A Wrongly Collected Tax Cannot Be Refunded Without Interest

With its decision in application no. 2021/22795, published in the Official Gazette of 30 October 2026, the Constitutional Court has once again settled one of the oldest debates in tax law. If a tax collected without legal basis is refunded only as principal, with no interest for the time that has passed, the right to property is violated.

The facts are familiar. Income tax was withheld from the severance payment made to an employee whose contract ended by mutual termination agreement; the tax court held that the withholding was a manifest tax error and the amount was refunded. The administration, however, paid not a single lira of interest for the period between the date of withholding and the date of refund. The first instance court's judgment accepting the applicant's claim for interest was overturned on appeal; the Regional Administrative Court dismissed the case with final effect on the ground that, since no deferral interest had actually been collected, there was no tax error that could be remedied through the correction and complaint procedure.

The Constitutional Court did not accept this approach. In the Court's view, the refund of an amount collected without legal basis cannot be limited to payment of the nominal sum; the economic loss the individual suffered during the period of deprivation must also be compensated through interest or a similar mechanism. Otherwise the state's duty to protect the right to property is reduced to a merely formal recognition of the right. The Court recalled the principles it set out in its 2015 Akel Gıda decision and also cited judgments of the Third, Fourth, Seventh and Ninth Chambers of the Council of State holding that taxes collected in excess or without basis must be refunded together with deferral interest. The outcome was a unanimous finding of violation and an order for retrial.

The real significance of this decision goes beyond the taxation of mutual termination payments; the decision clarifies the legal nature of interest on tax refunds. It is wrong to treat interest as an extra payment granted at the administration's discretion; interest is an integral component of the refund. The legislature itself expressly accepted this in 2012 through the amendment to the fourth paragraph of Article 112 of the Tax Procedure Law. Since then, the refund of taxes collected in excess or without basis together with interest calculated at the deferral interest rate from the date of collection has been the clear command of the law. That the administration nonetheless made a refund without interest, and that a regional appellate court found this lawful, shows that the problem lies less in the legislation than in the reflexes of practice.

What happens in practice? Tax offices, when refunding amounts under court judgments, often either do not calculate interest at all or pay it only once a separate lawsuit is filed. The taxpayer is forced to exhaust judicial remedies twice, first for the refund of the tax and then for the payment of interest. In this case too, the applicant had to pursue two separate series of proceedings, first for the refund and then for the interest; a process that began in 2018 concluded only in 2026 with the Constitutional Court's decision. It is no exaggeration to say that paying the nominal amount and closing the account for a person whose money sat in the state's coffers for years amounts, especially in periods of high inflation, to a de facto partial confiscation.

Nor is the issue unique to Türkiye. In Eko-Elda AVEE v. Greece, the European Court of Human Rights found that refunding a wrongly collected tax years later without interest violated Article 1 of Protocol No. 1. The Constitutional Court's case law is consistent with this line. Accordingly, the approach in tax litigation that treats a claim for interest as a legal dispute and places it outside the correction and complaint procedure no longer has any defensible side when measured against constitutional and international standards alike.

So what should happen next? First, tax offices should calculate interest of their own motion in every refund made under a court judgment or through the correction procedure; waiting for a separate petition or lawsuit is contrary to the clear text of the law. Second, regional administrative courts should abandon the narrow interpretation that pushes interest claims outside the scope of correction and complaint; the Constitutional Court has now stated plainly that this interpretation is incompatible with the right to property. Third, taxpayers' counsel should raise the claim for interest expressly and from the outset in refund cases and document both the date of withholding and the date of refund in the file.

Returning a wrongly collected tax years later to the last kuruş does not amount to doing justice; a refund that does not pay for the money held in the state's hands is a recognition of the right only on paper.

This article is based on the Constitutional Court's decision of 18/5/2026 in application no. 2021/22795 (Official Gazette, 30/10/2026, No. 33415) and the ECtHR judgment in Eko-Elda AVEE v. Greece.