The timely and complete collection of taxes, which are among the state's most essential sources of revenue, is of vital importance for the sustainability of public services. However, in certain cases, taxpayers fail to pay their tax debts on time. In such situations, the coercive enforcement process comes into play to secure the collection of public receivables.
This process is carried out under the provisions of Law No. 6183 on the Procedure for Collection of Public Receivables (AATUHK), and it differs from the Enforcement and Bankruptcy Law applicable in private law. Since the state's collection power relies on public authority, it can yield faster and more effective results.
The Path to Enforcement: Accrual and Due Date of the Debt
Once a tax debt is accrued under relevant tax laws, it must be paid within a specified deadline. If not paid within this period, the tax office starts charging late payment interest. In the absence of payment, the public receivable becomes collectible, and collection procedures are initiated.
Payment Order and Notification
The first step in the enforcement process is sending a payment order to the debtor.
- The order includes the type and amount of debt and the legal basis for its collection.
- The debtor must either pay or object within 7 days from the date of notification.
This stage is critical because failure to object in time makes the debt final and enables other enforcement measures to proceed swiftly.
Objection to Payment Order
The debtor can only file a lawsuit with the tax court based on:
- Nonexistence of the debt (e.g., due to payment or expiration), and
- Jurisdictional error of the collecting authority.
The lawsuit must be filed within 7 days from notification and must be limited to these two grounds.
Note: Filing a lawsuit does not automatically suspend enforcement. However, a stay of execution may be requested from the court.
Seizure Procedures
If no payment is made after the objection period or if the lawsuit is rejected, the tax office may initiate seizure on the debtor's assets.
Seizable Assets:
- Movable and immovable properties
- Bank accounts
- Salaries and wages (partially)
- Receivables from third parties
- Company shares and securities
E-Seizure (Electronic Seizure): A fast and effective method used especially for bank accounts by the Revenue Administration.
Sale Process and Collection
Seized assets are auctioned to collect the public receivable. The sale process is transparent and conducted via public auction.
Order of Allocation from Sale Proceeds:
- Collection and seizure costs
- Principal tax and delay charges
- Other public receivables
- Any remaining amount is refunded to the debtor
Installment Payment (Deferral)
In cases where the debtor is unable to pay, tax debts may be deferred before or during enforcement.
- If approved, the debtor is allowed to pay in installments.
- Interest reductions may apply under certain conditions.
- Failure to pay an installment cancels the deferral and reinitiates enforcement.
Important Notes:
- Collection Statute of Limitations: General limitation period is 5 years but can be interrupted or suspended by specific actions.
- Priority of Public Claims: State receivables take precedence over private debts.
- Tax Amnesty or Restructuring: Laws passed by the legislature may restructure tax debts and affect enforcement.
Safeguards for Public Tax Receivables
Before moving to enforcement, the tax authority may apply various safeguard measures to secure its receivables:
Collateral
The tax administration may require collateral if it suspects a risk to its receivable. The tax administration may request the taxpayer to provide collateral if it considers the receivable to be at risk. This collateral ensures protection of the public receivable against potential future defaults.
Accepted Collateral Types:
- Cash
- Bank letters of guarantee
- Treasury bills or government bonds
- Unencumbered immovable properties
When Is Collateral Required?
- When there is a risk of non-compliance with tax obligations
- In cases of tax fraud or use of fake documents
- When a significant tax loss is anticipated though not yet final
- If there is risk of fleeing abroad or asset concealment
Consequences of Failing to Provide Collateral:
- Precautionary seizure
- Direct seizure on assets
- Initiation of enforcement proceedings
- Possible travel ban in some cases
Judicial Review of Collateral Demands:
- Taxpayers may file a lawsuit within 30 days with the tax court.
- Applications can also be made to cancel or reduce the collateral requirement.
Objection and Legal Remedies:
- Taxpayers may challenge collateral requests as unlawful or disproportionate.
- Legal remedy: Annulment lawsuit
- Competent Court: Tax Court
- Jurisdiction: Location of the relevant tax office
- Deadline: 30 days from notification (per Article 7 of the Administrative Procedure Law). Missing the deadline finalizes the obligation.
Right of Priority (Precedence)
In certain situations, tax claims take precedence over other
debts. This is referred to as the right of
priority. For example, in the case of a debtor's
bankruptcy or asset seizure, the tax claim may, under certain
conditions, take precedence over private debts.
Example: In the event of a company's
bankruptcy, the seizure executed for a tax debt may take precedence
over a mortgage held by a creditor bank, ensuring that the public
receivable is collected first.
In certain situations, tax claims take precedence over other debts.
Example: In bankruptcy, a tax lien may precede a bank mortgage to ensure priority collection.
Limits to Priority Right:
- Secured debts: Creditors with liens are paid first from the pledged asset.
- Registered mortgages: May supersede tax debts.
- Employee claims: Wages and compensations have priority over taxes.
- Fraudulent transfers: Transfers made to avoid taxes can be declared invalid.
Precautionary Seizure
If tax collection is at risk and asset concealment is suspected, precautionary seizure may be applied, even for non-finalized debts.
Grounds:
- Suspicion of escape (e.g., preparing to leave the country)
- Risk of concealment or fictitious transfers
- Signs of financial insolvency
- Ongoing investigations for tax fraud or forgery
Execution:
- Initiated by the tax office
- Can be enforced directly or with court approval
Legal Remedy:
- Annulment lawsuit within 7 days from notification
- Filed with the Tax Court
- Request for stay of execution possible
- If damage is caused, compensation (full remedy) lawsuit may be filed
Precautionary Assessment
A temporary assessment of tax debt before it becomes final. Commonly applied:
- During tax audits
- In suspected tax evasion cases
This is a preparatory step for enforcement.
Invalid Transactions
If a taxpayer transfers assets to others to evade tax debts, such transactions may be declared invalid as fraudulent.
According to Article 27 of AATUHK, these transactions can be reversed, and assets may be seized.
Examples of Fraudulent Transfers:
- Transferring assets without compensation (e.g., house to spouse or child)
- Fictitious debts (e.g., fake promissory notes)
- Undervalued sales (e.g., selling a property worth 5M for 100K)
- Family share transfers to shift ownership
Tax Administration's Response to Fraud:
- Files annulment lawsuits
- Recovers assets and imposes seizure
- Penalizes the transferee for complicity
Note: Annulment lawsuits must be filed within 5 years of the tax receivable arising.
🔹 6. Other Measures Additional safeguards include:
- E-Seizure: Instant electronic seizure of bank accounts, vehicles, etc.
- Travel Ban: May be imposed on high-debt individuals
- Payment Order: Sent if the debt remains unpaid
- Digital Tracking: Special digital systems track collection
While the enforcement process provides the tax authority with powerful tools backed by public force, it also allows taxpayers to pursue legal remedies. Therefore, the system is designed to balance state collection powers and individual rights.
The timely and complete collection of tax receivables is crucial for sustainable public finance. The coercive enforcement mechanisms and safeguards serve as effective tools for the tax authority. For taxpayers, understanding these processes and seeking timely legal support is key to preventing rights violations.
Originally published April 21, 2025
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.
