contracting State shall endeavour to obtain the information to which the request relates in the same way as if its own taxation were involved even though the other State does not, at that time, need such information. Therefore, the provisions of these two treaties are also consistent with the standard. However, the absence of this provision in other treaties does not automatically create restrictions on the exchange of information. The Commentary to Article 26(4) indicates that paragraph 4 was introduced to express an implicit obligation to exchange information also in situations where the requested information is not needed by the requested State for domestic tax purposes. 341. The conclusion reached in respect of a domestic tax interest requirement (see section B.1, above) is that Turkey should clarify its laws in this regard, to ensure effective exchange of information. It is noted that in practice no requests for information have been declined on this basis by Turkey. A domestic tax interest requirement may however also exist for some of Turkeys treaty partners. The peer review of Lebanon carried out by the Global Forum revealed that the domestic laws of Lebanon contain such a requirement. It is recommended that Turkey renegotiate its older DTCs, with priorities in respect of its agreement with Lebanon, to incorporate wording in line with Article 26(4) of the OECD Model Tax Convention.
Absence of dual criminality principles (ToR C.1.5)

342. The principle of dual criminality provides that assistance can only be provided if the conduct being investigated (and giving rise to the information request) would constitute a crime under the laws of the requested jurisdiction if it had occurred in the requested jurisdiction. In order to be effective, exchange of information should not be constrained by the application of the dual criminality principle. 343. There are no dual criminality requirements in Turkeys agreements for exchange of information in tax matters.
Exchange of information in both civil and criminal tax matters (ToR C.1.6)
344. Information exchange may be requested both for tax administration purposes and for tax prosecution purposes. The international standard is not limited to information exchange in criminal tax matters but extends to information requested for tax administration purposes (also referred to as civil tax matters). 345. All of the information exchange agreements concluded by Turkey cover both civil and criminal tax matters. Turkey has indicated that the procedures and agencies involved are the same for civil and criminal tax matters, as far as the EOI Section is concerned. In the course of a tax investigation being conducted for obtaining requested information, if the tax inspector comes across an element that constitutes an offence the tax inspector informs the Public Prosecutor of this element. The Public Prosecutor and tax inspector continue their independent investigations within the framework of their respective legislation.
Provide information in specific form requested (ToR C.1.7)

346. In some cases, a Contracting State may need to receive information in a particular form to satisfy its evidentiary or other legal requirements. Such forms may include depositions of witnesses and authenticated copies of original records. Contracting States should endeavour as far as possible to accommodate such requests. The requested State may decline to provide the information in the specific form requested if, for instance, the requested form is not known or permitted under its law or administrative practice. A refusal to provide the information in the form requested does not affect the obligation to provide the information. 347. No restrictions apply in any exchange of information agreement signed by Turkey for information to be provided in the specific form requested. The DTC with the United States explicitly requires the requested

State to provide information in a form consistent with the purposes of the request, to the maximum extent possible under the laws and administrative practices and procedures of the State. There are no restrictions in the exchange of information provisions in Turkeys DTCs that would prevent Turkey from providing information in a specific form, as long as this is consistent with its own administrative practices.
In force (ToR C.1.8)

348. Exchange of information cannot take place unless a jurisdiction has exchange of information arrangements in force. Where such arrangements have been signed, the international standard requires that jurisdictions must take all steps necessary to bring them into force expeditiously. 349. There is no difference in the ratification process for DTCs and TIEAs. Article 90 of the Turkish Constitution provides that; The ratification of treaties concluded with foreign states and international organisations on behalf of the Republic of Turkey shall be subject to adoption by the Turkish Grand National Assembly by a law approving the ratification. 350. Turkey has enacted Law No. 244 Concerning the Authorisation of the Council of Ministers to Conclude, Execute and Publish International Agreements. Article 3 provides that confirmation of the international agreements, participation in these agreements, sending notification for entry into force of specific provisions of an agreement concerning Turkey or termination of these agreements are realised by the Council of Ministers decision. An international agreement gains force of law on the date of entry into force of the agreement. 351. The Ministry of Foreign Affairs sends the signed agreement and its draft law as received from the Ministry of Finance to the Office of the Prime Minister for signature by the members of the Council of Ministers. The Office of the Prime Minister then sends the draft law to the Grand National Assembly which enacts legislation for approval. Of the 87 bilateral information exchange agreements concluded by Turkey, 11 are not in force 12. Of these, Turkeys agreements with Australia and Malaysia were signed more than 2 years ago. Turkey has completed all domestic steps necessary to bring the agreement with the Philippines into force but in addition to all five TIEAs, the DTCs with Australia, Kosovo, and Malta and the protocols with Malaysia and Singapore are yet to be approved by the Turkish Parliament.
12. DTCs with Australia, Kosovo, Malta, the Philippines and the TIEAs with Bermuda, Gibraltar, Guernsey, Jersey and the Isle of Man and Protocols to the DTC with, Malaysia and Singapore.
352. Analysis of the Turkish treaty network indicates that the time period between the signature of an EOI agreement and the entry into force can at times be long. In many cases, it has taken more than 24 months. It is important that Turkey takes appropriate steps, in accordance with its internal requirements, to bring its treaties into force expeditiously. 353. The Convention on Mutual Administrative Assistance in Tax Matters was signed by Turkey on 3 November 2011 and is currently in the process of ratification by the Parliament.
Be given effect through domestic law (ToR C.1.9)

354. For information exchange to be effective, the parties to an exchange of information arrangement need to enact any legislation necessary to comply with the terms of the arrangement. 355. Turkish DTCs and TIEAs are subject to the approval of the National Assembly. The Turkish Constitution provides that international treaties, which have gone through due procedures, prevail over domestic laws. 356. All of Turkeys agreements that have been signed and ratified by both parties are in effect in Turkey. However, the Tax Procedure Law does not explicitly empower the Turkish authorities to obtain information for EOI purposes and Turkey should clarify its laws in this regard.
Phase 1 determination The element is in place, but certain aspects of the legal implementation of the element need improvement. Factors underlying recommendations Legal provisions enabling tax authorities to gather information for exchange of information purposes are not clearly provided in Turkish Law. The ratification of EOI mechanisms takes on average about two years. Recommendations It is recommended that Turkey clarify its laws to ensure that its competent authorities have the necessary powers to obtain information for EOI purposes. Turkey should ensure that it takes all internal steps to bring all its EOI mechanisms into force expeditiously.
Phase 2 rating Largely Compliant.
C.2. Exchange of information mechanisms with all relevant partners

