1. Introduction

The development of electric and hybrid vehicle technologies has brought about new challenges of interpretation and implementation in tax law. In Türkiye, the Special Consumption Tax (“SCT”) rates applied to vehicles equipped with Nissan e-Power technology have been found to be incompatible with the nature of this technology and have become the subject of numerous disputes brought before the courts.

The tax authority has applied an SCT rate of 80% on the basis of the 1.5-liter internal combustion engine contained in these vehicles, disregarding the fact that the vehicle is actually propelled solely by an electric motor. This approach has imposed an unjust financial burden on consumers and has constituted a violation of the principle of tax justice.

This situation has led consumers to initiate lawsuits seeking tax refunds, and the courts have rendered decisions in favor of the taxpayers.

2. Legal Significance of the E-Power Technology

The E-Power system, unlike conventional hybrids, is designed to transmit power to the wheels solely through the electric motor. The internal combustion engine functions only as a generator that charges the battery. Accordingly, the movement of the vehicle is at no stage provided by the internal combustion engine. In other words, the electric motor is the primary source of propulsion, while the petrol engine merely generates electrical energy without transmitting mechanical power to the wheels.

Since the E-Power system provides the vehicle’s traction power entirely through the electric motor, it is argued that such vehicles should be classified, from a technical standpoint, as vehicles powered solely by electric motors. The fact that the internal combustion engine serves exclusively to generate energy for the battery and that the vehicle’s movement is fully ensured by the electric motor necessitates a reassessment of the criteria used to determine the applicable SCT rate.

Taking these technical characteristics into consideration, it is contended that such vehicles should be classified as vehicles operating exclusively with electric motors and thus subject to an SCT rate of 10%. In tax law, the determining factor should be the vehicle’s actual propulsion system rather than the engine’s cylinder capacity.

3. Legislative Framework and SCT Application

Article 87.03 of List (II) annexed to Law numbered 4760 on Special Consumption Tax sets out the rules for subjecting motor vehicles to SCT:

• Vehicles Powered Exclusively by Electric Motors: For models under 160 kW, an SCT rate of 10% applies, whereas for models up to 160 kW, the rate is 40%.
• Petrol and Hybrid Vehicles: For vehicles with an internal combustion engine or utilizing hybrid systems, taxation is based on cylinder capacity, power output, and other technical criteria, and higher rates may apply.

Criticism has been directed at the current SCT practice applicable to vehicles equipped with the E-Power system, arguing that their technical features are not fully taken into account and that they are categorized as conventional petrol vehicles, thereby being subjected to higher tax rates.

Although the vehicle’s movement is entirely provided by the electric motor, the mere presence of the internal combustion engine—despite its sole purpose of electricity generation—is taken as the basis for taxation. This raises both technical and legal concerns. Consequently, the prevailing view is that such vehicles should be classified as vehicles powered solely by electric motors and should benefit from the lower SCT rates.

4. Source of the Taxation Error

In its assessment, the tax authority has considered only the engine’s cylinder capacity and has failed to take into account that the vehicle is propelled by the electric motor. This situation:

• Produces results contrary to the purpose of the legislation,
• Violates the principle of equality and
• Imposes an unjust tax burden on taxpayers.

Accordingly, lawsuits have been brought asserting that these vehicles should be taxed in accordance with their technical specifications, and significant court decisions have been rendered in favor of the plaintiffs.

5. Precedent Court Decisions

With the decision of the 7th Chamber of the Council of State dated 11.02.2022 numbered E.2019/3070 K.2022/506, unity of jurisprudence has been established, the technical findings of the lower courts have been affirmed, and it has been conclusively determined that the application of a 10% SCT rate is lawful. This decision carries a binding effect for subsequent disputes.

According to the 3rd Tax Litigation Chamber of the Istanbul Regional Administrative Court’ decision dated 18.02.2025 numbered E.2025/472, K.2025/436, ruled that the vehicle should be subject to the 10% SCT rate on the grounds that it is propelled solely by the electric motor. Expert reports confirmed that the internal combustion engine operates solely as a generator charging the battery.

5. Tax Refund Procedure and Judicial Remedies

Pursuant to Article 112 of the Tax Procedure Law numbered 213, taxes that have been unlawfully collected may be refunded upon the taxpayer’s application. At this stage, the first step is to submit a written application to the tax office.

If the application is rejected, the taxpayer may file a lawsuit before the tax court within 30 days. The statement of claim must be supported by technical reports and precedent decisions.

The taxpayer bears the burden of proof and must submit the vehicle sales invoice, vehicle registration copy, SCT payment document (bank receipt or collection slip), the vehicle’s technical catalogue, the tax calculation table showing the incorrect calculation, and the petition submitted to the tax authority. The court generally orders an expert examination to clarify the technical situation.

The general statute of limitations for tax refund claims is five years and begins on the date of payment. Failure to apply within this period results in loss of rights.

6. Conclusion

Disputes concerning vehicles equipped with E-Power technology have revealed the importance of taking technical realities into consideration in tax law. Courts have established tax justice by ruling that such vehicles, which have no source of traction other than the electric motor, must be subject to the lower SCT bracket.

These precedents are not only significant for current cases but also serve as a guide for the taxation of vehicles with similar features in the future. It is essential that the tax authority revise its practice in light of this technical reality in order to uphold legal certainty and the principle of equality.

Accordingly, the likelihood of success in lawsuits to be filed in this regard is considered to be high.

Best Regards,
DT Law