On 27 February 2013 the Supreme Court introduced the Regulatory Resolution ‘On the Judicial Practice of Application of the Tax Law’ (hereinafter – the ‘Resolution’), so that the previous regulatory resolution No. 5, dated 23 June 2006, has been repealed.

The new Resolution save the previous position of the Supreme Court in terms of many issues. Clarifications regarding the application by subsoil users of tax stability provisions and procedure for control over transfer prices were deleted, while the Resolution was added with an explanation of tax legislation in the following basic issues:

Tax Implications of Invalidation of the Supplier Registration

The Supreme Court explained that the recognition of registration of individual entrepreneur or a legal entity as invalid was not a ground for exclusion from the deductions of expenses incurred on the transaction with such entity, and for charging additional corporate income tax amounts.

Performance and Appeal of Notices Issued as a Result of In-House Audit

Notices made by the tax authority as a result of in-house audit, according to the Supreme Court, can be performed in three ways. Thus, as a performance of the notices is when a taxpayer within thirty business days either (1) submits tax returns, according to the requirements specified in the notice, or (2) provides an explanation on the notice to the tax authority, or (3) appeals actions of the tax authority that issued the Notice to a higher tax authority. The Supreme Court explained that the appeal of notice resulted from the in-house audit is an equivalent to the appeal of actions (or omissions) of the tax authority.

The taxpayer may also appeal actions of the tax authorities to the court as provided by Chapter 27 of the Civil Procedural Code of the Republic of Kazakhstan, provided that the notice had not been executed by one of the above ways. Courts may hear cases against the actions of the tax authorities only in terms of legality of the grounds for making notices without verifying their validity on the merits.

Unscheduled Tax Audit at the Request of Law Enforcement Authorities

As to the common cases of appointment by the tax authorities of unscheduled tax audits for taxpayers at a request or rulings of the law enforcement authorities the Resolution establishes a preclusive provision that during the pre-investigation the criminal the prosecution authority is not entitled to request from the tax authorities to conduct tax audit. In this regard, the injunction of the tax authority on an unscheduled tax audit under the request or ruling of prosecution authority sent prior to the criminal case commencement, as well as tax audit based thereon is invalid.

Confirmation of the Excess VAT Related to Export Turnovers to Refund from the Budget

When determining amount of the excess VAT to be refund from the budget, export of goods for which foreign exchange earnings came in Kazakhstani banks shall be considered. The fact of receipt of foreign currency earnings is supported by the opinion provided by banks. The Supreme Court explained that branches of non-resident legal entities operating in Kazakhstan were nonresidents for the purposes of currency control. In this regard, the lack of information on the record number of the contract or the date and number of the transaction passport in the bank’s opinion is not a ground for refusing to refund excess VAT from the budget.