Legal Remedies Which Can Be Resorted To Against The Accrual And Penalty Decisions Taken Under The Customs Legislation
The legal actions which debtors can take against the customs duty and penalty decisions taken in their name have been regulated in articles 242 and 244 of the Customs Law no. 4458. Accordingly, the legal actions which your company may take against the customs duty and penalty decisions taken in its name are as follows:
a. Resorting to "Settlement", which is the resolution of the customs duty disputes with the customs authority without bringing the matter into court,
b. Objecting to the higher authority; and resorting to "Litigation" if the objection is rejected.
a) Practice of Settlement
Procedures and principles relating to settlement specified in Article 244 of the Customs Law no. 4458 are regulated in the Customs Settlement Regulation, which became effective with the Official Gazette dated 27.08.2011.
i) The Scope of Settlement
As per the Customs Settlement Regulation, customs duty receivables which are determined at the end of the examination conducted on the declaration by the customs authority and which are communicated in connection with the value differences reported by the owner of the declarations; and the penalties stipulated in the law and other relevant laws are in the scope of settlement. Therefore, not only the customs duty receivables accrued by the customs authority but also the customs duty and penalty decisions made for the value differences reported by the taxpayer prior to the examination of the customs authority are included in the scope of settlement.
With respect to the receivables subject to settlement, debtors or penalized entities may also request settlement by claiming that there are deficiencies and conflicts due to insufficient insight into law or misinterpretation of the law or that the judicial decisions and the authority provide different opinions on the controversial issue.
On the other hand, if the receivables in the same nature relate to the transactions conducted in multiple customs authorities or regional directorates, the sum of the receivables may be subject to one single settlement.
Furthermore, all decisions on customs duty receivables and customs fines which are communicated to the debtor by being subject to additional accrual after the relevant customs authority has checked the declaration filed by the taxpayers can be included in the scope of settlement.
In case the customs duties and penalties which can be subject to settlement are related to the crimes/misdemeanors regulated in the Anti-Smuggling Law no. 5607, settlement may not be applied to these customs duties and penalties. Therefore, whether or not the settlement applications filed by debtors are in the scope of the mentioned law is determined by the secretariat service units of settlement commissions.
ii) Applications for Settlement
Applications for settlements are submitted by presenting a petition to the units in charge of conducting secretariat services of the competent authorities for settlement in line with the form in appendix 3 of the Customs Settlement Regulation. The applications for settlement may be filed either by the debtor himself, his representative or his customs advisor, provided that special power of attorney for the customs advisor is presented as well.
Under the mentioned Regulation, customs duties which can be subject to settlement are listed as follows:
iii) Parties to Settlement
Debtors must personally attend the meetings of settlement commissions. If the debtor does not personally attend the meeting, his representative or his customs advisor (provided that he is specially authorized with the power of attorney) may participate in the meeting and sign the reports on behalf of the debtor.
However, the maximum number of person to attend settlement commissions has been limited to three. Other person(s) that join the settlement commission meetings along with the person(s) authorized to sign the report may also sign the settlement report as those present in the meeting.
iv) Settlement Commissions
Settlement requests for the receivables subject to settlement are reviewed by "Settlement Commissions of Regional Directorate of Customs and Trade" and "Central Settlement Commission". These commissions assemble with the attendance of all its members and take decisions by majority voting.
Settlement Commissions of Regional Directorate of Customs and Trade are authorized for the requests that relate to receivables amounting up to TL 500.000.- (including this amount) whereas the competent authority for those exceeding TL 500.000.- is the Central Settlement Commission.
In the detection of the amounts relating to the jurisdiction of settlement commissions, the total of the customs duties applied to each single item and the penalties imposed according to the principal tax are taken into account, while the sum of the receivables is taken into account if there is more than one transaction relating to the receivables of the same nature.
v) Settlement Meetings
Debtors or penalized entities wishing to request settlement must file an application by presenting a petition to the units in charge of conducting secretariat services of the competent authorities for settlement within 15 days from the communication of customs duties and penalties. The petitions for settlement requests must address the Directorate of Settlement Commission.
