On declaring illegal and canceling the notification of the results of consideration of the taxpayer's (tax agent's) complaint against the notification of the audit results and (or) the decision of a higher state revenue body issued based on the results of consideration of the complaint against the notification
No.6001-23-00-6ap/1283 dated 6.11.2023
Plaintiff: LLP "M"
Respondent: Russian State Institution "Department of State Revenue"
The subject of the dispute: on the recognition as illegal and cancellation of the notification of the results of consideration of the taxpayer's (tax agent's) complaint about the notification of the audit results and (or) the decision of a higher state revenue authority issued based on the results of consideration of the complaint against notification No. 285/1 dated August 5, 2022.
Review of the cassation appeal of the plaintiff and the defendant
PLOT: Based on the order, the Department conducted a comprehensive tax audit against M LLP on the issue of the correctness of calculating the timeliness of taxes and other mandatory payments to the budget.
On March 17, 2022, M LLP was served with preliminary act No. 285, to which an objection was filed on April 12, 2022. On April 15, 2022, the Department returned the Partnership's objection to the preliminary act due to missing the deadline for its submission.
On April 12, 2022, the Department handed over to "M" LLP act No. 285 of the documentary tax audit, according to which the Department added additional CPI amounts for the 3rd and 4th quarters of 2019 in the amount of KZT 25,957,1944 and KZT 108,104,702, respectively, the loss was reduced by KZT 3,256,689,658.
LLP "M" appealed the results of the audit, by the decision of the Appeal Commission of the State Institution "Ministry of Finance of the Republic of Kazakhstan" dated August 5, 2022, Notification 1 was canceled in terms of calculating the CIT at the source of payment for the income paid on invoice No. TR dated October 23, 2018, the rest was left unchanged.
After that, on August 5, 2022, the Department issued Notification No. 285/1, according to which LLP "M" was charged additional CPN in the amount of 133,951,239 tenge, a fine in the amount of 26,212,328 tenge (hereinafter referred to as Notification 2).
When issuing Notification 2, the Department excluded from the tax base the amount of 737,714.25 tenge, for which invoice No. TR dated October 23, 2018 was issued, and therefore the accrued CPI amount decreased by 110,657 tenge (737,714.25*15%).
Judicial acts:
1st instance: the claim was partially satisfied. It was decided to declare illegal and cancel the notification of the results of consideration of the taxpayer's (tax agent's) complaint about the notification of the audit results and (or) the decision of the higher state revenue authority issued based on the results of consideration of the complaint against notification No. 285/1 dated August 5, 2022 regarding the accrued amounts of corporate income tax in the amount of 50,810,308 tenge and the corresponding penalty amounts.
Appeal: the decision remains unchanged.
Cassation: judicial acts are annulled with the referral of the case for a new hearing to the court of appeal in a different composition of the court.
Conclusions: based on the results of the audit conducted in relation to LLP "M", the latter received additional CPI amounts as a result of the recognition of income paid to LLP "M" in favor of a non-resident income in the form of royalties.
According to the invoices and payment data on them, "M" LLP made payments in favor of MAG under four contracts:
Sublicense agreement for the use of the trademark of the METKO Group dated July 15, 2016;
The Framework Agreement on IT Services, which entered into force on October 1, 2015;
Service Center Service Agreement dated October 1, 2015;
- Framework Agreement on Business Services dated October 1, 2015.
Based on the terms of the Framework Agreement on IT Services and its technical specifications, it follows that MAG provided services to M LLP for the provision of non-exclusive rights to the software, for the development and transfer of non-exclusive rights to the software being developed, as well as other IT services, including adaptation
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