A broad range of taxpayers are required to make tax declarations, from which their taxes are assessed. This category includes income tax for individuals; corporate income tax for corporate entities; stamp tax for parties to certain agreements, documents, and transactions; and withholding tax for employers and certain lessors.

However, if the tax authorities discover that a taxpayer has failed to submit a tax declaration on time the taxpayer will normally be liable for not only the principle amount, but also a tax penalty and interest on the principle, which will continue to accrue until the taxpayer actually makes the payment. Furthermore, the monetary penalties are in addition to the taxpayer’s criminal liability for tax evasion. To prevent such an unpleasant outcome, taxpayers may benefit from a provision in the Turkish tax law that allows for a voluntary disclosure of unpaid taxes, known in Turkish as a regret filing.[1]

How to make a voluntary disclosure through a regret filing

Voluntary disclosure is available for all taxes that are filed through a declaration (with the exception of property taxes). Most notably, it applies to income tax, corporate tax, value added tax, special consumption tax, and in some circumstances inheritance and succession tax. If a taxpayer has failed to submit a declaration and pay any of these taxes, he or she may voluntarily disclose this condition through a regret filing in order to avoid the risk of liability for penalties.

The voluntary disclosure mechanism is regulated under Article 371 (“Voluntary Disclosure Law”) of the Tax Procedural Code[2] (“Tax Code”). To benefit from the Voluntary Disclosure Law, taxpayers must personally notify the tax authority of any missed tax declarations before the authority initiates a complaint or investigation against them; if the tax office discovers the missing tax filing first, the taxpayer cannot benefit from the Voluntary Disclosure Law.[3] In addition, taxpayers must still file all missing tax returns, and pay all unpaid taxes along with a modest fee for interest.[4]

Taxpayers are required to make their voluntary disclosures to the tax authority regarding the unlawful situation in a specific manner in order to be protected from the penalties. Most importantly, the notification must be a truly voluntary act on the part of the taxpayer, and not in response to an investigation.

Voluntary disclosure unpaid taxes through a regret filing has the following conditions:

Reducing monetary penalties

As long as a late taxpayer follows the above steps under the Voluntary Disclosure Law before the tax authority discovers the unpaid taxes, the taxpayer will only have to pay the interest fee for delayed submission of a tax declaration. The Law on the Collection of Public Receivables (“Public Receivables Law”)[6] proscribes an interest penalty calculated at a rate of 1.4% per month,[7] but other than this accrued interest, there will be no monetary penalties assessed.

Avoiding criminal prosecution

To some taxpayers, perhaps even more important than reducing costs is the opportunity to avoid a criminal prosecution. That is why, in addition to eliminating the burden of a fine, the Voluntary Disclosure Law will stop the tax authority from reporting the taxpayer to the public prosecutor for the crime of tax evasion under the Tax Code.[8]

Voluntary disclosure prevents the assessment of penalties for crimes that result from the loss of tax revenue to the state, but it does not remove the criminal nature of the action in breach of the tax law, so theoretically a crime has still been committed. However, voluntary disclosure and payment of the tax functionally and legally results in no loss of tax for the state. Therefore, taxpayers who take advantage of voluntary disclosure will in practice, have nothing to fear regarding criminal sanctions once they have made their late tax payment and delayed submission of tax declaration interest payments.

Regret filing with reservations

Often taxpayers who are legally required to submit a tax declaration disagree with the content or the amount of the declaration. When taxpayers are, for whatever reason, required to pay more taxes then what they believe is reasonable or justified, they may submit the tax declaration with a reservation, so that they may sue the tax office in the future in order to claim the return of the assessed tax amount in whole or in part. The right of taxpayers to raise a reservation while submitting a declaration is set forth in the Law on Administrative Procedure, which states that “… claims filed arising from actions taken upon declarations made with reservation do not interrupt the collection proceedings. A stay of execution can be requested.”[9]

Many taxpayers wish to benefit from the reservation option when voluntarily disclosing unpaid taxes in a regret filing. In this way they would avoid the monetary and criminal penalties, while also reserving the right to challenge the principle tax amount in courts at a later date. However, there is an unresolved question in the doctrine and case law as to whether regret filings can be made with reservations.

It could be argued that since the disclosure must be filed personally and voluntarily by the taxpayer, the taxpayer is barred from challenging the tax assessment, because the regret filing is essentially an acknowledgement of the underlying tax liability as originally assessed. As a result, it is the tax administration’s view that tax bases cannot be declared with reservations for the purposes of voluntary disclosure in a regret filing.

Still, it could also be argued that if a reservation petition is given to the tax office on the day of disclosure with an additional petition stating something to the effect that he or she is voluntarily disclosing this unpaid tax, but also paying with the reservation of all additional rights, there should be an option to file a case challenging the allocated tax with the tax courts within 30 days of submitting the petitions.

Litigating cases on regret filings with reservations

Assuming a taxpayer considers the amount of tax assessed and paid to be unlawful, most Turkish tax lawyers and consultants generally suggest paying with reservations, and filing a case in the tax court to challenge the assessment, even for regret filings. This is partly due to the affordability factor of filing a case in Turkish tax courts; tax cases are filed with a fixed charge of TRY 29.20 (about USD 10.34), and there is a capped attorney fee of approximately TRY 1500 TL (about 531.45 USD)[10] to be adjudicated in favor of the winning party at the end of the proceedings. The court expenses are generally negligible as well.

In February of 2016 Hergüner Bilgen Özeke was representing an international insurance company, where the 9th Chamber of the Council of State ruled in favor of the taxpayer, holding that there is no legal obstacle to a taxpayer filing a voluntary disclosure with reservation. The Court reversed the decision of the lower court, which had been in favor of the tax authorities. The decision is still quite recent, but it should provide strong legal support, if not outright precedent, for taxpayers who wish to make a regret filing with reservation.

However, there remain other Chambers of the Council of State, which have issued different rulings on this topic, generally rejecting reservations on voluntary disclosures. Therefore, any taxpayer who plans to benefit from the Voluntary Disclosure Law with reservations should consult a tax litigation expert, in order to come up with the best legal strategy to meet the needs of his or her particular circumstances.  


[1] “Pişmanlık” in Turkish is translated as “regret,” but in the legal context, it suggests that action must be taken preemptively, in order to be considered truly “voluntary” in a legal sense.

[2] The Tax Procedure Code, Law No. 213, Official Gazette of January 10, 1961 No. 10703-10705.

[3] Law No. 213 Art. 371.

[4] Id.

[5] This is the actual “regret filing” (“pişmanlık”) mentioned above.

[6] The Law on the Collection of Public Receivables, Law No. 6183, Official Gazette of July 28, 1953 No. 8469.

[7] Law No. 6183 Art. 51.

[8] Law No. 213 Art. 359.

[9] Administrative Procedure Law, Law No. 2577 Art. 27, Official Gazette of January 20, 1982 No. 17580.

[10] Amount and exchange estimate as of May 2016.