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Tariff Disputes in Turkey and Alternative Methods for Resolution

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1. Introduction

Customs duties can be examined within the scope of two types of taxes which are expenditure tax and excise (Indirect) tax. Customs duty can be described as an expenditure tax. Expenditure taxes are for the services and goods produced sold or consumed. Customs duties are type of excise (indirect) tax as well because taxpayers reflect custom duties to consumer by including the tax into the prices of the goods to be sold. Taxable event, time and who to bear are not certain.

Immovable properties and services are not subject to custom duties. Subjects of the custom duties are movable properties which cross the borders of the country and the properties which are subject to international trade.

2. Customs Liability

Customs duties are calculated by the custom tariff which is valid at the starting date of customs liability. Import tax amount is calculated as of the date of the starting of the customs duty regarding those goods and other factors of taxation.

Under Turkish Tax Legislation, customs duty for import tax starts as of the registry date of bill of entry for the goods that are imported or beginning of free circulation of the imported goods. Here, declarant will be the taxpayer.

In case the goods are exported from Turkish Customs Territory, customs liability occurs. Customs liability starts as of the registry date of bill of entry.

3. Taxpayer

In case of importation, taxpayer is declarant of the bill of entry. However, customs regime rights and liabilities may be transferred under defined conditions of law. “Regime Right Holder” or “Right Holder” mean the person acting on its own behalf and own account or the person who is transferee of these rights and liabilities. In circumstances of more than one taxpayer who are liable for the same customs duty, all taxpayers shall be jointly and severally liable for tax under Turkish Taxation System.

If taxpayer can prove that he could not fulfill his tax obligation due to force majeure, goods specifications, hardship or official permission; customs duty will not occur in importation. In addition, in case of illegal importation, the persons who import goods illegally, and who abet in illegal importation and who know this illegality or persons who need-to-know and store goods temporarily and others who are obligated to perform the customs duty shall be responsible for customs duty under Turkish Tax Law.

4. Legal Disputes

Anti-smuggling and customs law regulate the penalties in the situation of illegal import and exports. The followings are the possible penalties which can be imposed by Turkish Authorities:

Tax loss depending on mistake in bill of entry

Tax loss depending on breach in temporary admission conditions

Irregularity fine

1% of CIF amount as a penalty

And other penalties pursuant to Anti-Smuggling Law

Administrative sanction decisions are taken by customs chief or vice-chiefs. Irregularity penalties must be determined and calculated with customs taxes and notified to taxpayer as soon as possible with the ultimate tax amounts.

5. Dispute Resolutions

a. Appeal

The taxpayer can appeal against the notified written penalty, customs duties and other administrative decisions in fifteen days (15) as of the date of notification. The appeals can be submitted to higher authority, if there is no higher authority, appeals can be submitted to the authority which has given the penalty or tax decision. In addition, appeal submitted to authorities must be concluded in thirty (30) days and notified to taxpayer. In case of rejection of appeal, taxpayers can appeal to administrative courts against the rejection of appeal of administrative authorities. After the submission of appeals to administrative courts (tax courts), taxpayers do not have to pay the taxes or penalties until the court decision. If the decision is not satisfactory enough for the parties, they can appeal against tax court decision to Council of State (Danıştay). Time for appeal is thirty days (30) after the notification of the reasoned decision of the courts.

b. Reconciliation

Administration of customs can reconcile with taxpayers in some certain circumstances in regard to notified document which includes the difference between bill of entry and examination result of administration of customs and penalties foreseen in the Customs Law. Reconciliation request must be submitted in fifteen days (15) as of notification date, before the appeal against the administration of customs decision.

After a reconciliation request, appeal and term of litigation stay unless reconciliation request comes out well, duration resumes on. After these stages taxpayers cannot submit another reconciliation request to administration of customs.

On the other hand, after a positive reconciliation, a minute must be signed by both parties. Parties cannot appeal the minute after the signature.

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