The Constitutional Court recently considered a case where the first instance court ruled that VAT applied to the applicant, despite being presented with many court precedents stating otherwise (2013/3244). The Constitutional Court held that the applicant's constitutional property rights had been violated on the basis of unpredictability. It unanimously awarded the applicant's legal and attorney's fee be paid.

In the case, the tax authority levied an attachment on an individual's vehicle and real estate because the person had not submitted a VAT statement, nor paid the amounts allegedly due for the individual's lease of a canteen from a school council. The applicant initiated an action against the tax authority's decision. The first instance court ruled that the canteen was subject to VAT, despite the applicant presenting many prior court decisions supporting the applicant's claim.

The applicant bought the case to the Constitutional Court, which noted:

  • Constitutional property rights can only be restricted by law in accordance with public interests and general principles regarding restriction of fundamental rights and freedoms.
  • Legal provisions must be reasonably accessible, predictable and determined by force of legal security pursuant to the European Convention on Human Rights and Article 36 of the Constitution.
  • Determinism is a primary principle for a state of law (Article 2 of the Constitution). Accordingly, public authorities cannot act in an arbitrary manner and legal provisions must be explicit, obvious, understandable and applicable without doubt, applying to persons as well as to authorities.
  • Individuals should clearly understand the legal consequences of their acts or transactions, as well as which authority is entitled to intervene.
  • Legal security requires predictability.

The Constitutional Court agreed that many past decisions by the Council of State and District Administrative Court have held that:

  • School councils cannot be deemed to be commercial enterprises.
  • Real estate leased by school councils to third parties should be determined to be a lease of real estate, not transfer of an enterprise.
  • Real estate leased by school councils to third parties should be exempt from VAT.

The Constitutional Court stated that principles of predictability require the first instance court to give consideration to the prior decisions on the topic made by the Council of State and act in line with these precedents. Therefore, the Constitutional Court unanimously ruled that the first instance court's decision had violated applicant's constitutional property rights on the basis of unpredictability.

Please see this link for the full text of the Constitutional Court's decision (only available in Turkish).

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