The jurisdictions network of information exchange mechanisms should cover all relevant partners.
357. Ultimately, the international standard requires that jurisdictions exchange information with all relevant partners, meaning those partners who are interested in entering into an information exchange arrangement. Agreements cannot be concluded only with counterparties without economic significance. If it appears that a jurisdiction is refusing to enter into agreements or negotiations with partners, in particular ones that have a reasonable expectation of requiring information from that jurisdiction in order to properly administer and enforce its tax laws it may indicate a lack of commitment to implement the standards. 358. Turkey has exchange of information relationships with more than 90 jurisdictions, of which 82 are through a DTC and 5 through a TIEA. The Convention on Mutual Administrative Assistance in Tax Matters is signed by 43 countries which include Argentina, Columbia, Costa Rica, Ghana, Guatemala, Iceland and Mexico with whom Turkey at present does not have any bilateral agreement. Turkeys exchange of information network covers jurisdictions representing: all of its major trading partners (EU members, Russia, China, the United States and Iran); 30 OECD member jurisdictions and 26 EU member jurisdictions; and 54 Global Forum member jurisdictions.
359. Turkey is seeking to expand and update its treaty network. Turkey has advised that negotiations of new DTCs or revised DTCs are in progress with China, Denmark, Ghana, India, Libya, Mexico, the Netherlands, Republic of Korea and Uzbekistan and Turkey has confirmed that all of these agreements will conform to the international standard. In addition, Turkey has initialled a DTC with Palestine and a DTC with Vietnam is close to being signed. At the same time, Turkey is revising the EOI articles contained in former DTCs through Protocols to DTCs in order to bring them into line with international standard. The protocols revising the exchange of information article of the agreements with Belgium and South Africa are in an advanced stage. 360. The most significant exchange of information partners for Turkey over the last three years have been: Germany, the United Kingdom, the Netherlands, France, Norway and Belgium. The significance of these countries results from the fact that many Turkish citizens are working and living
in these countries. Turkey also receives a large number of requests for information from Bulgaria, the Russian Federation and Ukraine. 361. Comments were sought from Global Forum member jurisdictions in the course of the preparation of this report, and no jurisdiction advised that Turkey had refused to negotiate or conclude an information exchange agreement with it. In summary, Turkeys network of information exchange agreements covers all relevant partners.
Phase 1 determination The element is in place. Factors underlying recommendations Recommendations Turkey should continue to develop its EOI network with all relevant partners. Phase 2 rating Compliant.
C.3. Confidentiality
The jurisdictions mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received.
Information received: disclosure, use, and safeguards (ToR C.3.1)

362. Governments would not engage in information exchange without the assurance that the information provided would only be used for the purposes permitted under the exchange mechanism and that its confidentiality would be preserved. Information exchange instruments must therefore contain confidentiality provisions that spell out specifically to whom the information can be disclosed and the purposes for which the information can be used. In addition to the protections afforded by the confidentiality provisions of information exchange instruments, jurisdictions with tax systems generally impose strict confidentiality requirements on information collected for tax purposes. 363. All of the arrangements for the exchange of information concluded by Turkey contain a provision ensuring the confidentiality of information exchanged and limiting the disclosure and use of information received, which has to be respected by Turkey as a party to these agreements.

364. The duty of confidentiality under tax laws is broad and strict. There are special provisions in the Turkish Tax Procedure Law prohibiting the disclosure and use of information by prescribed authorities for personal benefit or for the benefit of third persons. 365. Article 5 of the TPL provides that officials in charge of taxation formalities and examination, Tax Courts, District Administrative Courts and those assigned by the State Council, those taking part in the work of commissions instituted in accordance with fiscal laws and experts employed in taxation operation are bound by a duty of confidentiality. They must not divulge and use information on taxpayers or their accounts and transactions etc., with which they have become acquainted during performance of their duties, for their own benefit or for the benefit of third persons. The information records obtained by the tax administration pursuant to provisions of Articles 148 and 149 must be kept confidential (Art. 152 TPL). 366. This prohibition continues even after the aforesaid persons have retired from their duties (Art. 362 TPL). Sanctions prescribed under Article 239 of the Turkish Criminal Code apply for violations of the confidentiality provisions. The provisions of a tax treaty override domestic law provisions. Turkey has confirmed that Turkey discloses information received from its counterpart competent authority only for use by the authorities mentioned in the EOI agreements.
All other information exchanged (ToR C.3.2)

367. Confidentiality rules should apply to all types of information exchanged, including information provided in a request, background documents to such requests, and any other documents or communications reflecting such information. 368. The confidentiality provisions in Turkeys exchange of information agreements do not draw a distinction between information received in response to requests or information forming part of the requests themselves. As such, these provisions apply equally to all requests for such information, background documents to such requests, and any other document reflecting such information, including communications between the requesting and requested jurisdictions and communications within the tax authorities of either jurisdiction.
Ensuring confidentiality in practice

369. Legal provisions regarding the duty of confidentiality apply to information provided by a competent authority and to information obtained during an enquiry.
370. The Turkish competent authority has established procedures ensuring the confidentiality of the information exchanged. All the documents including the Annexes are stamped confidential, adding that the information is furnished under the provisions of a Tax Treaty with a foreign government, and is subject to tax confidentiality under the provisions of that Treaty and Article 5 of the Tax Procedure Law. Article 362 of the Tax Procedure Law shall apply in case of breach of confidentiality. The Turkish authorities have confirmed that in no case has the information received by the Turkish competent authority been disclosed to any person other than permitted pursuant to the provisions of the agreement. 371. The Turkish authorities also indicate that all the information requests are forwarded by the PRA to the Tax Audit Board are sent with a cover letter and, from there, they pass on to tax inspectors. All officials are bound by the duty of confidentiality. But, forwarding the full request as received from foreign counterparts outside the EOI Section involves increased risks of information contained therein reaching unauthorised persons. Turkey should monitor this aspect of its procedure. In practice, the EOI Section is accessible to only tax officials and the 372. EOI files are kept in lockable cabinets. The access to the EOI files is available to officials working in the EOI Section only. Turkeys peers who have provided input to this review have not indicated that there has ever been a breach of confidentiality concerning their exchange of information with Turkey.
C.4. Rights and safeguards of taxpayers and third parties

The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties.
Exceptions to requirement to provide information (ToR C.4.1)

