Correction of Tax Errors 26 December 2022

Correction of Tax Errors

   I. Introduction

Error refers to the actions that show the existence of an unlawful transaction and that need to be corrected by the administration. Tax errors are unlawful transactions originating from the taxpayer or the administration (Tax Office), which we encounter in the following process from assessment to tax collection. The emergence of the said errors may be due to the complex and technical aspects of the taxation phenomenon, or the legislation structure that is subject to frequent changes and the inadequacy of the legislation in terms of content. In addition, errors arising from the incomplete or narrow interpretation of the laws by the tax office or the taxpayer can also serve as an example for this scope.

II. In What Ways Does the Correction of Tax Errors Occur?

The institution of error correction is regulated in Article 120 of the Tax Procedure Law (TPL). The correction process is made in accordance with the correction slip and the tax office manager has the authority to sign the correction slip. Correction of tax errors can be made by the tax office ex officio or upon the application of the taxpayer, in both cases the result will be the same. As a result of the correction, all legal and tax consequences of the imposition or collection transactions until that time will be eliminated as of the date of the transaction.

It is of great importance that taxpayers correctly analyse the concepts of tax error and legal dispute and apply accordingly. In case of application to the administration with an error correction request for a legal dispute, the financial administration rejects this request. In order for taxpayers to avoid any loss of rights, if they think that there is a legal dispute in the transaction, it is thought that it would be appropriate to get support from experts in the field, whether it is necessary to resort to litigation within the period of filing a lawsuit, in addition to the application for the correction application or in the related proceedings.

1. Administrative Procedures and Judicial Correction

In Turkish Tax Law, administrative solution is not regulated as a prerequisite for judicial solution, it is possible to apply directly to tax jurisdiction without making an application at the administrative stage.

Ex Officio Correction

Ex officio correction, which is regulated within the scope of Article 121 of the TPL, is the spontaneous correction of clear and absolute tax errors by the administration without seeking any application. If the correction is against the taxpayer and constitutes a violation of the law, a lawsuit must be filed in the tax court within 30 days.

Application for Correction

Pursuant to Article 122 of the TPL; Taxpayers may request the correction of errors in tax transactions from the tax office in writing. However, this application must be made within the correction time limit in accordance with Article 126 of the TPL. If the correction authority sees the request on the spot, the correction is made; If he does not see it on the spot, the person requesting the correction will be notified in writing. In case of correction upon application, different results arise depending on whether the lawsuit is within the period of filing or not. It should be noted that the "implied refusal" period, which was previously applied as 60 days, has been reduced to 30 days with the Law No. 7331. Therefore, if the tax office does not respond within 30 days, the period to file a lawsuit will start from the end of the 30-day implied rejection period following the application to the tax office. The time elapsed until the rectification application will be deducted from the filing period. The application for rectification is in the nature of suspending the period of filing a lawsuit pursuant to Article 11 of the Administrative Procedure Law (APL).

Making the Application for Correction within the Time of Litigation

If the rectification request is rejected or no response is received within 30 days, a lawsuit must be filed within the time remaining after the 30-day filing period, taking into account the time elapsed for the rectification request. If the answer given by the tax office is not final within the thirty-day period, the relevant answer can be considered as rejection of the request, or he/she can file a lawsuit or wait for a definitive answer. In this case, the filing period will not run. However, according to article 10/2 of APL, the waiting period cannot exceed four months from the date of application.

Making the Correction Application After the Litigation Period Has Expired

These errors may have been noticed after the filing period. In this case, a correction request can be made to the tax office, but in case of rejection, it will not be taken to the judicial stage. In this case, taxpayers have the opportunity to apply to the Ministry of Treasury and Finance by complaint pursuant to TPL 124. If the application made to the Ministry through complaint is rejected directly, a lawsuit must be filed within 30 days; In case of s rejection without a response within 30 days, it is possible to file a lawsuit within 30 days from this date. An application will be made to the relevant authority about special provincial administration taxes and to the mayor's office about municipal taxes. In cases filed before the complaint process is exhausted, "administrative authority infringement" decisions may be encountered at the preliminary examination stage. However, this situation is not implemented by every court in practice, and it can be deduced that the complaint institution is an elective right within the literal interpretation of the law. 

2. Errors in the Judicial Stage

Pursuant to Article 125 of the TPL, if there are tax errors in the transactions that have been passed by the tax court, regional administrative court and the Council of State, these errors can be corrected in the procedure outlined in the previous articles, even if the judicial decisions are final. So far; in order for the correction to be made, it is essential that a decision has not been made by the aforementioned judicial authorities about the errors.

III. How the Statue of Limitations Applied in Correction?

The statute of limitations on correction is regulated under Article 126 of the Law:

Tax errors discovered after the expiry of the statute of limitations written in Article 114 cannot be corrected. As far as the fix timeout period is:

a) A mistake was made in the taxes levied and notified within the last year of the statute of limitations;

b) The payment order has been notified to the taxpayer in the taxes accrued without being the subject of a lawsuit in the tax court;

c) In the taxes notified by notice and payment order announcement, seizure was made in accordance with the Law No. 6183;

It cannot be less than one year from the date.

In this context, it should be determined that the period foreseen for the correction limitation period is 5 from the beginning of the year following the calendar year in which the taxable event arose. (For detailed information about Article 114 of the TPL, you can refer to our article titled Statue of Limitations in Turkish Tax Law.)

If the transactions listed in the above paragraphs of the relevant article occur, the statute of limitations cannot be shorter than a year.

 IV. Conclusion

The subject we deal with, belongs to a dynamic area where unilateral actions of the administration are intense and there are conflicts of opinion before the legislation and practical applications. In this context, it should be noted that it is very important for taxpayers to get assistance from experts in the field, both in administrative proceedings and in the judicial process, in order to prevent loss of rights.