One of the key eligibility requirements for companies wishing to participate in public tenders is the absence of final and overdue debts owed to the tax administration and the Social Security Institution (Sosyal Güvenlik Kurumu, “SGK”). In other words, bidders must not have legally finalised and past-due tax debts or social security premium debts owed to the State. Otherwise, even if they meet technical and financial qualification criteria, they may still face disqualification due to their debt status. In practice, contracting authorities request “No Debt Certificate” letters issued by the tax offices and SGK; bidders who cannot submit these documents are not accepted into the tender process. This article explains in detail how tax or SGK debt may affect participation, which legal solutions may be available, and key issues to consider.
The “Debt-Free” Requirement in Public Tenders
Article 10 of the Public Procurement Law No. 4734 regulates qualification rules for participation in public tenders. Under this provision, bidders with finalised tax debt or finalised social security premium debt are not eligible to participate in public tenders. Accordingly, companies whose debts to the State are finalised as of the tender date—under Turkish law (or, for foreign bidders, under their domestic legislation)—may be excluded even if they satisfy all other requirements. The purpose of this rule is to ensure that contractors engaged in public procurement have fulfilled their obligations vis-à-vis the State and maintain a clean financial and compliance record. Therefore, companies considering participation should verify their debt status with the tax office and SGK in advance.
Among the documents requested at the application stage are official letters confirming the absence of tax debt and SGK premium debt. In current practice, bidders often submit a declaration/undertaking at the application stage; however, if awarded the tender, they must submit the actual certificates before executing the contract. If, contrary to the declaration, a finalised debt is identified, or if the required certificates cannot be produced prior to contract signature, the bidder will be disqualified and its bid bond (temporary guarantee) will be forfeited and recorded as revenue for the Treasury. This sanction aims to deter misrepresentations during tender procedures.
What Is a “Finalised Debt”?
In procurement practice, the critical term is “finalised tax or SGK debt”. A finalised debt is a debt that is no longer legally disputable—i.e., no administrative objection or judicial remedy remains available (or relevant time limits have lapsed)—and therefore becomes subject to enforcement and compulsory collection by the administration. Finalisation indicates that the amount and the obligation have become legally certain because the taxpayer has either exhausted available remedies or failed to use them within statutory periods.
For example, if a company is subject to an assessment made ex officio or by the administration and the period for filing a lawsuit is still open, or if judicial proceedings are ongoing, that debt is not deemed finalised. In such circumstances, the taxpayer may obtain documentation confirming that the debt is not final, and may still be able to participate in the tender. Similarly, where an objection or lawsuit regarding SGK premiums is pending and no final decision has been issued, there is no finalised premium debt.
In short, non-finalisation may provide companies with critical time. If a tax or SGK debt has been served on your company, initiating an objection or filing a lawsuit before the statutory deadlines expire may prevent the debt from becoming “finalised,” thereby reducing the risk of tender disqualification.
Exceptions That May Allow Participation Despite Debt
Under certain circumstances set out in the Public Procurement General Communiqué, some liabilities may not be treated as “finalised debt” even if there is an outstanding balance:
- Debts rescheduled/structured (instalment plans): Debts that are overdue but have been deferred and rescheduled under Article 48 of Law No. 6183, or restructured under specific restructuring laws (e.g., Laws No. 7326 and 7440), are not considered finalised for tender purposes provided that payments continue regularly without default. In other words, if your tax or premium debt is covered by an approved payment plan with the tax office or SGK and instalments are paid on time, this does not constitute a tender barrier.
- Legally deferred debts: Debts whose payment deadlines have been postponed by law for a defined period (e.g., deferrals granted due to extraordinary events such as earthquakes or epidemics) are generally not treated as finalised debt during the deferral period. Since the due date has not legally arrived, the bidder is not considered “in debt” as of the tender date.
- Administrative fines and ancillary debts: With respect to SGK, certain debts consisting solely of administrative fines or solely of ancillary items such as late fees/surcharges may, under specific conditions, be excluded from evaluation. These liabilities are typically addressed separately in the Communiqué.
- Debts below TRY 5,000: If the total tax or premium debt does not exceed TRY 5,000, procurement rules may treat the bidder as debt-free for this purpose. For example, an SGK premium debt of TRY 4,500 would not prevent tender participation. Nonetheless, paying such debts where possible is recommended, as amounts may increase with interest and exceed the threshold.
Companies benefiting from these exceptions must be able to document their status. For example, if your tax debt is rescheduled, you may obtain a letter from the tax office confirming the instalment plan and regular payment status. Likewise, if your SGK debt is restructured, SGK may issue a “no debt” certificate as long as the payment plan is being complied with.
Practical Legal Solutions to Participate When Tax or SGK Debt Exists
If you learn that your company has tax or SGK debt as of the tender date, you should act swiftly to implement appropriate legal solutions. Common options include:
1) Paying the Debt in Full
The most definitive solution is to fully settle the overdue debt. Once paid, the tax office and SGK will update your status to “no debt,” enabling issuance of the relevant certificates. While this may not be practical for high amounts, where feasible it is the safest approach.