373. The international standard allows requested parties not to supply information in response to a request in certain identified situations. 374. In line with the international standard, Turkeys DTCs and TIEAs generally contain wording stating that the contracting parties are not obliged

to provide information which would disclose any trade, business, industrial, commercial or professional secret or trade process, information subject to legal privilege, or information the disclosure of which would be contrary to public policy. 375. All DTCs signed by Turkey contain a provision that a Contracting State is not obliged to supply information that would disclose any professional secrets. The scope of the term professional secrets is not defined in tax treaties. Considering the provisions of paragraph 2 of Article 3 of the respective tax treaties, for application of the tax treaties by Turkey, this term will derive its meaning from its domestic laws. As noted previously in Section B.1 of the report, the scope of protection afforded to information available with attorneys, etc. is very broad (not limited to giving advice or conduct of legal proceedings) in comparison to the scope of attorney-client privilege recognised in the commentary to Article 26(4) of OECD Model Tax Convention. This extremely broad protection afforded to information available with attorneys, etc. translates into similar protection under the DTCs. The Turkish authorities are prevented from obtaining much of the information held by attorneys, etc. and so such information cannot be exchanged with tax treaty partners. Accordingly, as far as interpretation of the ground of refusal to supply information on account of protection available to information under professional privilege is concerned in Turkey, the tax treaties are not to the standard. 376. No issues in relation to the rights and safeguards of taxpayers and third parties have been encountered in practice, nor have they been raised by Turkeys exchange of information partners.
Phase 1 determination The element is in place, but certain aspects of the legal implementation of the element need improvement. Factors underlying recommendations The scope of professional privilege in tax matters is broader and extends beyond that provided for in the international standards. Recommendations It is recommended that Turkey ensures that scope of attorney-client privileges afforded to professionals in tax matters is consistent with the international standard.
Phase 2 rating Largely Compliant.
C.5. Timeliness of responses to requests for information

The jurisdiction should provide information under its network of agreements in a timely manner.
Responses within 90 days (ToR C.5.1)

377. In order for exchange of information to be effective it needs to be provided in a timeframe which allows the tax authorities to apply the information to the relevant cases. If a response is provided after a significant lapse of time the information may no longer be of use to the requesting authorities. This is particularly important in the context of international cooperation as cases in this area must be of sufficient importance to warrant making a request. 378. There are no specific legal or regulatory requirements in place which would prevent Turkey from responding to a request for information by providing the information requested or providing a status update within 90 days of receipt of the request. Under Article 135 and 148 of the TPL officials other than working under the TIB can also be authorised to conduct investigations or obtain information, however, the PRA depends significantly on the TIB for obtaining the requested information. Tax auditors are generally given six months time to obtain and provide information. Non-receipt of information within six months leads to issue of a reminder and an additional reminder is sent after a lapse of another three months. The PRA takes about one month to process the request received before sending it to the TIB and another two months to process the reply received from the TIB before sending it on to the requesting State. Therefore, the current process often takes at least nine months to respond to a request. The authorities have indicated that tax auditors have a heavy workload of pending audits and they take on average one year to respond to the requests of the PRA. Further, the TIB does not send a response until the audit is complete. 379. About 90% of the information requests are sent to the TIB to obtain the information and the remainder go to a local tax office or in some cases, the EOI Section is in a position to provide the information. 380. During the three year review period ending December 2011, Turkey has received 518 13 requests for information from 37 different jurisdictions. Germany, the United Kingdom, the Netherlands, France, Norway and Belgium are the jurisdictions with which Turkey has had the most significant relationships over the past three years. The significance of these countries
13. The method used in calculating the requests is counting the number of taxpayers (individuals or entities) about whom information is requested, regardless of whether more than one piece of information is requested in respect thereof.

results from the fact that there are many Turkish citizens working and living in those countries. Turkey has recently started receiving a large number of information requests from the Russian Federation, Bulgaria and Ukraine. 381. Of the 518 incoming requests, Turkey has been able to provide the requested information substantially or partially in 260 cases 14. 157 cases are pending with the tax inspectors and another 20 cases are pending for non-receipt of clarifications or additional information from the requesting jurisdictions. Information requests in 26 cases were not processed by the EOI Section due to the absence of an applicable Agreement with the requesting jurisdictions (Germany and Georgia) during the relevant period. Turkey has also not provided information in 55 cases for the reasons mentioned below: Insufficient identity information was available from the requesting jurisdictions to identify the relevant taxpayer; Requested tax information was not covered by the relevant DTA.
382. The data in relation to three year review period ending December 2011 provided by the Turkish authorities shows that it provided information in 260 cases and only in 11% of these cases information was provided within 90 days. In 19% of the cases information was provided within 180 days. Information was provided within one year in 29% of the cases and Turkey took more than one year to provide information in 41% of the cases. Requests that are not fulfilled within 90 days do not relate to a particular type of information or particular types of investigative measures. In addition, in only 15% of the cases where the Turkish authority has been unable to obtain and provide information within 90 days of receipt of a request, Turkey provided an update on the status of the request. The reason for a failure to supply a systematic and regular update to a requesting jurisdiction is mainly on account of non-receipt of information and feedback from the TIB. Currently, 177 requests for information are still in progress, 157 of which are under investigation by tax inspectors. Out of these 177 requests, 30 requests were received in 2009, 62 were received in 2010 and 85 in 2011.
14. This figure is calculated on the basis of all requests where a final response is provided to the requested jurisdiction, i.e. where the case is now closed. In addition to 260 cases in which information has been provided, in another 55 cases information was not provided and the requesting jurisdictions have been informed of the reasons. Therefore, a total of 315 cases have been closed. These are comprised of: 17 % (information not provided) + 65% (all of information has been provided) + 14% (most of the information has been provided) + 1% (some of the information has been provided). Additionally, in about 3% of the cases, Turkey has asked for additional information from the requesting country and investigations are in progress for these requests. 157 requests where the investigations are still continuing are not included in the calculation of these percentages.
383. The input from Turkeys exchange of information partners, together with the statistics as provided by Turkey to the assessment team, suggests that in the vast majority of the cases a final response, an update or interim response was not provided within 90 days. An EOI partner of Turkey has indicated that it finds it difficult to receive an updated status from the revenue administration as to what information can be expected to be received and when a response to its information request may be received. 384. Turkey has indicated that the majority of requests for information are now being received from Bulgaria, the Russian Federation and Ukraine. The requests from these jurisdictions are often received in groups and many requests relate to enforcing customs duties, not covered by the EOI agreements. Therefore, many requests do not satisfy the foreseeably relevant test and much time is lost in evaluating the requests received and seeking clarifications where necessary in order to verify whether a request satisfies the foreseeably relevant standard. During the review period a total of 253 requests were received from these three jurisdictions which constitute 48.84% of total requests. Out of these, responses have been given in 131 requests and for the balance of 122 requests either additional information has been requested from the requesting jurisdiction or the requests are pending with tax auditors. 385. Most requests for information received are forwarded to the TIB to obtain the information. Tax auditors have a five year time limit to complete the audit starting from the end of relevant fiscal year and due to the heavy workload of uncompleted audits, information collection for exchange of information purposes does not get a higher priority.
Organisational process and resources (ToR C.5.2)

386. The Minister of Finance heads the Ministry of Finance. The General Directorate of Revenue Policy is responsible for the revenue policies whereas the Presidency of Revenue Administration (PRA) is in charge of implementing the revenue laws of the country. The PRA is headed by a Commissioner who directly reports to the Minister. The Commissioner is assisted by 6 Deputy Commissioners and 15 Heads of Departments. As of December 2011, 27 823 people were working in the Ministry of Finance and 38 903 people in the PRA. The PRA is the revenue collecting arm of the Ministry and has offices in provinces at various levels. 387. In 2011, four different auditing units were merged to become the Tax Auditing Board which is responsible to the Minister of Finance and entrusted with all tax audit functions. There are about 4 500 auditors working in the TIB and plans are to increase this number to 10 000 to cater for the high workload and to reduce delays.

