The Crime of Tax Evasion

What is the Crime of Tax Evasion?

The crime of tax evasion, regulated under Article 359 of the Tax Procedure Law, refers to offenses committed by unlawfully preparing, using, altering (falsifying), or destroying books, records, and invoices that are required to be kept and presented under tax laws. In practice, it is known that the most frequently encountered form of tax evasion is the offense of issuing and using false invoices.

What is the Penalty for the Crime of Tax Evasion?

The crime of tax evasion is regulated under Article 359 of the Tax Procedure Law (VUK), titled “Offenses of Evasion and Their Penalties,” and paragraphs (a), (b), and (c) of the said article also contain provisions regarding the penalties for this offense.

a. As regulated in Article 359/a of the Tax Procedure Law (VUK),

“Persons who, in relation to the books and records kept or issued under tax laws and which are required to be preserved and submitted:

1. Commit accounting and bookkeeping fraud, open accounts under the names of fictitious persons or persons unrelated to the transactions, or record the accounts and transactions that should be entered into the books—either entirely or partially—in other books, documents, or recording media in a manner that results in the reduction of the tax base,
2. Falsify or conceal books, records, and documents, or issue documents that are misleading in content, or use such documents…” shall be sentenced to imprisonment from 18 months to 5 years.

b. In Article 359/b of the Tax Procedure Law (VUK), it is stated that:

“Those who destroy the books, records, and documents that are kept or issued in accordance with tax laws and are required to be preserved and submitted, or those who destroy pages of the books and replace them with others, or fail to insert any pages, or those who wholly or partially issue forged originals or copies of such documents, or use such forged documents…” shall be sentenced to imprisonment from 3 to 8 years.

This paragraph also includes the statement:
“A document is considered forged if it is prepared as if there were a real transaction or circumstance when, in fact, there is none.”
c. As stated in Article 359/c of the Tax Procedure Law (VUK):

“Those who print documents that, under the provisions of this Law, may only be printed by persons who have an agreement with the Ministry of Finance, without having such an agreement with the Ministry, or those who knowingly use such documents…” shall be sentenced to imprisonment from 2 to 8 years.

What Acts Constitute the Crime of Tax Evasion?

As can be understood from the legal provision, the crime of tax evasion arises from multiple acts, and the penalties for these acts vary. Accordingly, the acts that constitute the crime of tax evasion are as follows:

1. Falsifying Books, Records, and Documents
2. Concealing Books, Records, and Documents
3. Issuing Misleading Documents or Engaging in Transactions with These Documents
4. Committing Accounting and Bookkeeping Fraud
5. Opening Accounts Contrary to the Truth
6. Falsification in Books, Documents, and Records
7. Keeping Double Books

Effective Remorse and Sentence Reduction in the Crime of Tax Evasion

Based on the determination that the tax has been evaded through the acts listed in Article 359 of the Tax Procedure Law (VUK), the tax assessed, along with the full amount of delay interest, delay surcharge, and half of the imposed penalties, along with the corresponding delay surcharge, will be reduced as follows:

• If paid during the investigation phase, the penalty will be reduced by half,
• If paid before a judgment is rendered during the prosecution phase, the penalty will be reduced by one-third. (VUK Article 359/6)

Additionally, according to the provisional Article 34 of the VUK:
“Those who have been sentenced and whose case is at the enforcement stage, and whose tax has been determined to have been evaded as a result of the acts listed in Article 359, may benefit from the effective remorse regulation made by the Law that introduced this article for the investigation phase, if they pay the entire tax, delay interest, delay surcharge, and half of the penalties, along with the corresponding delay surcharge, to the Treasury within one year from the date the Law introducing this article came into force.”

What is the Aggravating Circumstance that Reduces the Penalty in the Crime of Tax Evasion?

The aggravating circumstance that reduces the penalty in the crime of tax evasion is regulated in Article 360 of the Tax Procedure Law (VUK), and the relevant regulation is as follows:

“In the case of accomplices who participate in the commission of the crimes listed in Article 359, if they have no personal interest in the commission of these crimes, the penalty to be imposed on them shall be reduced by half, according to the provisions of the Turkish Penal Code regarding participation in the crime.”

Therefore, as understood from the legal provision, if the accomplices participating in the crime of tax evasion have no personal interest in committing the crime, the penalty to be imposed is reduced by half.

Procedure for Trial in Tax Evasion Cases

Tax evasion cases have a highly detailed and complex structure due to the fact that the examination reports prepared by tax inspectors constitute significant evidence during the trial process. Tax inspectors generally send a written notice to the taxpayer requesting the submission of documents such as invoices, promissory notes, and receipts related to income and expenses, usually within a 15-day period.