2) Deferral / Instalment Rescheduling (Restructuring)
If immediate full payment is not possible, you may apply to the tax office or SGK to defer and/or reschedule the debt. Deferral and instalment plans spread payment over time and may suspend certain follow-up and penalty procedures during the plan term. For example, under Law No. 6183, tax debts may—subject to administrative discretion—be deferred (with interest) for up to 36 months. Similarly, SGK debts may be rescheduled through administrative discretion or restructuring laws. Key points are: pay any required upfront amount/first instalment and continue paying all instalments on time. As long as the plan is complied with, the debt may cease to be a tender barrier and you may obtain “no debt” documentation. If an instalment is missed, the debt may revert to overdue status and jeopardise eligibility.
3) Filing an Objection or Pursuing Legal Remedies
If the statutory objection/litigation period has not expired, you may prevent finalisation by using your legal remedies. Examples include filing a lawsuit before the tax court for a tax assessment, or pursuing objection procedures for SGK premiums. While the dispute is pending, the debt may not be regarded as finalised, which may allow you to obtain the relevant documentation and avoid disqualification. This approach is particularly useful where the debt is genuinely disputable and time is needed; it should be managed with support from counsel experienced in tax law.
Required “No Debt Certificates” for Tender Participation
Procurement rules require bidders to evidence their tax and SGK debt status.
- Tax “No Debt” Certificate: This is an official document reflecting the company’s tax debt status across Türkiye. It may be requested from any tax office, and may also be obtained electronically via the Revenue Administration’s online systems. It is important to ensure that the certificate reflects the status as of the tender date and covers all relevant tax types specified in the tender notice (e.g., income, corporate, VAT, SCT, stamp tax, etc.). Typically, the certificate contains wording such as “no debt as of the tender date.”
- SGK “No Debt” Certificate: This document must confirm that the company has no SGK debt nationwide. To obtain it, you may apply to the SGK directorate where your company is registered. SGK checks all workplaces/registrations nationwide associated with the employer and issues the certificate if no debt is identified. If your company has SGK registration numbers in multiple provinces, you should ensure that all registrations are debt-free; if any one registration shows debt, the contracting authority may still be obliged to disqualify the bidder.
Some contracting authorities request these certificates at the application stage, while others proceed based on declaration and require certificates only from the winning bidder prior to contract signature. In either case, the bidder is responsible for ensuring accuracy and currency. Where electronic certificates do not reflect a restructuring arrangement correctly, you may need to apply to the relevant institution for correction or request an officially issued manual document.
Key Considerations During the Tender Process
For companies with tax or SGK debt, tender participation becomes particularly sensitive. Key issues include:
- Subcontractor (sub-employer) debts: Especially in construction tenders, SGK debts of subcontractors may affect the main contractor. Under SGK rules, the main employer may be held responsible for premium debts relating to the subcontractor’s employees. Since contracting authorities may check debt status comprehensively, ensure that subcontractors also have no SGK debt. Otherwise, even after award, an identified subcontractor debt may create a risk of cancellation.
- Risk of forfeiture of the bid bond: If you declare “no debt” but later cannot substantiate it with certificates, you may be disqualified and your bid bond may be forfeited. Given the significant financial impact, declarations must strictly reflect the real status. If a debt exists and no restructuring is in place, resolving it prior to bidding is the prudent approach.
- Potential cancellation of an awarded tender: Certain regulatory approaches may allow cancellation even after award if debt is identified later. If a tax or SGK debt is discovered after completion of the tender process, termination and cancellation may be possible even if the contract has been signed. This can lead to reputational harm and substantial loss of time and effort. Therefore, it is critical to remain debt-free and continue monitoring debt status through to contract execution.
- Seek professional support: Restructuring/deferral procedures, official correspondence with institutions, and monitoring legal objection periods require a professional approach. Incorrect or incomplete applications may cause loss of rights (e.g., missing a restructuring opportunity) or unnecessary payment of disputable debts. In public procurement—where timing is often decisive—support from counsel experienced in tax law can help accelerate and safeguard the process.
Conclusion and Assessment
In conclusion, the absence of finalised tax or SGK debt is a fundamental requirement for participating in public tenders. As a rule, bidders with such debts are not admitted; however, as explained above, disqualification is not inevitable where (i) the debt has not yet become final, or (ii) the debt is placed under a lawful restructuring/deferral payment plan. The applicable regulations provide certain exceptions and mechanisms that may allow indebted companies to participate under specific conditions. The critical point is to take the right steps in a timely manner: identify the debt in advance, complete necessary payment or restructuring actions, prepare tender documentation accurately, and monitor the process closely.
Correctly assessing the legal nature of these steps and implementing them without error is essential to preserving your company’s eligibility. To avoid missed opportunities due to tax or SGK debt, it is necessary to understand the finalisation status of debts and the available legal rights. With proper use of the remedies described above, it may be possible to move from “in debt” to “debt-free” status and participate smoothly in tenders.
If you would like legal consultancy and professional support regarding tax and SGK debt matters in connection with your company’s participation in public procurement, you may contact our specialist team.
