On recognition as illegal and cancellation of the notification of the results of the audit, on the imposition of the obligation to refund the value added tax
No. 6001-24-00-6ap/2273 dated March 04, 2025
Plaintiff: "E" LLP
The defendant: RSU "Department of State Revenue" (hereinafter referred to as the Department)
The subject of the dispute: on recognition as illegal and cancellation of the notification of the results of the audit, on the obligation to refund value added tax (hereinafter referred to as VAT)
Review of the defendant's cassation complaint PLOT:
The LLP, in the VAT declaration for the 2nd quarter of 2023, filed on August 31, 2023, indicated a requirement to refund the amount of excess VAT of 8,354,037,818 tenge for the period from July 1, 2018 to June 30, 2023.
On October 5, 2023, the Department issued an order for an inspection. Based on this instruction, a thematic tax audit of the LLP was conducted to confirm the accuracy of the VAT amounts submitted for refund and the fulfillment of VAT tax obligations for the period from July 1, 2018 to June 30, 2023.
Based on the results of the audit, an act of a documentary tax audit and a notification of the audit results dated January 12, 2024 were drawn up.
According to the notification, the amount of excess VAT, which has not been confirmed for refund and is not payable to the budget for the period from July 1, 2018 to June 30, 2023, is 8,354,037,818 tenge.
Referring to the violation of the audit procedure and the lack of evidence of the conclusions indicated in the audit report, the LLP filed a lawsuit with the court.
Judicial acts:
1st instance: the claim is satisfied. The notification of the audit results dated January 12, 2024 regarding the refusal to refund VAT in the amount of 2,249,911,218 tenge was declared illegal and canceled. The Department is responsible for
the obligation to refund VAT to "E" LLP in the amount of 2,249,911,218 tenge. At the same time, the Chairman of the Committee was given a private ruling on the revealed violations of legality by the Department.
Appeal: the decision and the private ruling of the court of first instance are left unchanged.
Cassation: judicial acts have been changed, in terms of satisfying the claim for the obligation to refund value-added tax in the amount of 2,249,911,218 tenge, it has been canceled with the return of the claim of "E" LLP in the specified part. The Department is responsible for completing the administrative procedure initiated at the request of the plaintiff, E LLP, taking into account the legal position of the court.
Leave the rest of the judicial acts unchanged.
Conclusions: local courts, guided by articles 143, 152, paragraph
1 of Article 431 of the Tax Code and paragraphs 11, 12, 54 of the Rules for the Refund of Excess Value Added Tax, approved by Order of the Minister of Finance of the Republic of Kazakhstan No. 391 dated March 19, 2018 (hereinafter referred to as the Rules), satisfied the claim.
The satisfaction of the claim by the courts is motivated by the fact that the absence of violations from the taxpayer's direct suppliers, and not from suppliers of the second and subsequent levels, is important for VAT refund.
Paragraph 54 of the Rules establishes that direct suppliers are those who supplied goods or services through intermediaries or directly.
For VAT refunds, violations are important for direct suppliers, not for suppliers at the next level.
The presence or absence of violations by the taxpayer's supplier (LLP) in transactions with third parties should not affect the result of VAT refunds from the budget.
Accordingly, the defendant's arguments about the need to analyze all supplier transactions are untenable.
The inaccuracy of such an interpretation when carrying out the procedure for refunding VAT amounts by the court of cassation was indicated in previously considered similar administrative cases with similar legal situations and circumstances.
Also, the tax authority did not prove the existence of circumstances for refusing a VAT refund.
In the context of the above, the judicial board agrees with the conclusions of the local courts on the satisfaction of the claim.
Meanwhile, the claim regarding the obligation to refund VAT was not subject to court review, since the issue of VAT refund is part of the administrative procedure to be reviewed and resolved by the tax authority, taking into account its administrative discretion.
Thus, subparagraph 6) of the first part of Article 4 of the CPC defines that administrative discretion is the authority of an administrative body, an official, to make one of the possible decisions based on an assessment of their legality in accordance with the purposes and limits established by the legislation of the Republic of Kazakhstan.
Consequently, the claim regarding the imposition of VAT refund obligations on the defendant is not subject to consideration by the court on the basis of subparagraph 11) of the second part of Article 138 of the CPC, since this, due to the defendant's administrative discretion, is not within the competence of administrative proceedings.
Since the VAT refund follows from the service provided to the taxpayer, which must be performed by an administrative body, the decision-making and provision of this service must be carried out directly by the administrative body.
Given that the local courts established the facts about the suppliers who eliminated the violations as of the date of completion of the audit, and the defendant has administrative discretion, the judicial board considered it appropriate to impose on the defendant the obligation to complete the administrative procedure initiated at the request of the plaintiff LLP "E", taking into account the legal position of the court.
At the same time, it was clarified that the initiation of a new administrative procedure (registration of a new audit) was not required, since all other facts and circumstances established during the audit and reflected in the act of the documentary tax audit were not disputed.
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