Interest payment liability of the State on refunds to the taxpayer upon the court decisions rendered in favor of the taxpayer

Atty. Sinem Gül

As is known, pertaining to the sub-clause 1.b of the 3rd clause within the Article 112 of Tax Procedures Law no. 213 (VUK), in the circumstance that it has been resorted to litigation by the taxpayer against any additional, ex-officio or administrative assessment imposed in the name of him/her and if any court decision is rendered against that taxpayer; the State collects that receivable from the taxpayer including the delay interest calculated at a rate of the default interest determined as per the Law For Procedures of Collection of Public Receivables no.6183 (AATUHK), covering the period between the usual due date and the date of notification on the court decision.

 

Similarly, pertaining to the 6th clause within the Article 112 of VUK as well, a delay interest at a rate of the deferment interest that is determined as per the AATUHK within the context of statutory principles, covering the period between the date of refund to the taxpayer and notification of the court decision to the tax office is calculated on taxes paid following the declaration with reservation and subject to a refund upon a decision rendered in favor of taxpayer and collection of it pursuant to a court decision rendered in favor of the tax authority during the judicial process.

 

Through the concerning regulations, in the cases that the State is proved to be convincingly right before the court; the compensation of any losses arising from tax receivables which were unfairly unpaid and were resorted to litigation against is legally preserved.

 

Similarly, in the cases that the individual is proved to be convincingly right, the losses arising from amounts paid as taxes following unjust and unlawful administrative act would be expected to be compensated and remain under legal preservation as well. With another expression, whether the unjustified part is the State or an individual, that should not refer to any diversity in terms of the liability for compensation. As a matter of fact, that is a requirement for being a State of Law.

 

However, the situation did not develop that way when specific to Turkey.

 

Accordingly, despite the Article 28 of Administrative Jurisdiction Procedures Law no. 2577 (İYUK) contains regulation for applying a delay interest at a rate of the deferment interest that is set pursuant to the Article 48 of AATUHK in favor of the individual; the concerning regulation seems far away from providing compensation of the loss to be calculated as covering the dates between payment and refund since it’s a regulation intended to compensate for the losses arising from late execution of court decision.

 

Moreover, the absence of an explicit law provision, such as the sub-clause 1-b of Article 112/3 of VUK, concerning payment of the interest to be applicable in favor of the taxpayers upon the court decision stating that the tax paid by the taxpayer is unjust and unlawful, besides the amount that is paid as tax by the taxpayer, brought along a series of legal arguments.

 

Hence, whether the regulation regarding the refund of excess and unjustifiable taxes enacted through the Article 112/4 of VUK covers the refunds to the taxpayer upon the court decision or not had been discussed both doctrinally and judicially and the State’s liability of paying interest was tried to be explained around this Article for a long time while some losses were born on the side of taxpayers.

 

However, when the decisions of tax court rendered recently in line with the European Court of Human Rights rulings, Council of State and Constutional Court are examined, it might be possible to state that this legal argument has been finalized before the courts and the understanding that defends constitutional law and superior rules of law has overcome the perception searching for an explicit legal regulation regarding the interest to be paid in favor of the taxpayers upon the court decisions in favor of the taxpayer.

 

Herein this article, the legal fundamentals of interest payment liability of the State for the period covering payment and refund dates upon the tax court decisions in favor of the taxpayer will be evaluated in the light of existing legal regulations, judicial discussions lasted in the previous period and up-to-date court decisions and our suggestions on the matter will be provided.

 

 

 

 

 

Explanations in this article reflect the writer's personal view on the matter. EY and/or Kuzey YMM ve Bağımsız Denetim A.Ş. disclaim any responsibility in respect of the information and explanations in the article. Please be advised to first receive professional assistance from the related experts before initiating an application regarding a specific matter, since the legislation is changed frequently and is open to different interpretations.