388. Under Turkeys information exchange mechanisms, the Minister of Finance or his representative are designated as the primary Competent Authority. These functions have been delegated to the Commissioner, Deputy Commissioner, Head of Department of EU and Foreign Affairs and Head of Group of EOI. The Department of EU and Foreign Affairs consists of two Groups, each headed by a Head of Group. One Group comprises an international exchange of information (EOI) section and three other sections: two dealing with DTAs and one with EU matters. The EOI Section is headed by a manager who is supported by nine staff, three of whom are English translators and six are revenue experts. Staff in the EOI Section have knowledge of English, French and German in addition to the Turkish language. The EOI Section handles both incoming and outgoing requests for information. The other Group comprises two sections: the Section for Bilateral and Multilateral Agreements and the OECD Section. 389. The EOI Section is located at central Head Quarter of the PRA in Ankara. It handles all information requests received under the provisions of the DTAs, the TIEAs and the Multilateral Convention. It also works in close cooperation with the DTA Sections (also based in Ankara) and with tax inspectors working under the Ministry of Finance.
Organisational process
390. Turkeys competent authority does not have any bespoke instruction manuals or written guidance on procedures for processing incoming requests. However, the EOI staff are well-informed of the standard procedures to be followed in common types of requests. In other cases, the staff consult relevant OECD Manuals, Model DTC and TIEA commentaries while checking the validity of and responding to requests. If changes are made by the Head of Department, Head of Group or Manager of Section concerning the procedures to be followed in practice, or when a clarification is needed in ambiguous situations, the whole EOI Section is informed by e-mail or during a meeting. On receipt, all requests for information are reviewed by the EOI Unit 391. that checks the identity of the requesting competent authority, the validity of the request in particular with a view to deciding whether taxes and persons are covered by the agreement and the foreseeable relevance standard is met. The EOI Section also carefully ensures compliance with the limitations laid down in the relevant EOI mechanism. The request is recorded and given a number by the Registry unit both in the computer system and on paper. After the files are received in the EOI Section, the Manager assigns them to one of the employees in the Section, who remains responsible for monitoring the handling of the request. Once the responsible EOI staff member sends out the request to the relevant auditing unit (after having carried out required
checks and translation), s/he takes a note of a possible reminder date in case a response is not provided. As an internal rule, all files received by the EOI Section must be processed within 30 days (including checking the validity of the request, translating and forwarding it to auditing unit or requesting clarification from the requesting country if required). 392. If a request is unclear or incomplete, Turkey always requests additional information or clarification about the case from the requesting authority and in no case it does decline a request without first contacting the requesting jurisdiction and seeking additional information. 393. To track the requests assigned to the EOI staff, the Section creates monthly a computer-based list (Excel file) that shows the number of requests answered, still in process or awaiting a response from the Tax Inspection Board. This list along with the explanations given by the responsible employees for uncompleted requests is examined and reviewed by the Manager of the Section and the Head of Group. 394. In practice, the response time to an incoming request varies greatly depending on the complexity of the investigations to be made, the number of persons to be investigated as well as the workload of the relevant auditing unit. 395. The EOI Section does not routinely send provisional responses to requests, however, if there is information which can be obtained by the EOI Section, the EOI Section itself, sends the responses to requests immediately. They sometimes send a partial response also, if they do not get a complete report from the TIB.
Resources
396. The EOI Section consists of one manager and nine other supporting staff members. The EOI Section is located centrally in Ankara and fulfils its role as a bridge between competent authorities of foreign jurisdictions and Turkish domestic auditing units for exchange of information purposes. It does not conduct an investigation or audit to respond a request but relies on the support of the TIB to obtain information that it does not already hold. 397. The EOI Section appears to be sufficiently resourced so far as finance, technical and IT infrastructure are concerned. OECD commentaries and the manuals for EOI are the main guide for the staff in EOI Section. The Head of Department and the manager of EOI Section have participated as speakers in EOI seminars conducted by the OECD. The staff have also received training on EOI matters at the OECD Centre in Ankara. Staff from the EOI Section also participate as speakers in Fiscalis working visits. The Head of Department has been responsible for EOI since February 2009.

Additionally, the previous and current Head of Department and Head of Group have contributed to the peer review process of the Global Forum by working as assessors. The EOI Section has benefitted from their experience. However, the Turkish authorities have expressed the view that the EOI Section suffers from the problem of turnover of personnel, which, from time to time, causes resource issues in dealing with the workload of the Section. Sometimes it is difficult to get replacement staff who are suitably experienced.
Absence of restrictive conditions on exchange of information (ToR C.5.3)

