The case described herein is of significant importance for companies encountering the consequences of desk audits in respect of transactions previously challenged before the courts. The Supreme Court of the Republic of Kazakhstan has confirmed the application of a ten-day period for the issuance of notifications requiring the rectification of violations identified during desk audits (the “Desk Audit Notifications”).
KP Disputes successfully challenged before the Supreme Court eight Desk Audit Notifications issued against a major construction company in Kazakhstan (the “Company”). The aggregate amount of the claims was USD 150,000.
The notifications were based on the deduction of amounts under transactions subsequently declared void pursuant to a court decision that had entered into force (the “Transaction Decision”).
The difficulty with such notifications lies in the fact that they cannot be closed by way of explanations; in the event of disagreement, the only remedies available are pre-trial and judicial appeals.
The key issue in dispute was the determination of the point in time from which the ten-day period for the issuance of Desk Audit Notifications, as prescribed by subparagraph 10 of paragraph 2 of Article 114 of the Tax Code, is to be calculated.
1. The Parties' Positions: The Tax Authority and the Company
The Tax Authority contended that:
- Desk audits involve the analysis of reporting, information obtained from state bodies, and other data, with violations being identified upon comparison of these sources;
- The ten-day period ought to be calculated from the completion of the audit, which in practice would mean the absence of any limitation save for the statute of limitations.
The Company maintained that:
- A court decision declaring a transaction void in itself evidences a violation in tax reporting, since deductions are not applicable and expenses relating to a void transaction are not deductible;
- The Transaction Decision entered into force on 29 June 2022, whereas the Desk Audit Notifications were issued only on 28 and 29 December 2023 — a year and a half later, in manifest breach of subparagraph 10 of paragraph 2 of Article 114 of the Tax Code;
- Judicial acts are matters of public record, and the Tax Authority ought to have been aware thereof in 2022.
- The Company's position was supported by the practice of the Supreme Court, including Resolutions No. 6001-23-00-6ап/1392 dated 11 January 2024 and No. 6001-24-00-6ап/1621 dated 23 January 2025.
2. Outcome of Judicial Proceedings
The courts of first instance and appeal dismissed the Company's claim, concurring with the arguments of the Tax Authority.
However, the Judicial Panel for Administrative Cases of the Supreme Court overturned those decisions. The Supreme Court held that:
- Desk Audit Notifications must be issued within ten working days from the moment of detection of the violation during the desk audit, and not from the date of entry into force of the judicial act;
- The burden of proof regarding the date of detection of the violation rests with the Tax Authority;
- In the event of dispute, the court must establish this date on the basis of the totality of evidence, including the date of receipt of the judicial act and the chronology of the processing of documents.
In the present case, the Supreme Court determined the date of detection of the violation as 11 December 2023 — the date on which the Medeu District Prosecutor's Office (the claimant in the case on the invalidation of the transaction) transmitted the judicial act to the tax authority at the place of the Company's registration. The Desk Audit Notifications were issued only on 28 and 29 December, thereby exceeding the statutory period.
Result: The Supreme Court annulled the lower court judgments and granted the Company's claim in full. Resolution No. 6001-24-00-6ап/3674 dated 17 June 2025.
Commentary by KP Disputes
Our attempts to invoke the ten-day period for issuing Desk Audit Notifications commenced as early as 2021, coinciding with the establishment of the administrative courts. The development of favourable judicial practice in this respect has taken considerable time, yet the outcome of this case demonstrates that the position is beginning to take root at the level of the Supreme Court.
We anticipate that this legal trajectory will be further continued within the newly established Cassation Court for Administrative Cases, thereby affording companies greater legal certainty in tax disputes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