Tax evasion offenses are investigated ex officio by the prosecutor’s office with the completion of both the tax technique report and the tax offense report. A criminal case for tax evasion cannot be filed against the taxpayer before these reports are completed, and the tax office’s opinion on this matter is considered a requirement for the trial process. Additionally, in these cases, the competent court is the criminal court of first instance, and the jurisdiction lies with the court in the location where the crime was committed. In this regard, the parties involved may need a criminal lawyer to follow the investigation, such as a criminal lawyer in Antalya.

Frequently Asked Questions

1.Is Tax Evasion a Complaint-Dependent Offense?

By law, tax evasion offenses are not classified as complaint-dependent offenses. Therefore, these crimes are investigated ex officio by the prosecutor’s office, and there is no complaint period for them.

2.What is the Procedure for the Execution of a Tax Evasion Offense?

In tax evasion cases, if the existence of the crime is determined, the judge imposes a prison sentence on the defendant. In this regard, crimes outlined in Article 359/a of the Tax Procedure Law (VUK) carry sentences ranging from 18 months to 5 years, those regulated in Article 359/b range from 3 years to 8 years, and those stated in Article 359/c range from 2 years to 8 years. Therefore, according to the Turkish Penal Execution calculation, these crimes are punishable with prison sentences, and if the maximum sentence is imposed on the defendant, they may face imprisonment.

3.Is Tax Evasion Subject to Mediation?

Mediation essentially means that the defendant and the person who has been harmed by the crime committed by the defendant reach an agreement through communication facilitated by a mediator. However, the tax evasion offense outlined in Article 359 of the Tax Procedure Law (VUK) is not among the offenses subject to mediation.

4.Can a Tax Evasion Offense Be Converted into a Judicial Fine?

A judicial fine is defined as the conversion of a prison sentence into a monetary fine by the courts under certain conditions. For a prison sentence to be converted into a judicial fine, several conditions must be met, including the following:

1. The prison sentence imposed by the court must be 1 year or less,
2. The nature of the crime must not involve an aggravation that would cause public outrage,
3. The offender must show remorse for the crime and make efforts to remedy the consequences of the crime.
   

As stated, the condition regarding the maximum prison sentence in Article 1 does not align with the penalties for tax evasion offenses. As a result, it is not possible to convert the prison sentence imposed on the defendant for the tax evasion offense into a “judicial fine.”

5.Can a Judgment of Deferred Pronouncement of Sentence (HAGB) Be Given for the Crime of Tax Evasion?

A Judgment of Deferred Pronouncement of Sentence (HAGB); is a situation where, if the defendant meets the necessary conditions, no consequence arises from the sentence given, meaning the criminal judgment is eliminated. With the issuance of this decision, the sentence imposed on the person is not carried out. During this process, adults are placed under supervision for 5 years, while minors are placed under supervision for 3 years, and their actions are monitored.

6.What is the Statute of Limitations for Tax Evasion?

The tax evasion offense is a type of crime subject to the general statute of limitations regulated under Article 66 of the Turkish Penal Code (TCK). In the mentioned provision of the TCK:

(1) Unless otherwise specified in the law, the statute of limitations for public cases is: a) Thirty years for crimes that require aggravated life imprisonment, b) Twenty-five years for crimes that require life imprisonment, c) Twenty years for crimes that require a prison sentence of no less than twenty years, d) Fifteen years for crimes that require a prison sentence of more than five years but less than twenty years, e) Eight years for crimes that require a prison sentence of no more than five years or a judicial fine.

Additionally, the provision continues with:
(2) For individuals who were twelve years old but have not yet reached fifteen at the time of committing the offense, half of these periods will apply; for those who have reached fifteen but have not yet turned eighteen, the statute of limitations will be extinguished after two-thirds of these periods have passed.

(3) When determining the statute of limitations period, the more severe forms of the crime, which require a heavier penalty based on the evidence available in the case, will also be taken into account.
(4) In determining the periods mentioned in the above paragraphs, the upper limit of the penalty specified for the crime in the law is taken into account; for crimes that involve alternative penalties, the statute of limitations is based on the prison sentence.

From the cited provisions, it is understood that the statute of limitations for the crime of tax evasion is 8 years. This statute of limitations period begins from the date when the act constituting the crime of tax evasion was committed.

Additionally, in line with the statute of limitations periods, there is also an extended statute of limitations. The extended statute of limitations defines the period applied to the defendant or victim in cases where there are reasons that interrupt the statute of limitations (Turkish Penal Code, Article 67).

