I. Ruling of the judicial panel for administrative cases of the Supreme Court No. 6001-24-00-6ap/664 dated January 8, 2024.
Appeal against the actions of the Ministry of Finance of the Republic of Kazakhstan regarding inclusion in the tax audit schedule.
Based on Order No. 480 of the Ministry of Finance of the Republic of Kazakhstan dated May 6, 2022, the claimant was included in the schedule for comprehensive tax audits for the second half of 2022. Disagreeing with this inclusion, the claimant filed a lawsuit seeking to declare the Order of the Ministry of Finance of the Republic of Kazakhstan unlawful in the part concerning their inclusion.
Conclusions of the cassation instance:
- The State Revenue Committee failed to confirm the correctness of the risk assessment criteria calculations that classified the claimant as high risk.
- The appellate court established that the State Revenue Committee incorrectly determined the tax period when calculating the risk assessment criteria.
- Representatives of the Ministry of Finance of the Republic of Kazakhstan and the State Revenue Committee were unable to substantiate the accuracy of the risk assessment calculations and the classification of the claimant as high risk during the court hearing.
The case was reviewed twice. Initially, the first-instance court dismissed the claim. The appellate panel upheld this decision. However, the Supreme Court of the Republic of Kazakhstan, reviewing the case in cassation, remanded it for reconsideration by the appellate instance with a different judicial panel.
Upon reconsideration, the appellate panel overturned the first-instance court's decision and issued a new ruling in favor of the claimant. The cassation court upheld the conclusions of the appellate instance and dismissed the State Revenue Committee's cassation appeal.
II. Ruling of the judicial panel for administrative cases of the Supreme Court No. 6001-24-00-6ap/1151, (2) dated December 3, 2024
Appeal against the notification on the elimination of violations identified based on the results of desk audit.
The tax authority issued a notification on the elimination of violations with a medium risk level, identified based on the results of a desk audit regarding the Company. The basis for issuing the notification was a ruling of the district court, according to which the supplier's manager engaged in illegal business activities by issuing invoices without actual performance of work, provision of services, or delivery of goods.
Conclusions of the cassation instance:
- The court identified procedural violations – the notification was signed using an electronic digital signature by a person who was not listed in the details of the contested notification. Additionally, the notification in paper form was not sent to the claimant;
- The issued notification does not comply with the principles of legality and reasonableness, as it lacks specific circumstances confirming the fictitious nature of the transaction in settlements with the claimant;
- The circumstances established by the appellate court are not sufficient to issue the notification;
- The tax authority misinterpreted the ruling of the district court, thereby depriving the claimant of the right to provide explanations regarding disagreement with the identified violations;
- The Judicial Panel of the Supreme Court of the Republic of Kazakhstan upheld the conclusion of the first-instance court that the fact of the supplier's delivery of goods to the claimant was proven based on the submitted documents.
The first-instance court ruled in favor of the claimant. The appellate court overturned this decision and issued a new ruling denying the claim. The cassation instance annulled the appellate court's ruling, upholding the decision of the first-instance court.
III. Ruling of the judicial panel for administrative cases of the Supreme court No. 6001-24-00-6ап/1295, dated December18, 2024
Appeal against the order of the territorial tax authority on the appointment of a thematic tax audit.
Tax authority issued a notification on the elimination of violations, identified based on the results of desk tax audit regarding the Company. The company submitted an explanation disagreeing with the violations stated in the notification. Following the review of the explanation, the tax authority deemed the notification unfulfilled. Subsequently, the tax authority sent a letter to the company regarding the issuance of a preliminary decision on the appointment of a thematic tax audit. The company, disagreeing with the preliminary decision, submitted written objections. After that, the territorial tax authority issued an order on the appointment of a thematic tax audit.
Conclusions of the cassation instance:
- In violation of Article 73 of the Administrative Procedure and Process Code, the respondent failed to ensure the hearing procedure, thereby violating the company's right to independently eliminate the violations or submit objections regarding the adopted decision;
- A violation of administrative procedure legislation constitutes grounds for declaring the administrative act unlawful.
The first-instance court dismissed the claim. The appellate court overturned the firstinstance court's decision and issued a new ruling in favor of the claim. The cassation instance upheld the conclusions of the appellate court.
IV. Ruling of the judicial panel for administrative cases of the Supreme Court No. 6001-24-00-6ap/1469 dated December 24, 2024
Appeal against the notification of refusal to refund VAT.
