Our Explanations:

Constitutional Court Decision no. E.2020/11, K.2023/98 dated 18/05/2023

It was claimed that the rule contradicted with Articles 90 and 127 of the Constitution, stating that valuable house tax was included in the revenues of central administrations and not local administrations with the rule, residences subject to valuable house tax were also subject to real estate tax, the regulation would cause separate liabilities for the taxpayer towards both the relevant municipality and the relevant tax office, and the situation conflicted with international conventions stipulating that sufficient financial resources should be provided to local administrations and financial resources of local administrations should be proportionality with their responsibilities.

In consequence of its norm evaluation, the Constitutional Court concluded as follows:

• In Terms of Payment of Valuable House Tax to Central Administration

Real estate tax is important because it is a major financial resource required by municipalities while offering public services, as well as a local and common tax. Collection of taxes locally is essential for real estate tax for the purpose of ensuring that taxes collected by local administrations are spent to local services.

The purpose of valuable house tax is to impose taxes on residential immovable properties deemed as a luxury asset and valued over a certain amount, and not to contribute to local common needs arising from the immovable properties in a residential area. Regarding immovable properties subject to valuable house tax, it is possible to fulfil local common needs with real estate tax as well as taxes collected and managed by local administrations (such as environment tax) or shares transferred from general budget tax revenue to local administrations as per the provisions of Law no. 5779.

It cannot be concluded that the rule in dispute for inclusion of valuable house tax into revenue imposed on residential immovable properties, which also constitutes the subject of real estate tax that local administrations are authorized to levy and collect, constitutes an intervention in the financial autonomy of local administrations. For the explained reasons, the rule is contrary to Articles 73, 127 and 36 of the Constitution.

• In Terms of not Taking Valuable House Tax into Consideration in the Calculation of Shares to Local Administrations

Residential immovable properties within the boundaries of Türkiye, which are subject to valuable house tax, also constitute the subject of real estate tax if they are not included in the scope of any exceptions or exemptions. Valuable house tax is defined as a central administration revenue, while real estate tax is levied and collected by the relevant municipality. Accordingly, it is seen that both the abovementioned revenue items and real estate tax are among the financial resources for the services offered and costs incurred by local administrations in their areas of authority. For the explained reasons, recording valuable house tax collected as a general budget revenue and not taking it into consideration in the calculation of shares to local administrations as per Law no. 5779 and other relevant laws are not contrary to the principle of autonomy of local administrations.

The decision was published on the Official Gazette dated 12 September 2023, accessible via the attached link. https://www.resmigazete.gov.tr/eskiler/2023/09/20230912-3.pdf

Regards,