VIII |
WHY
TO AVOID TAX EVASION? |
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According to the
current tax regulations, the owner of a property has
to declare
- The actual value of the property
to the TAPU office (at the time of transfer of the
ownership of the property into his/her name) and
- The actual price which has
been paid to the seller to the municipality (by
end-December in the year of acquisition)
With regards to
purchase, if the amounts you declared to the tax authorities
are less than the amount you actually paid for the property,
you are highly likely to encounter the following problems.
For simplification
purposes, assume that the actual purchase price you
have paid is £100,000 and the amount you declared
to both the TAPU office and the Municipality is just
£30,000 (Although personal income tax in Turkey
is calculated in YTL-terms and some inflation-based
multipliers are used for present value assessments,
so as to simplify the explanations, the following explanations
are made in Sterling terms and we do not show the breakdown
of all calculations):
8.1 |
Are
you a tax evader? |
According to the
example described above, since you have not paid
- A “Real Estate Sale-and-Acquisition
Levy“ (Tapu Harci) of £1,050 [=1.5%*(100,000-30,000)]
at the time of purchase,
- A Real-estate tax of £
70 [=0.1%*(100,000-30,000)] for each year during
which you owned the property
you are considered
as a 'tax evader' and you are subject to severe financial
penalties when the evasion is detected.
8.2 |
Can
the financial penalties charged on a tax evader
be amnestied? How? |
The amount of financial penalty
depend on whether
a)You
have recognised that you had evaded tax due to someone
else's mistake or misleading recommendations (In that
case you are to inform the tax&Tapu authorities
about the situation through a petition stating you
regret the situation)
b)The evasion is detected by the
tax inspectors
c)Someone else informs the tax authorities
about the evasion
d) The other (sellling) party informs
the tax authorities about the evasion.
If you fall in Category (a) mentioned
above, tax penalties to be charged on you is amnestied
partially.
8.3 |
The
principal term of the financial penalty and
interests charged on a tax evader |
The
principal term of the penalty accrues when the ownership
(title deeds) is transferred into your name even if
the evasion is detected later. The principal is the
amount of tax evaded plus administrative penalties
envisaged by the tax laws.
Moreover, a late payment penalty
at an interest rate of 2.5% per month is also charged
on the principal.
In other words, evading a real
estate acquisition and sale levy of £1,050 at
the time of purchase plus a real estate tax of £70
for each following year will cause you to face financial
penalties worth thousands of Sterling Pounds within
only few years.
8.4 |
Risk
of paying much more personal income tax in case
of a sale |
Please note that if an owner sells
out his property within the 4 year period following
the purchase of the property, he is subject to personal
income tax based on the capital gain. Sale after the
fourth year is not subject to any personal income
tax. The current Personal income tax rates change
between 15% and 35%, depending on the capital gain
levels (please see section 7.3.10)
Suppose that, you sell out the
property at £200,000 next year and the new owner
refuses to evade tax.
a) If
you have the actual purchase price declared to the
municipality corrected, you will pay a personal income
tax of approximately £66,000.
(i.e. Effective Tax rate1 *£170,000
<---170,000= 200,000-30,000).
b) If not,
the tax will be approximately £38,000
(i.e. Effective
Tax rate2 * £100,000 <----100,000=200,000-100,000)
In other words, with regard to
personal income tax, if you have your
tax/TAPU records corrected so as to make them show
the actual payment made to the previous owner, you
will save approximately £28,000.
8.5 |
Risk
of being paid very low compensation in case
of nationalisation |
Sometimes municipalities may rarely
introduce slight changes in the city-development-plans.
For example, they may enlarge the width of streets
and this may cause municipalities to seize some parts
of private properties. In that case, pursuant to the
relevant laws, municipalities are to pay a compensation
fee to the property owners in question. The compensation
is somehow linked to the value shown on the TAPU.
8.6 |
Risk
of re-mortgaging your property at a lower value |
By the end of this year, the mortgage
system will be launched. When you like to re-mortgage
your property, the amount shown on the TAPU may be
of high importance for the financial institutions.
8.7 |
Risk
of being involved in an anti-money laundering
activity |
Money-launderers heavily make
use of property sale/purchase transactions everywhere
in the world. The Turkish Government is aware of this
and very keen to take necessary measures to prevent
money-laundering. Money-launderers, fraudsters and
those involved in such cases are heavily punished
in Turkey when they are detected.
Within this context, the property
market is expected to be very closely watched by the
State. Inconsistencies among the figures of TAPU,
banking transfers, taxes etc. are very likely to draw
anti-money laundering inspectors’ attention.
8.8 |
Risk
of being included in the black lists of financial
organisations |
You, as a tax evader, may be included
in the black lists of the financial services companies
and as a result, you may be refused when you ask for
loans or a credit card in the future.
8.9 |
Other
important points |
In this regard, make sure that
the prices shown in the purchase & sales contract,
the TAPU (title-deeds), and the documents declared
to tax authorities are all the same and equal to the
actual purchase price.
Make sure that you keep all relevant
invoices and receipts which justify you have made
the payments. If you are using an agent, solicitor,
translator, or other professionals, please ask for
an invoice.
If you are forced by a
seller or agent to under-declare the price, you can
be sure that he/she is very likely to be a fraudster.
Moreover, you may be instructed
by a seller or real estate agent to pay the agreed
price into two or more accounts. In that case, you
can think that the seller is highly likely to evade
tax.
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