Loader

The Ruling of the Turkish Constitutional Court on the Annulment of the Provisions of Law Preventing the Predictability of the Burden of Tax and Charge to be Faced by the Contractors Participating in International Public Tenders

The Ruling of the Turkish Constitutional Court on the Annulment of the Provisions of Law Preventing the Predictability of the Burden of Tax and Charge to be Faced by the Contractors Participating in International Public Tenders

With the decision of the Turkish Constitutional Court ["Court"] dated 24/12/2020 and numbered 2020/15 E., 2020/78 K., the expressions of “public tenders… to which foreign companies responded…" in Art. 2 of the Stamp Tax Law No. 488 and Art.1 of the Act of Fees No. 492, have been annulled, as they were considered to unconstitutionally prevent contractors who participate in international public tenders from foreseeing the tax burden to be faced. The aforementioned provisions regulate the tax exemptions for "international tenders" that are held by public institutions and organizations open to the participation of domestic and foreign companies either separately or together. The articles regulating the exemption have not been completely annulled but only the phrases quoted above were found to be contrary to Articles 13, 48 and 73 of the Constitution, and were annulled by a unanimous vote.

Contested Provisions and Grounds of Application

In the provisions, which include the contested expressions, the international public tender is defined as " tenders held by public institutions and organization that are open to the separate or joint participation of domestic and foreign companies and to which foreign companies responded”, and the terms of tax and charge exemption are set out.

In the application petition it is stated that the activities within the scope of international tenders are exempt from stamp tax and charges, and in order for a tender to be considered as an international tender, foreign companies must have submitted a bid for this tender. However, it is not possible for the participants to know whether foreign participants have bid during the tender process. Thus, it has been argued that the rules are contrary to Articles 2 and 73 of the Constitution by stating that this situation causes the participant who bid to the tender to be unable to foresee the tax burden to be faced if s/he wins the tender, and therefore it is incompatible with the principles of legal security, certainty, and the legality of taxation.

Assessment of the Court

The provisions requested to be annulled are examined in terms of Article 48 of the Constitution on the freedom of work and contract, Article 13 on the restriction of fundamental rights and freedoms, and Article 73 on the principle of the legality of taxation, and consequently, the contested expressions are found to be contrary to the principles of "freedom of contract", "rule of law” and “clarity and predictability in taxation”.

In the ruling, it is stated that the participants who bid to the tender were unable to foresee the tax burden to be faced in case of winning the tender, since it is not possible for them to know whether foreign participants have bid during the tender process. In this respect, the Court ruled that the contested expressions were contrary to Articles 13, 48 and 73 of the Constitution and violated the principles of “legal predictability and certainty”. Thus, the contested expressions were annulled with a unanimous vote. However, it must be noted that annulment of these expressions does not eliminate the tax exemption in the international tenders.