Cancellation of the notification of the audit results regarding the amount of excess VAT that is not confirmed for refund and is not payable to the budget

No.6001-23-00-6ap/251 dated 08/10/2023

Plaintiff: AMK LLP

Respondent: Russian State Institution "Department of State Revenue"

The subject of the dispute: the cancellation of the notification of the results of the audit No. 192 dated September 6, 2021 regarding the amount of excess VAT in the amount of 29.9 million tenge that was not confirmed for refund and was not payable to the budget.

Review of the defendant's cassation appeal.

PLOT: in the period from September 21 to December 2, 2021, the Department conducted a thematic tax audit in relation to the Partnership on the issues of confirming the accuracy of VAT amounts submitted for refund for the period from October 1, 2020 to June 30, 2021.

             According to the act and the notification, the Partnership declared in the VAT declaration an excess of VAT in the amount of 4 billion tenge for refund. On December 2, 2021, the Department issued a documentary tax audit report and notification of the audit results No. 192, according to which the amount of VAT that is not refundable amounted to 48.9 million tenge.

On January 20, 2022, the plaintiff filed a complaint with the Ministry of Finance of the Republic of Kazakhstan (hereinafter referred to as the Ministry of Finance). On March 24, 2022, based on the results of the complaint review, a preliminary decision was made on the validity of the audit.

On April 4, 2022, by the decision of the appeal commission of the Ministry of Finance, the notification was left unchanged, the complaint was not satisfied.

             Judicial acts:

1st instance: the claim was denied.

Appeal: the court's decision is overturned. The claim is satisfied.

Cassation: the appeal ruling is upheld.

Conclusions: According to sub-paragraphs 2) and 3) of paragraph 12 of Article 152 of the Tax Code, no VAT refund is made within the limits of the amounts for which violations were detected by the results of the analysis of the Pyramid analytical report on the suppliers of the taxpayer being audited, and the accuracy of the VAT amounts has not been confirmed.

Paragraph 11 of the Rules stipulates that when conducting a thematic audit to confirm the accuracy of VAT excess amounts submitted for refund, as well as the reliability of VAT amounts returned from the budget to a service recipient for whom a simplified refund procedure has been applied, the state revenue authority generates an analytical report "Pyramid" for the inspected service recipient using the information system for the tax period under review." by suppliers.

In accordance with paragraph 12 of the Rules, the tax authority also takes measures:

1) by sending a notification on the elimination of violations identified by the tax authorities based on the results of desk control provided for in subparagraph 10) of paragraph 2 of Article 114 of the Tax Code, in order to eliminate violations identified by the results of the analysis of the Pyramid report;

2) by appointment of counter inspections of the service recipient's suppliers and (or) suppliers of the supplier in accordance with Article 143 of the Tax Code.

Thus, for the purposes of VAT refund, it is important that there are no violations in the calculation and payment of VAT by direct suppliers under the transaction with the exporter, in respect of which a refund application has been submitted. The presence or absence of violations by the supplier of the exporter in transactions with third parties should not affect the provision of the "VAT refund from the budget" service to the exporter.

At the same time, in violation of the requirements of paragraph 13 of the Rules for the Application of the risk management System, in order to confirm the accuracy of VAT excess amounts and risk criteria approved by Order No. 118 of the Minister of Finance of the Republic of Kazakhstan dated February 2, 2018, and paragraph 11 of Article 152 of the Tax Code, the defendant compared the entire turnover of the supplier with all electronic invoices of the supplier.

Thus, all supplier transactions were analyzed, and not only the supplier and exporter transactions, as evidenced by the excess of the amount of violations identified by the tax authority and the amount of VAT claimed by the plaintiff for refund, the contrary was not proven by the defendant in court in accordance with part 2 of Article 15 of the CPC. In accordance with paragraph 1 of Article 146 of the Tax Code, the deadline for conducting a tax audit should not exceed 30 working days from the date of delivery of the order, unless otherwise specified in this article.

Paragraph 7 of the said article stipulates that the deadline for conducting, extending and suspending thematic inspections to confirm the accuracy of VAT excess amounts submitted for refund is set in compliance with the deadlines provided for in Article 431 of the Tax Code.

According to paragraph 2 of Article 431 of the Tax Code, the amount of excess VAT, confirmed by the results of a tax audit for refund, is subject to transfer to the taxpayer on the basis of his request for refund of the amount of excess VAT specified in the VAT declaration, within 55 working days after the expiration of 30 calendar days from the period established by paragraph 1 of Article 424 of the Tax Code for submission of the VAT declaration.

Paragraph 1 of Article 424 of the Tax Code stipulates that a VAT payer is required to submit a VAT declaration no later than the 15th day of the second month following the reporting tax period. In this case, the deadline for submitting the VAT declaration for the 2nd quarter of 2021 is no later than August 16, 2021 (August 15, 2021 is a day off).

September 15, 2021 – 30 calendar days from the deadline for submitting the VAT declaration. September 16, 2021 – the beginning of 55 working days for the refund of excess VAT and tax audit.

December 2, 2021 – expiration of 55 working days for refund of excess VAT and tax audit. In this case, the tax audit was started later by 5 calendar days or 3 business days. Whereas the tax audit could have been conducted by the respondent from September 16, 2021 to December 2, 2022, which could have affected the possibility of receiving responses to requests before the audit was completed.

Based on the above, the judicial board considers the plaintiff's arguments that the time for conducting an audit has been shortened, and accordingly requests have been sent and answered as part of the audit.

             The court found that requests were sent on October 8, 2021, as part of the ongoing tax audit. The tax audit was completed on December 2, 2022. 59 out of 65 responses to inquiries were received after the tax audit was completed, and 5 out of 6 responses about the absence of violations were received before the audit was completed.

There are no violations or were eliminated for 16 requests, 33 requests were not processed at the supplier's place of registration due to technical errors or initial defects in the requests sent (the invoice is not reflected, the VAT amount according to the request is 0, there is no period for the 2nd quarter of 2021 in the launch, it is not possible to issue a notification, since the amount of violation does not exceed the minimum the threshold for setting).

In accordance with paragraph 9 of the Rules, requests for the elimination of violations must be sent by the tax authority within 15 working days from the date of the start of the tax audit.

Paragraph 10 of the Rules stipulates that responses to requests are provided within 40 working days (5 working days for sending a notification to the supplier, 30 working days for the supplier to execute the notification, 5 working days for the OGD to respond to the request of the tax authority).

If the respondent strictly observed the specified deadlines, responses to requests could be received before the end of the tax audit period.

However, none of the requests contain the invoice numbers and dates for which violations were detected. All requests contain an indication of the same amount of VAT (0 tenge) and the cost of goods (works, services) without VAT (0 tenge).

The Judicial Board considers that the presence of the above violations of the procedure for conducting a tax audit, incorrect contents of requests affected the amount of VAT confirmed for refund.

The general requirements for an administrative act are defined in article 79 of the CPC, according to which an administrative act must be lawful and justified. An administrative act should be clear to understand, ensure uniform application, and comprehensively define the circle of persons to whom it applies.

 

 

 

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