The tax authority conducted a thematic tax audit of the company regarding the verification of the accuracy of VAT amounts claimed for a refund. Based on the results of the audit, the VAT refund was denied. Disagreeing with the audit results, the company appealed them in court.
Conclusions of the cassation instance:
- The courts of lower instances rightfully assessed the actions of the territorial tax authority regarding the failure to conduct a hearing procedure, which deprived the claimant of the opportunity to express its position on the preliminary results of the tax audit;
- The courts also properly evaluated the procedural violations committed by the territorial tax authority during the tax audit. It was established that the notification of the audit commencement was delivered to a person who was not authorized to participate in the audit on behalf of the audited taxpayer;
- For the purpose of VAT refunds, the absence of violations in the calculation and payment of VAT by the direct suppliers in the transaction with the taxpayer submitting the refund claim is crucial. According to the "Pyramid" analytical report, violations were identified at the supplier levels 3-6. However, no violations were established concerning the company's direct suppliers;
- The courts correctly found the arguments of the territorial tax authority unlawful due to their broad interpretation of the VAT refund regulations;
- The territorial tax authority failed to confirm the fact of violations of tax legislation by suppliers at levels 3-6;
- There is an established judicial practice in this category of tax disputes, which contradicts the position of the territorial tax authority.
The cassation instance upheld the decisions of the first-instance and appellate courts to annul the notification on the tax audit results.
V. Ruling of the judicial panel for administrative cases of the Supreme Court No. 6001-24-00-6ap/1147 dated December 24, 2024
Appeal against the notification on the results of the tax audit.
The tax authority conducted a thematic tax audit of the company regarding the accuracy of tax calculation and the timely payment of taxes and other mandatory payments to the budget. Based on the results of the audit, a notification was issued on the additional assessment of CIT and VAT, as well as a reduction of losses. Disagreeing with the audit results, the company appealed them in court.
Conclusions of the cassation instance:
- A legally binding verdict of the interdistrict court established the fictitious nature of the invoices issued by the counterparty to the company. This fact has prejudicial significance;
- The courts of lower instances failed to properly assess the above-mentioned verdict of the interdistrict court, as a result of which the existing primary documentation was unjustifiably accepted as evidence of the reality of the transaction;
- The notification on the results of the audit issued by the territorial tax authority complies with the requirements of legality and reasonableness.
The first-instance court upheld the claimant's claims and declared the contested notification unlawful. The appellate court supported the conclusions ofthe first-instance court. However, the cassation instance annulled the judicial acts of the courts of lower instances and issued a new ruling denying the claim,thereby granting the respondent's cassation appeal.
VI. Ruling of the judicial panel for administrative cases of the Supreme Court No. 6001-24-00-6ap/1185 dated December 17, 2024
Appeal against the notification of refusal to refund VAT.
The tax authority conducted a thematic tax audit ofthe company regarding the verification of the accuracy of VAT amounts claimed for a refund. Based on the results of the audit, the VAT refund was denied. Disagreeing with the auditresults,the company appealed them in court.
Conclusions of the cassation instance:
- The Supreme Court agreed with the conclusions ofthe courts of lower instances regarding the unlawfulness of the issued notification, considering the confirmation of the receipt of foreign currency proceeds, the rectification of violations by the direct supplier by the time the tax audit was completed, the establishment during the court proceedings of the fact of goods export, as well as the procedural violations committed by the territorial tax authority, which included the failure to state the reasons for the refusal in the audit report and the failure to conduct a hearing procedure before issuing the final auditreport;
- The Supreme Court confirmed that, according of Article 152 (12) of the Tax Code, a legitimate ground for refusing to refund the VAT excess amount is the existence of violations by the company's direct suppliers;
- The Supreme Court ruled that the claimant's demand to compel the VAT refund was unfounded, as the refund is carried out by the district tax administration, which was not involved in the case as a respondent;
- The Supreme Court made corrections to the operative part of the first-instance court's decision, removing the phrase "conduct again".
The first-instance court granted the claim and declared the notification on the audit results unlawful. The territorial tax authority was obligated to complete the administrative procedure. The appellate panel upheld the first-instance court's decision without changes. The cassation instance upheld the conclusions of the first-instance and appellate courts while excluding the phrase "conduct again" from the operative part of the first-instance court's decision.
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.