398. There are no legal or practical requirements in Turkey that impose unreasonable, disproportionate or unduly restrictive conditions on the exchange of information. However, some of the EOI partners consider that sometimes, when Turkey seeks clarification (concerning the origin of the inquiry, intent and tax issues, explanation of the case, the reasons and suspicion that gave rise to the request), this may lead to delay in providing the information, and sometimes such clarifications go beyond the concept of the foreseeably relevant standard. Turkey is of the view that it only requests clarification of a request when this is justified. At present there are no outstanding issues regarding the interpretation of the foreseeably relevant standard between Turkey and its EOI partners.
Conclusion
399. Turkey has not been able to provide a response to all requests in a timely manner and delays can be attributed to a variety of reasons. The Turkish authorities should study the processes systematically and analyse time taken so that they are able to provide quality responses within stipulated times. They need to reduce the process time taken by the EOI Section to improve the length of time that is taken in responding. With the increased focus on exchange of information globally, it is likely that Turkey will not only be receiving more requests for information but obviously will also seek information from partner countries more often than at present. The EOI Section handles both incoming and outgoing requests. Outgoing requests amount to about 10% of the number of incoming requests. It is recommended that Turkey studies best practices in EOI and adapt those to fit its situation. Information may reside in the database of the tax administration, or tax files, or with third parties, or public authorities or taxpayers and different procedures may assist in ensuring that reliable information can be obtained and provided to foreign authorities in a timely manner. Some suggestions in this regard are:
The EOI Section could identify the various actors involved in the EOI process and set suitable timelines at each stage so as to achieve the ultimate objective of providing complete and reliable information in a timely manner; If requests for information can be segregated based on the likely source of information, some of the requests can be dealt with partially by the EOI Section, based on information in the database of the tax administration to which it should have full access; Expansion of the EOI Section may improve time taken in translation and processing of requests to check the foreseeably relevant standard; Tax inspectors should prioritise EOI requests more than at present and specific legislation to deal with EOI requests could curtail the need to conduct an audit in most cases; A coordination mechanism between the EOI Section and the Tax Inspection Board could be established to better monitor the status of requests; The EOI Section may consider having a designated representative in each of the provincial headquarters of the tax administration to pursue the cases pending with tax inspectors, possibly being assigned powers to collect information from taxpayers and third parties independently, where appropriate.
Phase 1 determination
This element involves issues of practice that are assessed in the Phase 2 review. Accordingly no Phase 1 determination has been made.

Phase 2 rating Partially Compliant. Factors underlying recommendations In most cases, Turkey is not able to respond within 90 days to international requests for information in tax matters and does not commonly provide requesting parties with status updates. Recommendations Turkey should ensure that its authorities establish appropriate internal procedures to be able to respond to EOI requests in a timely manner, by providing the information requested within 90 days of receipt of the request, or if it has been unable to do so, to provide a status update. Turkey should ensure that it finds appropriate mechanisms to obtain information from the information holder without procedural delays so it is able to respond to information requests in a timely manner.
In most cases, tax audits are conducted to obtain the information requested by foreign competent authorities, which takes about one year before it reaches the EOI Section.
SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS 109
Summary of Determinations and Factors Underlying Recommendations

Factors underlying recommendations
Determination
Recommendations
Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities (ToR A.1) Phase 1 determination: Joint stock companies are The element is not in allowed to issue bearer shares. place. The Central Registry Agency maintains information on all shares, including bearer shares, issued by publicly held joint stock companies whose shares are traded on the stock exchange. However, there are insufficient mechanisms in place that ensure the availability of information allowing for identification of owners of bearer shares issued by other joint stock companies. Phase 2 rating: Non-Compliant. Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements (ToR A.2) Phase 1 determination: The element is in place. Phase 2 rating: Compliant. Turkey should take necessary measure to ensure that appropriate mechanisms are in place to identify owners of bearer shares in all instances.
110 SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS

Determination Phase 1 determination: The element is in place. Phase 2 rating: Compliant.
Recommendations
Banking information should be available for all account-holders (ToR A.3)
Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information) (ToR B.1) Phase 1 determination: The element is in place, but certain aspects of legal implementation of the element need improvement. Legal provisions enabling tax authorities to gather information for exchange of information purposes are not clearly provided in Turkish Law The scope of professional privilege in tax matters is broader and extends beyond that provided for in the international standards. In most of the cases, tax audits are conducted to obtain the required information to meet the information requests from the foreign competent authorities. Information is generally not provided until the tax audit is complete which on an average takes 12 months. Tax auditors do not give priority to EOI requests. This process unduly delays effective exchange of information. It is recommended that Turkey establishes clear legal mechanisms empowering its authorities to obtain information for EOI purposes. It is recommended that Turkey ensures that the scope of attorney-client privileges afforded to professionals in tax matters is consistent with the international standard. The entire process of obtaining information for EOI purposes should be reviewed with a view to ensuring that it is compatible with the effective international exchange of information in tax matters.
Phase 2 rating: Partially Compliant.
The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information (ToR B.2) Phase 1 determination: The element is in place. Phase 2 rating: Largely Compliant.
SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS 111
Determination
Recommendations
Exchange of information mechanisms should allow for effective exchange of information (ToR C.1) Phase 1 determination: The element is in place, but certain aspects of the legal implementation of the element need improvement. Legal provisions enabling tax authorities to gather information for exchange of information purposes are not clearly provided in Turkish Law. The ratification of EOI mechanisms takes on average about two years. It is recommended that Turkey clarify its laws to ensure that its competent authorities have the necessary powers to obtain information for EOI purposes. Turkey should ensure that it takes all internal steps to bring all its EOI mechanisms into force expeditiously.
Phase 2 rating: Compliant. The jurisdictions network of information exchange mechanisms should cover all relevant partners (ToR C.2) Phase 1 determination: The element is in place. Turkey should continue to develop its exchange of information network with all relevant partners.
Phase 2 rating: Compliant. The jurisdictions mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received (ToR C.3) Phase 1 determination: The element is in place. Phase 2 rating: Compliant. The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties (ToR C.4) Phase 1 determination: The element is in place, but certain aspects of the legal implementation of the element need improvement. Phase 2 rating: Largely Compliant. The scope of professional privilege in tax matters is broader and extends beyond that provided for in the international standards. It is recommended that Turkey ensures that scope of attorney-client privileges afforded to professionals in tax matters is consistent with the international standard.
112 SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS

Determination
Recommendations
The jurisdiction should provide information under its network of agreements in a timely manner (ToR C.5) This element involves issues of practice that are assessed in the Phase 2 review. Accordingly no Phase 1 determination has been made. Phase 2 rating: Partially Compliant. In most cases, Turkey is not able to respond within 90 days to international requests for information in tax matters and does not commonly provide requesting parties with status updates. Turkey should ensure that its authorities establish appropriate internal procedures to be able to respond to EOI requests in a timely manner, by providing the information requested within 90 days of receipt of the request, or if it has been unable to do so, to provide a status update. Turkey should ensure that it finds appropriate mechanisms to obtain information from the information holder without procedural delays so it is able to respond to information requests in a timely manner.
In most cases tax audits are conducted to obtain the information requested by foreign competent authorities which takes about one year before it reaches the EOI Section.
ANNEXES 113
Annex 1: Jurisdictions Response to the Review Report 15