Court of Cassation Decisions Regarding Tax Evasion Crimes

1. “Although a public case was opened against the defendant for the crime of ‘using a false invoice in the 2010 calendar year,’ and the justification for the appealed decision accepted that the defendant used a false invoice in the 2010 calendar year and thereby committed the crime of tax evasion, the name of the crime was incorrectly stated as ‘issuing a false invoice’ in the judgment section, which is contrary to the law. Since the defendant’s attorney’s appeal grounds are found to be valid, the judgment is to be REVERSED according to Article 321 of the 1412 Code of Criminal Procedure, as required by Article 8/1 of Law No. 5320.” (Court of Cassation, 11th Criminal Chamber, Decision dated 27.01.2022, Case No. 2019/5884, Decision No. 2022/1467)
2. “…it is necessary to accept that the crime is completed when the false invoice is prepared in accordance with the legal form from the perspective of the person who issued the false invoice. In the present case, a lawsuit was filed against the defendant for the crimes of issuing false invoices in the 2006-2007-2008-2009 calendar years. It must be determined whether the indictment, which is a condition for the case and not available in the file, exists, and whether the original or certified copies of the tax offense reports and technical examination reports are present in the file, as well as the false invoices that are the subject of the crime and are sufficiently convincing in quantity. Instead of determining and deciding on the defendant’s legal situation in light of all the evidence, the court ruled in writing, stating that no tax loss occurred as a result of the act and acquitted the defendant. This decision is contrary to the law, and the appellant’s objections are deemed valid, leading to the reversal of the judgment for this reason, in accordance with Article 321 of the 1412 Code of Criminal Procedure, as required by Article 8/1 of Law No. 5320.” (Court of Cassation, 11th Criminal Chamber, Decision dated 15.02.2017, Case No. 2016/11813, Decision No. 2017/984)
3. “There is no obstacle to the deferment of the pronouncement of the judgment, and the defendant, in their defense statement taken in court, expressed their desire to benefit from the institution of deferment of the pronouncement of the judgment. As there is no KEMT (Customs and Trade Ministry) certificate in the file and the defendant is not aware of the public damage, it is required that the customs office calculate the public damage based on the CIF value of the goods, as determined by the expert, and the customs duties and other equally effective taxes and financial burdens on the importation of the goods. The total public damage should be determined and notified to the defendant, and if necessary, a decision should be made taking into account Article 231/9 of the Criminal Procedure Code (CMK). However, instead of doing so, the court stated that ‘the prevention of the state’s financial loss, the protection of honest gas stations from unfair competition, the prevention of the victimization of citizens purchasing fuel in bulk, and the deterrence of tax evasion’ were unlawful justifications. Additionally, the court argued that the defendant had not shown remorse and concluded that the application of Article 231 of the CMK was not appropriate. This decision contradicts the rationale that ‘the defendant has expressed remorse and there is a positive opinion that they will not commit a crime again.’ Therefore, the decision to defer the execution of the prison sentence under Article 51/1 of the Turkish Penal Code (TCK) constitutes grounds for the reversal of the judgment.” (Court of Cassation, 7th Criminal Chamber, Decision dated 05.04.2016, Case No. 2014/24113, Decision No. 2016/4903)
4. “In the public case filed against the defendant for committing tax evasion by separately and continuously issuing fake invoices in the years 2005, 2006, 2007, and 2008, it was found that, despite the absence of an opinion from the Tax Inspection Board in accordance with Article 367 of Law No. 213, the trial should have been suspended and an opinion should have been requested from the Tax Inspection Board. If no opinion was given, the public case should have been dismissed. However, a decision was made with insufficient investigation, contrary to the law. The defendant’s lawyer’s objections to the appeal were found to be valid for this reason. Since the other aspects of the case were not examined, the judgment is reversed for this reason, in accordance with Article 321 of the Code of Criminal Procedure No. 1412, as required by Article 8/1 of Law No. 5320.” (Court of Cassation, 11th Criminal Chamber, Decision dated 26.04.2017, Case No. 2016/5013, Decision No. 2017/3131)
5. In the review of the appeals filed by the defendant … and the complainant’s attorney regarding the judgments rendered against defendants … and … for the offense of using forged invoices in 2005; It was determined that, in accordance with Article 367 of Law No. 213, the opinion of the tax office presidency — which is a procedural requirement — and its basis, the tax offense (evasion) report dated 19.10.2007 and numbered VDENR-2007-1109/65, pertain to the offense of issuing forged invoices for the calendar years 2004–2005. However, with the indictment dated 20.02.2008, the defendants were prosecuted for the offense of issuing forged invoices. There was no duly issued opinion — a procedural requirement — with respect to the offense of using forged invoices. It should be noted that the acts of issuing and using forged invoices are separate and independent offenses. Although the reasoning part of the judgment states that the defendant … committed the offense of tax evasion by issuing forged invoices, the judgment section states that he committed the offense of tax evasion by obtaining and recording numerous forged invoices in his commercial books and using them to claim VAT and income tax deductions — creating a contradiction between the reasoning and the verdict. Issuing such judgments without considering this contradiction is contrary to the law. Since the appeals of the complainant’s attorney and the defendant are therefore deemed justified, the judgment is REVERSED on these grounds pursuant to Article 321 of the Code of Criminal Procedure No. 1412, which must be applied as per Article 8/1 of Law No. 5320. (Court of Cassation, 11th Criminal Chamber, Decision dated 14.12.2016, Case No. 2016/1833, Decision No. 2016/8385)

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