Events
The educational institutions, student dormitories and dershanes belonging to the company of which the applicant was the chairman of the board of directors in the period after 27/6/2012 were closed down with Article 2 of the Decree Law No. 667 on the State of Emergency; the movables and all kinds of assets, receivables and rights, documents and papers belonging to the closed educational institutions, student dormitories and dershanes were transferred to the Treasury free of charge. With paragraph (3) of Article 5 of the Decree Law No. 670 on the Measures to be Taken within the Scope of the State of Emergency (Decree Law No. 670), the company’s activities were terminated and its commercial registry was officially cancelled, and its assets other than the assets taken over were deemed to have been transferred to the Treasury free of charge. Pursuant to the aforementioned regulation, the legal entity of the company was also cancelled.
The transactions of the company for the special accounting periods 1/7/2014-30/6/2015 and 1/7/2015-30/6/2016 were examined with tax inspection reports dated 8/12/2016. Taxes and penalties determined in the said reports were levied on behalf of the applicant as the legal representative due to the termination of the legal entity of the company
The lawsuits filed by the applicant were partially rejected and partially cancelled by the Tax Courts. The appeals were rejected on the merits and definitively by the regional administrative courts.
Allegations
The applicant claimed that his right to property was violated as the tax and penalty arising from the violation of the tax obligations of the company, which was closed down by a decree with the force of law within the scope of the state of emergency measures, were levied in the name of the legal representative.
Assessment of the Court
The principle of tax legality requires that the taxpayer of the tax be clearly regulated in the law. If the provisions regarding the taxpayer are not specific and foreseeable, this violates the principle of legality of taxation. Executive Decree 670 Article 5 Paragraph (3) stipulates that the activities of the companies to which the closed institutions are affiliated are terminated and their commercial registry records are officially cancelled; however, there is no provision regarding the tax and penalties to be levied in the event that it is determined that the tax liabilities of the companies are violated during the period in which the legal personality of the companies continues.
On the other hand, Article 10 of the Tax Procedure Law No. 213 does not contain a regulation stipulating the assessment of the tax debt on behalf of the legal representative. In this case, it cannot be said that Article 10 of Law No. 213 constitutes a legal basis for the assessment of the company’s tax debt on behalf of the applicant.
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However, even though it is not referred to in the decisions in the concrete case, it is seen that paragraph (9) added to Article 17 of the Corporate Tax Law No. 5520 with Article 6 of Law No. 5904 is also discussed in the decisions of the Council of State. In the aforementioned paragraph, it is stated that all kinds of tax assessments and penalties to be imposed for the period before the liquidation of the taxpayers, whose legal entity has been deleted from the trade registry by liquidation, shall be made on behalf of any of the legal representatives. According to the interpretation of the Third Chamber of the Council of State, in order for a tax assessment to be made on behalf of the legal representative, the legal entity must have been liquidated and deleted from the trade registry. Since the companies cancelled from the trade registry pursuant to paragraph (3) of Article 5 of the Decree Law No. 670 have not been liquidated, it is not possible to assess their tax debts for the pre-liquidation period on behalf of their legal representatives.
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On the other hand, the Fourth Chamber of the Council of State states that the said paragraph can also be applied in cases where the legal entity has ceased to exist through methods other than liquidation. In this context, the Fourth Chamber of the Council of State accepts that it may also be applied to the taxes and penalties arising from the violation of tax liabilities of the companies, which were cancelled from the trade registry with paragraph (3) of Article 5 of the Decree Law No. 670, in the period prior to the date of termination of their legal personality.
This difference of opinion between the two chambers of the Council of State has resulted in the emergence of two different practices within the country. In this framework, the assessments made against the persons in the geographical areas within the jurisdiction of the Fourth Chamber of the Council of State are found to be in accordance with the law, while the assessments made against the persons in the areas within the jurisdiction of the Third Chamber of the Council of State are cancelled.
On the other hand, it cannot be said that the aforementioned paragraph is a new provision of law. It is observed that the said article has been in force for approximately ten years as of the date of finalisation of the judicial process concerning the applicant. A period of ten years is long enough for the case-law on the interpretation of the said article to become settled and uniform. The lack of uniformity in the interpretation of the law during this period results in different decisions depending on the jurisdiction of the Chambers.
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As a matter of fact, with the sixth paragraph added to Article 10 of the Law No. 213 with the Law No. 7103, these discussions were put an end to and the tax and penalties related to the period prior to the termination of the legal personality of the companies whose legal personality was terminated for reasons other than liquidation were allowed to be levied on behalf of the legal representatives. However, the aforementioned paragraph added to Article 10 of Law No. 213 entered into force on 21/3/2018 and it is not possible to apply it to transactions before this date in accordance with the rule of law principle. In this case, it has been accepted by the legislator that there is an uncertainty as to whether the assessment will be made on behalf of the legal representative in the period before 21/3/2018, when Law No. 7103 entered into force.
The existence of two different interpretations of the same legal provision and the inability to unify the case law in a way to ensure the validity of one of these interpretations weakens the capacity of the rules of law to guide the behaviour of their addressees and thus their predictability. The lack of certainty and certainty regarding the issue of whether a levy can be made on behalf of the legal representative leads to uncertainties as to which decision the persons will plan their future business and transactions and direct their behaviour within the framework of these plans. This situation contradicts the principles of legal certainty and predictability and undermines the trust of individuals in the judicial system and court decisions.
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As a result, the principles of legal certainty and predictability have been damaged due to the existence of different jurisprudence -at the date of the incident- on whether the debts of companies whose legal personality has been terminated through procedures other than liquidation can be levied on behalf of the legal representative and the lack of uniformity in the interpretation of the relevant provision despite the long period of time since the entry into force of paragraph (9) of Article 17 of Law No. 5520. In this case, it has been concluded that the interference with the right to property through taxation is not based on a law that meets the criteria of certainty and predictability.
The Constitutional Court decided that the right to property was violated for the reasons explained.
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