First of all, Turkey is aware that assessment of the reports of the 50 jurisdictions in a short time requires ultimately careful and precise evaluation. And we appreciate the effort expert team made. But, after observing the PRG meeting in Paris on 7-9 October, Turkey has the impression that the assessment and decision making mechanism of PRG are not consistent with the present criteria and equality principle. And the Phase 2 ratings for individual elements and the overall ratings for Turkeys Combined Peer Review is not reflecting the truth over Turkeys exchange of information practices. When we look at the bearer share issue in the individual element A1 of peer review reports of Turkey and Germany, we can see that the availability of ownership information for bearer shares is not different from the each other. As in the situation of Germany, the information is also available to Turkish jurisdiction by CRA, trade registry and the tax returns. The concern on the issue for Turkey should not be more than the concerns expressed for Germany. In addition, when we look at the determinations of Republic of Korea and Canada leading the A1 ratings to be largely compliant, it is stated at the factors that the identity of holders of bearer shares is not available and no record of the ownership of the bearer shares is required to be kept. This situation certainly causes a contrast between the mentioned countries and Turkey. Also, it should have been considered that Turkey has no other P1 determination or any Phase 2 determination under A1. On the other hand, we do not think that, Phase 2 rating for element B1 of Turkey is consistent. Even it is stated in the paragraph 262 of the Report that Turkey has never faced any legal problems and has been successfully obtaining information for the purposes of EOI, the rating was assigned as partially compliant. We do not think that this is a reasonable approach since Phase 2 is practical side of the EoI. Also it should be noted that, other Phase 1 determination under B1 has never caused a practical problem in exchange of
15. This Annex presents the jurisdictions response to the review report and shall not be deemed to represent the Global Forums views.
114 ANNEXES
information leading to a partially compliant. Further, as we have stated in the written report before, Turkey has took expeditious action and made two legislative amendments in Tax Procedure Law regarding the recommendations in section B1, also in section C1 and C4. First,Turkey has established clear legal mechanism to obtain information for EoI purposes by publishing TPL article 152/A. And second, Turkey has made an amendment regarding the scope of professional privilege in tax matters by publishing TPL article 151/3. These amendments have been duly communicated to the Global Forum Secretariat. So, given the fact that there has been no instant in practice where Turkey has failed to obtain information with respect to the B1 determinations and the legislative actions Turkeys individual ratings in B1 should be changed from partially compliant to largely compliant. Likewise despite the same Phase 1 determinations take place in part C1 and C4 (for which the above mentioned legislative amendments have been duly made) there is no Phase 2 determination presented there either. Therefore, C1 and C4 ratings should be changed from largely compliant to compliant. This would be a more correct and fair approach reflecting the real EOI picture for Turkey. Taking all that into consideration, Turkey is of the view that Turkeys Peer Review Report Ratings is not appropriate and fair and an equal treatment is not provided against Turkey. The overall EOI rating which is assigned as partially compliant is far from reflecting the true nature of EOI in Turkey; given all legislative framework facilitating EOI, its wide network of agreements and its large volumes of EOI. The main concern for EOI practice has been the timeliness issue which Turkey is well aware of. But it is understood from the ratings that the determinations in Phase 1 most of which basically deal with theoretical aspect had much more impact on ratings than the what actually happens in practice. Therefore, Turkey preserves its view that the overall rating should be upgraded to largely compliant.
ANNEXES 115
Annex 2: List of All Exchange-of-Information Mechanisms Signed
Multilateral instruments
Turkey has signed the amended Convention on Mutual Administrative Assistance in Tax Matters (MAC) on 3 November 2011. The status of the Multilateral Convention is set out in the below table 16. When two or more arrangements for the exchange of information for tax purposes exist between Turkey and a treaty partner, the parties may choose the most appropriate agreement under which to exchange the information.
Bilateral and multilateral agreements

