What is an Invitation for Explanation?
In short, Invitation for Explanation is when, for taxpayers whose accounts and transactions have not been subjected to tax audits or referred to estimation commissions, if suspicions arise that tax has been evaded and preliminary determinations are made for this reason, the taxpayers are invited to explain. Three points should be noted in the definition. Conditions that must be met for an invitation for explanation:
1) Not having undergone an audit by authorized officials (Tax Inspectors) or not having determinations made by commissions,
2) There must be signs of tax loss,
3) There should be no tip-off until the preliminary determinations made by the authorized officials.
Advantages of the Invitation for Explanation Institution
The institution of invitation for explanation can be expressed as a right granted to taxpayers. This is because if taxpayers make the necessary corrections and provide declarations as a result of the invitation for explanation, they will not be referred for tax audit, and only a 20% tax evasion penalty will be imposed on the evaded tax. As is known, tax evasion penalties equal to one times the evaded tax are imposed in tax audits conducted by tax inspectors. Thanks to the invitation for explanation, taxpayers will pay a tax evasion penalty of 20% instead of one time.
Who is Not Invited for Explanation?
Those who commit the offenses of smuggling mentioned in Article 359 of the Tax Procedure Law cannot benefit from the institution of invitation for explanation due to these actions. For example, taxpayers who issue fake and misleading documents will not be called for an invitation for explanation. We must emphasize that although the act of using fake documents is one of the smuggling acts listed in Article 359 of the Tax Procedure Law, the legislator has provided flexibility for the act of using fake documents and paved the way for them to benefit from the institution of invitation for explanation. However, conditions have been set for this, which are listed below.
1) The amount of the fake documents used should not exceed 100,000.00 TL (amount as of 2020),
2) Even if this amount is exceeded, taxpayers whose amount does not exceed 5% of the total goods and services purchases in the relevant year can be invited for explanation.
To explain the situation above with an example, X Inc. purchased goods totaling 5,000,000.00 TL in 2020, and 200,000.00 TL of these purchases were recorded as fake invoices. As can be seen, although the total amount of fake invoices exceeded 100,000.00 TL, since the proportion within purchases was 4%, they can be invited for explanation.