If settlement is reached in the settlement meeting, the agreed amounts must be recorded in settlement report, and this report must be signed both by the chairman and members of the commission and the debtor and/or penalized entity. The amount agreed at the end of the meeting and stated in the report must be paid within a month from the communication of the amount to the debtor. Otherwise, parties will be deemed not to have settled, and public receivables will be collected according to general provisions.
If debtors and/or penalized entities do not accept the amounts offered by the settlement commission, this indicates that the settlement did not take place. In such a case, the amounts offered by the settlement commission are recorded in settlement report and this report is signed by both parties. In this case, the rights of debtors and/or penalized entities to accept the amounts offered by the settlement commission are reserved until the end of statutory objection period.
b) Administrative Objection
Debtors may primarily choose to object to the higher authority as per Article 242 of the Customs Law instead of resorting to settlement with regard to the tax and penalty decisions issued in their name.
On the other hand, if settlement is not reached in the settlement meeting although debtors have resorted to settlement, as per Article 242 of the Customs Law, they have the right to make an administrative objection to the tax and penalty decisions communicated to them. In this case, the administrative objection period which had stopped due to the settlement request will start to run again as from the date when the report stating that settlement has not been reached was communicated to its addressee. However, if there are less than three days left to the end of the administrative objection period, this period shall be extended for three days.
The objection filed to the authority must be finalized within 30 days and communicated to the taxpayer. If this period has ended but the authority has not responded to the objection or has rejected the objection within this period, debtors may resort to litigation.
Tax litigation process conducted under the Administrative Jurisdiction Procedures Law no. 2577 is a quite complicated one. This process might take 18 to 36 months depending on the exhaustion of legal remedies. In order to make this complicated process more comprehensible, it can be divided into phases as follows. Besides, our scheme of the tax litigation procedures is attached to this article.
i) Tax Court
In case their objection is rejected, debtors have the right to apply to administrative courts in the place where the transaction was conducted. In such a case, the tax lawsuit in question must be filed within 30 days from the date when the notice about the rejection of the objection is communicated to the debtor and/or penalized entity.
In case a tax lawsuit is filed, the obligation to pay the controversial tax and penalty decision is cancelled at that stage; the payment is deferred until the decision date determined by the tax court. If the decision taken by the tax court is negative, the payment must be made.
ii) Council of State
The party against the decision taken by the tax court can file an application for appeal against this decision to the Council of State (except for the decisions taken by one single judge). The application for appeal must be filed within (30) days from the communication of the tax court decision. At the end of the review, the Chamber of the Council of State that will review the appeal will either rule on "approval" or "cancellation".
ii) Revision of the Decision
The party against the decision taken by the Council of State at the end of the review of the appeal may file an application for the revision of the decision. This application must be filed within (15) days from the day following the date when the decision by the Council of State on the appeal was communicated. With the rejection of the revision request filed against the Council of State decision which relates to the approval of the decision of the tax court of first instance at the appeal phase, the lawsuit will be finalized parallel to the decision of the court of first instance.
iii) Second Phase of Tax Court
If at the end of the review of the appeal the Council of State rules on the cancellation of the decision made by the tax court, the lawsuit will be sent back to the tax court for a second review.
At the end of the review conducted by the tax court, the court will rule either on "conformity" or "persistence". If the tax court conforms to the "cancellation" decision taken by the Council of State, the dispute will be definitely resolved with a consent decree.
iv) Second Appeal
If the tax court rules on "persistence" against the cancellation decision taken by the Council of State, the party against this decision may again file an application for appeal. This time, the review of the appeal will be conducted by the Plenary Assembly of the Council of State ("Assembly") and the final decision for the dispute will be taken. The decision to be taken by the Assembly at the end of the second appeal is definitive and there is no legal remedy to be resorted to against this decision. If the "persistence" decision made by the tax court is not approved by the Assembly and cancelled, the tax court will have to take a new decision parallel to the decision of the Assembly.
We are of the opinion that this phase at the Plenary Assembly of the Council of State can be completed within 3 to 6 months.
Accordingly, the litigation process (if all legal remedies are exhausted by parties) will be completed at least in 18 and in maximum 36 months. The possible alternatives according to court decisions are demonstrated in the scheme below. if the tax court rules in favor of the plaintiff at the first phase:
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.