Exchange of information agreements signed by Turkey as at January 2013, in alphabetical order:
Jurisdiction 1 2 3 4 5 6 7 Albania Algeria Argentina Australia Austria Azerbaijan Bahrain Type of EoI Arrangement DTC DTC MAC DTC MAC DTC DTC MAC (Original) DTC Date Signed 4 Apr 1994 2 Aug 1994 3 Nov 2011 28 Apr 2010 3 Nov 2011 28 Mar 2008 9 Feb 1994 26 Mar 2003 14 Nov 2005 Date In Force 26 Dec 1996 30 Dec 1996 1 Jan 2013 Not in force 1 Dec 2012 1 Oct 2009 1 Sep 1997 1 Oct 2004 2 Sep 2007
16.
The updated table is available at www.oecd.org/ctp/exchangeofinformation/ Status_of_convention.pdf.
116 ANNEXES
Type of EoI Arrangement DTC DTC DTC 10 11 12 13 14 15 16 17 18 19 Belgium Bermuda Bosnia and Herzegovina Brazil Bulgaria Canada China Colombia Costa Rica Croatia MAC TIEA DTC DTC MAC DTC DTC MAC DTC MAC MAC DTC DTC MAC DTC MAC DTC DTC DTC DTC MAC DTC DTC MAC MAC TIEA
Jurisdiction 8 9 Bangladesh Belarus
Date Signed 31 Oct 1999 24 Jul 1996 2 Jun 1987 4 Apr 2011 23 Jan 2012 16 Feb 2005 16 Dec 2010 3 Nov 2011 7 Jul 1994 14 Jul 2009 3 Nov 2011 23 May 1995 23 May 2012 1 Mar 2012 22 Sep 1997 12 Nov 1999 26 October 2012 30 May 1991 27 May 2010 25 Dec 1993 25 Aug 2003 2 Mar 2005 6 Oct 2009 27 May 2010 16 Jun 1995 18 Feb 1987 27 May 2010 10 Jul 2012 04 December 2012
Date In Force 23 Dec 2003 29 Apr 1998 8 Oct 1991 1 Dec 2000 (protocol not yet in force in Belgium) Not in force 18 Sep 2008 9 October 2012 Not in force 17 Sep 1997 4 May 2011 Not in force 20 Jan 1997 Not in force Not in force 18 May 2000 16 Dec 2003 Not in force 20 Jun 1993 1 Feb 2012 31 Dec 1996 21 Feb 2005 14 Aug 2007 4 May 2012 1 Feb 2012 28 Nov 1996 1 Jul 1989 1 April 2012 Not in force Not in force
20 Czech Republic 21 Denmark
22 Egypt 23 Estonia 24 Ethiopia
25 Finland 26 FYROM 27 France 28 Ghana 29 Gibraltar
ANNEXES 117
Jurisdiction 30 Georgia 31 Germany
Type of EoI Arrangement DTC MAC DTC MAC DTC MAC TIEA MAC DTC MAC DTC MAC DTC MAC DTC DTC MAC TIEA DTC DTC MAC DTC MAC TIEA DTC DTC DTC MAC DTC DTC DTC DTC DTC
Date Signed 21 Nov 2007 3 Nov 2010 19 Sep 2011 3 Nov 2011 2 Dec 2003 21 Feb 2012 13 Mar 2012 5 December 2012 10 Mar 1993 27 May 2010 31 Jan 1995 26 Jan 2012 25 Feb 1997 3 Nov 2011 17 Jun 2002 24 Oct 2008 30 Jun 2011 21 Sep 2012 14 Mar 1996 27 Jul 1990 27 May 2010 8 Mar 1993 3 Nov 2011 24 Nov 2010 6 Jun 1985 15 Aug 1995 24 Dec 1983 27 May 2010 10 Sep 2012 6 Oct 1997 1 Jul 1999 3 Jun 1999 12 May 2004
Date In Force 15 Feb 2010 1 Feb 2012 1 Aug 2012 Not in force 5 Mar 2004 Not in force Not in force Not in force 9 Nov 1995 In force in Iceland 30 Dec 1996 1 June 2012 6 Mar 2000 Not in force 27 Feb 2005 18 Aug 2010 Not in force Not in force 1 Jan 1999 1 Dec 1993 1 May 2012 28 Dec 1994 Not in force Not in force 3 Dec 1986 18 Nov 1996 25 Mar 1986 1 July 2012 Not in force 13 Dec 1999 20 Dec 2001 23 Dec 2003 21 Aug 2006
32 Greece 33 Guernsey 34 Guatemala 35 Hungary 36 Iceland 37 India
38 Indonesia 39 Iran 40 Ireland 41 42 Isle of Man Israel
43 Italy 44 Japan 45 Jersey 46 Jordan 47 Kazakhstan
48 Korea, Republic of 49 Kosovo 50 Kuwait 51 52 Kyrgyzstan Latvia
53 Lebanon
118 ANNEXES
Type of EoI Arrangement DTC DTC DTC Protocol DTC DTC Protocol DTC MAC MAC DTC MAC DTC DTC DTC DTC MAC DTC MAC DTC MAC DTC DTC DTC DTC MAC DTC MAC DTC DTC MAC DTC MAC DTC
Jurisdiction 54 Lithuania 55 Luxembourg 56 Malaysia 57 Malta 58 Mexico 59 Moldova, Republic of 60 Mongolia 61 Montenegro and Serbia
Date Signed 24 Nov 1998 9 Jun 2003 30 Sep 2009 27 Sep 1994 17 Feb 2010 14 Jul 2011 26 October 2012 27 May 2010 25 Jun 1998 27 Jan 2011 12 Sep 1995 12 Oct 2005 7 Apr 2004 27 Mar 1986 27 May 2010 22 Apr 2010 26 October 2012 15 Jan 2010 27 May 2010 31 May 2006 14 Nov 1985 18 Mar 2009 3 Nov 1993 9 Jul 2010 11 May 2005 27 May 2010 25 Dec 2001 1 Jul 1986 15 Oct 2012 15 Dec 1997 3 Nov 2011 9 Nov 2007
Date In Force 17 May 2000 18 Jan 2005 14 Jul 2011 31 Dec 1996 Not in force Not in force Not in force 1 Sept 2012 28 Jul 2000 1 March 2012 30 Dec 1996 10 Aug 2007 18 Jul 2006 30 Sep 1988 Not in force 28 Jul 2011 Not in force 15 Jun 2011 1 Feb 2012 15 Mar 2010 8 Aug 1988 Not in force 1 April 1997 1 Feb 2012 18 Dec 2006 Not in force 11 Feb 2008 15 Sep 1988 Not in force 31 Dec 1999 Not in force 1 Apr 2009
62 Morocco 63 The Netherlands 64 New Zealand 65 Norway 66 Oman 67 Pakistan 68 Philippines 69 Poland 70 71 72 73 74 Portugal Qatar Romania Russian Federation Saudi Arabia
ANNEXES 119
Jurisdiction 75 76 Singapore Slovakia
Type of EoI Arrangement DTC DTC Protocol DTC DTC MAC DTC MAC DTC MAC DTC DTC MAC DTC Mutual Agreement DTC DTC DTC DTC MAC DTC DTC
Date Signed 9 Jul 1999 5 Mar 2012 2 Apr 1997 19 Apr 2001 27 May 2010 3 Mar 2005 3 Nov 2011 5 Jul 2002 3 Nov 2011 26 Aug 2001 21 Jan 1988 27 May 2010 18 Jun 2010 7 June 2012 6 Jan 2004 6 May 1996 11 Apr 2002 2 Oct 1986 16 Jul 2012 22 Dec 1987 17 Aug 1995
Date In Force 27 Aug 2001 Not in force 2 Dec 1999 23 Dec 2003 1 Feb 2012 6 Dec 2006 Not in force 18 Dec 2003 1 Jan 2013 31 Jan 2005 18 Nov 1990 1 Feb 2012 8 Feb 2012 Retrospective from 8 Feb 2012 21 Aug 2004 26 Dec 2001 13 Jan 2005 28 Dec 1987 Not in force 30 Dec 1988 24 Jun 1997
77 Slovenia 78 South Africa
79 Spain 80 Sudan 81 Sweden
82 Switzerland 83 Syrian Arab Republic 84 Tajikistan 85 Thailand 86 Tunisia 87 Turkish Republic of Northern Cyprus17
88 Turkmenistan
17.
Note by Turkey: The information in this document with reference to Cyprus relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Turkey shall preserve its position concerning the Cyprus issue. Note by all the European Union Member States of the OECD and the European Commission: The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.
120 ANNEXES
Type of EoI Arrangement DTC MAC DTC DTC MAC DTC MAC DTC DTC
Jurisdiction 89 Ukraine The United Arab 90 Emirates 91 United Kingdom
Date Signed 27 Nov 1996 27 May 2010 29 Jan 1993 19 Feb 1986 27 May 2010 28 Mar 1996 27 May 2010 8 May 1996 26 Oct 2005
Date In Force 29 Apr 1998 Not in force 26 Dec 1994 26 Oct 1988 1 Feb 2012 19 Dec 1997 Not in force 30 Sep 1997 16 Mar 2010
92 United States 93 Uzbekistan 94 Yemen
ANNEXES 121
Annex 3: List Of All Laws, Regulations and Other Material Consulted
Constitutional and Administrative Laws

The Constitution of the Republic of Turkey Law Concerning the Authorisation of the Council of Ministers to Conclude, Execute and Publish International Agreements No. 244
Commercial laws
Associations Law No. 5253 Communiqu on Domestic Trade: 2009/2 Code of Obligations No. 818 Code of Obligations No. 6098 Foundation Law No. 5737 Turkish Civil Code Law No. 4721 Turkish Commercial Code No. 6102 Code on Effectiveness and enforcement of Turkish Commercial Code Law No. 6103 Regulation on the General Assembly Meetings of the Companies with Share Capital and on Officials from the Ministry of Industry and Trade Free Zones Law No. 3218
Financial sector laws

