I. Resolution of the Judicial Board for Administrative Cases of the Supreme Court of the Republic of Kazakhstan No. 6001-24-00-6ап/515 dated November 12, 2024
Appeal against a notice based on the results of an inspection.
A desk tax inspection was conducted regarding the Company, resulting in a notice and additional charges of CIT, VAT, and penalties. Disagreeing with the inspection results, the Company appealed to the Ministry of Finance. Following the consideration of the complaint by the Ministry of Finance, the results of the tax inspection were partially annulled. The Company, partially disagreeing with the notice on the results of the complaint review, filed a court appeal.
Conclusions of the cassation court:
- Based on the literal interpretation of Articles 264 and 400 of the Tax Code, a taxpayer is entitled to recognize expenses as deductible, and VAT amounts as creditable, if the following conditions are met: actual receipt of goods, works, services; reflection of these transactions in accounting based on primary documents; compliance with invoice requirements; and the use of goods, works, services for taxable operations.
- Exclusion of expenses from deductions and VAT amounts from credits is possible only in the presence of a valid court act indicating the invalidity of transactions between counterparties or in the presence of a valid court verdict or a decision on case termination on non-rehabilitative grounds established during a tax inspection.
- In the course of the judicial appeal, it was established that the plaintiff's activities are aimed at generating income, the expenses incurred are supported by documents, and no circumstances were identified regarding the plaintiff and its counterparties that would exclude the expenses from deductions and VAT amounts from credits.
- The defendant failed to prove the occurrence of circumstances that could lead to the exclusion of expenses from deductions and VAT amounts from credits.
The cassation court upheld the conclusions of the lower courts on the partial satisfaction of the claim, leaving the defendant's cassation appeal unsatisfied.
II.esolution of the Judicial Board for Administrative Cases of the Supreme Court of the Republic of Kazakhstan No. 6001-24-00-6ап/526 dated November 5, 2024
Appeal against a notice to eliminate violations identified based on a desk audit.
The tax authority issued a notice to eliminate violations identified based on a desk audit regarding the Company. The Company, disagreeing with the issued notice, appealed to the court, stating that the requirements outlined in this notice were identical to those contained in a previous notice, which had already been deemed fulfilled in a judicial decision.
Conclusions of the cassation court:
- The basis for issuing the contested notice was the invalidation of the state registration of the Company's counterparty. At the time of issuing the previous notice, this circumstance did not exist.
- Taking into account that the territorial tax authority considered new circumstances, indicated a different tax period, as well as a different amount of violations, the contested notice to eliminate violations identified based on a desk audit was deemed lawful.
The court of first instance partially satisfied the plaintiff's claims and declared the contested notice unlawful. The appellate court upheld the conclusions of the court of first instance. The cassation court overturned the judicial acts of the lower courts, issued a new decision rejecting the claim, and dismissed the plaintiff's cassation appeal.
III. Resolution of the Judicial Board for Administrative Cases of the Supreme Court of the Republic of Kazakhstan No. 6001-24-00-6ап/565 dated November 12, 2024
Appeal against a notice to eliminate violations identified based on a desk audit.
The tax authority issued a notice to eliminate violations identified based on a desk audit regarding the Company. The basis for issuing the notice was a court decision recognizing transactions between the Company and its counterparty as invalid. The Company, disagreeing with the issued notice, appealed to the court.
Conclusions of the cassation court:
- According to Article 96(5) of the Tax Code, the plaintiff is entitled to prove the actual supply of goods, performance of works, or provision of services only in exceptional cases.
- The presence of a court decision recognizing transactions between counterparties as invalid does not fall under exceptional cases.
- In the current situation, courts only assess whether the territorial tax authority had grounds for issuing the notice.
- During court proceedings, it was established that the contested notice meets the criteria of legality and validity.
The cassation court agreed with the conclusions of the lower courts on rejecting the Company's claim and dismissed the plaintiff's cassation appeal.
IV. Resolution of the Judicial Board for Administrative Cases of the Supreme Court of the Republic of Kazakhstan No. 6001-24-00-6ап/645 dated November19, 2024
Appeal against an internal order of the territorial tax authority and a decision of the conciliation commission.
The Company filed a lawsuit seeking to invalidate the internal order of the territorial tax authority and the decision of the conciliation commission, based on which the tax authority intended to file a lawsuit to recognize transactions between counterparties as invalid. By a decision of the court of first instance, the Company's lawsuit was returned.
Conclusions of the cassation court:
- The procedure for the territorial tax authority to file a lawsuit in court to recognize transactions between counterparties as invalid is carried out in accordance with the civil procedural legislation, while the issuance of an order to file such a lawsuit does not pertain to public-law relations.
- The decision of the conciliation commission is not an administrative act, as it does not entail legal consequences for the Company and is addressed solely to the territorial tax authority.
- Claims for the annulment of the internal order of the territorial tax authority and the decision of the conciliation commission are not subject to consideration within administrative proceedings.
The cassation court upheld the conclusions of the courts of first and appellate instances on the return of the lawsuit, leaving the plaintiff's cassation appeal unsatisfied.
V. Disputes concerning appeals against refusals to refund VAT
In this category of cases, consistent judicial practice has formed at all levels of the judicial system in favor of taxpayers. When considering such disputes, courts focus on the following aspects and make the following conclusions:
- Sending requests to eliminate violations in the fulfillment of tax obligations by suppliers of the 2nd or higher levels is not a lawful basis for refusing to confirm the refund of excess VAT amounts.
- For VAT refund purposes, the absence of violations in the calculation and payment of VAT by direct suppliers in the transaction with the taxpayer filing the refund request is crucial.
- The amount of excess VAT not confirmed for refund due to identified violations in fulfilling tax obligations by the direct supplier shall be refunded after the supplier remedies the identified violations, provided the exporter submits a repeated requestfor a refund.
- The justification for a refusal due to the non-confirmation of foreign currency proceeds depends on the factual circumstances. If, during judicial appeal, the plaintiff confirms the actual receipt of foreign currency proceeds, such refusal will be deemed unlawful.
- When calculating the limitation period, the date of acceptance of the refund claim for the excess VAT amount should be considered, notthe date of completion ofthe tax audit.
Below are the details of the resolutions of the Judicial Board for Administrative Cases of the Supreme Court of the Republic of Kazakhstan related to appeals against judicial acts on VAT refunds:
‒ Resolution of the Judicial Board for Administrative Cases of the Supreme Court of the Republic of Kazakhstan No. 6001-24-00- 6ап/460 dated November 5, 2024;
‒ Resolution of the Judicial Board for Administrative Cases of the Supreme Court of the Republic of Kazakhstan No. 6001-24-00- 6ап/1055 (2) dated November 14, 2024.
Originally Published 29 January 2025
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.