Banking Law No. 5411 Capital Market Law No. 2499
122 ANNEXES
Capital Market Law 6362 Communiqu on Principles regarding Intermediary Activities and Intermediary Institution Communiqu on Principles Regarding Book-entry Recording of Dematerialised Capital Markets Serial: IV, No. 28 Communiqu on the Principles Regarding Registration with Board and Sale of Shares Serial: I, No. 40 Communiqu on the Principles Regarding the Public Disclosure of Material Events Serial: VIII, No. 54 Law No. 5549 dated October 2006 on Prevention of Laundering Proceeds of Crime Law (AML law) Regulation on Measures Regarding the Prevention of Laundering Proceeds of Crime and Financing of Terrorism.(AML Regulation)
Taxation laws
Corporation Tax Law No. 1949.(CTL) Income Tax Law No. 193 (ITL) Tax Procedure Law No. 213 Tax Procedures Law Communiqu No. 340 Legislation on the Taxpayer Identification Number General Communiqu No. 1 on Accounting System Application
Miscellaneous
Turkish Criminal Law No. 5237
ANNEXES 123
Annex 4: People Interviewed During On-Site Visit
Presidency of Revenue Administration

President, Presidency of Revenue Administration Head of Group, Department of EU and Foreign Affairs Manager of EOI Section, Department of EU and Foreign Affairs Revenue Experts of EOI Section, Department of EU and Foreign Affairs Revenue Experts of DTA Section, Department of EU and Foreign Affairs Translators of EOI Section, Department of EU and Foreign Affairs Revenue Experts from Implementation and Data Management Department (PRA) State Revenue Experts/Revenue Experts from Income Management Department (PRA) Manager And State Revenue Expert/Department of Audit and Management of Compliance
Tax Inspection Board

Tax Inspector
MASAK (Financial Crime Investigation Board)

Financial Crimes Investigation Expert
Ministry of Customs and Trade

Customs and Trade Experts from Ministry of Customs and Trade
124 ANNEXES
The Union of Chambers and Commodity Exchange of Turkey

An engineer and an expert
Capital Market Board of Turkey

A Capital Market Expert
Directorate of Associations
An Inspector and an Assistant Inspector
Banking Regulation and Supervisory Agency

Sworn Banking Auditors and Banking Experts
General Directorate of Foundations

Foundation Experts Director of Department of Statistics
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

The OECD is a unique forum where governments work together to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an ageing population. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to coordinate domestic and international policies. The OECD member countries are: Australia, Austria, Belgium, Canada, Chile, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The European Union takes part in the work of the OECD. OECD Publishing disseminates widely the results of the Organisations statistics gathering and research on economic, social and environmental issues, as well as the conventions, guidelines and standards agreed by its members.
OECD PUBLISHING, 2, rue Andr-Pascal, 75775 PARIS CEDEX 16 (23 2013 67 1 P) ISBN 978-92-64-20595-6 No. 61039 2013-01
Global Forum on Transparency and Exchange of Information for Tax Purposes
PEER REVIEWS, COMBINED: PHASE 1 + PHASE 2,
incorporating Phase 2 ratings TURKEY

The Global Forum on Transparency and Exchange of Information for Tax Purposes is the multilateral framework within which work in the area of tax transparency and exchange of information is carried out by 120 jurisdictions, which participate in the Global Forum on an equal footing. The Global Forum is charged with in-depth monitoring and peer review of the implementation of the international standards of transparency and exchange of information for tax purposes. These standards are primarily reected in the 2002 OECD Model Agreement on Exchange of Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax Convention on Income and on Capital and its commentary as updated in 2004. The standards have also been incorporated into the UN Model Tax Convention. The standards provide for international exchange on request of foreseeably relevant information for the administration or enforcement of the domestic tax laws of a requesting party. Fishing expeditions are not authorised but all foreseeably relevant information must be provided, including bank information and information held by duciaries, regardless of the existence of a domestic tax interest or the application of a dual criminality standard. All members of the Global Forum, as well as jurisdictions identied by the Global Forum as relevant to its work, are being reviewed. This process is undertaken in two phases. Phase 1 reviews assess the quality of a jurisdictions legal and regulatory framework for the exchange of information, while Phase 2 reviews look at the practical implementation of that framework. Some Global Forum members are undergoing combined Phase 1 and Phase 2 reviews. The Global Forum has also put in place a process for supplementary reports to follow-up on recommendations, as well as for the ongoing monitoring of jurisdictions following the conclusion of a review. The ultimate goal is to help jurisdictions to effectively implement the international standards of transparency and exchange of information for tax purposes. All review reports are published once approved by the Global Forum and they thus represent agreed Global Forum reports. For more information on the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes, and for copies of the published review reports, please refer to www.oecd.org/tax/transparency and www.eoi-tax.org.
Consult this publication on line at http://dx.doi.org/10.1787/9789264205963-en. This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical databases. Visit www.oecd-ilibrary.org for more information.
ISBN 978-92-64-20595-6 23 2013 67 1 P
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GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES

Peer Review Report Combined: Phase 1 + Phase 2, incorporating Phase 2 ratings

ISBN 978-92-64-20595-6 (print) ISBN 978-92-64-20596-3 (PDF)

Corrigenda to OECD publications may be found on line at: www.oecd.org/publishing/corrigenda.

ABOUT THE GLOBAL FORUM 5

About the Global Forum

Information and methodology used for the peer review of Turkey

Taxation and international cooperation

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 19

Compliance with the Standards

20 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 21

A.1. Ownership and identity information

22 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 23

Joint Stock Companies

24 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 25

Commandite Companies with Shares

26 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Limited Liability Companies

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 27

Capital Markets Regulations

28 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 29

Ownership information held by companies

30 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Ownership information held by the authorities Trade registry

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 31

Database of the PRA

32 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Central Data Base

Electronic filing of tax returns

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 33

Free zones entities

34 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 35

36 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 37

Bearer shares (ToR A.1.2)

38 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 39

Ownership information held by service providers

40 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Partnerships (ToR A.1.3)

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 41

42 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 43

44 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Trusts (ToR A.1.4)

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 45

Foundations (ToR A.1.5)

46 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 47

Other relevant entities and arrangements

48 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Associations of ship owners

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 49

Enforcement provisions to ensure availability of information (ToR A.1.6)

50 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 51

52 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Capital Market Law

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 53

54 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Phase 2 rating Non-Compliant.

A.2 Accounting records

General requirements (ToR A.2.1)