The return or refusal of the courts of first instance to accept claims for invalidation of the transaction.

By Order No. 86 of the State Revenue Department of the Akmola Region dated March 17, 2020, pursuant to paragraph 1.2 of the protocol instructions of the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan dated March 6, 2020, a permanent Conciliation Commission was established for the pre-trial review of materials on transactions with signs of invalidity. This commission was an advisory body and was established in order to minimize litigation involving business entities and State revenue authorities.

For a short period of time (in 2020), the SMES of the Akmola region returned tax authorities' claims for invalidation of the transaction, and those accepted for production were left without consideration at the plaintiff's request due to the absence of a positive decision by the Conciliation Commission to file this statement of claim in court, i.e. due to the plaintiff's failure to comply with the pre-trial dispute resolution procedure.

An analysis of judicial practice has shown that tax authorities' claims for invalidation of transactions, as a rule, indicated the following grounds:

- the transactions were made on the basis of invoices that were not confirmed by reliable primary accounting documents, according to which the defendant offset the amount of VAT and deducted the cost of them, despite the fact that the party that issued the invoice does not have staff, administrative and other logistical resources for the provision of services., performance of works and delivery of goods;

- the existence of a court verdict on the recognition of persons guilty of tax evasion, which indicates the registration (re-registration) of an enterprise in the name of a person unrelated to its creation and financial and economic activities;

- the existence of a decision by the tax authority to de-register the counterparty for VAT;

- the existence of a court decision declaring the registration (re-registration) of a legal entity invalid, including on grounds of non-involvement of the head (founder) of the legal entity in financial and economic activities.

The courts of the regions had certain problems assessing evidence, namely, when accepting or not accepting contracts, invoices, invoices, bank statements, documents on payment of taxes on the transaction, protocols of interrogations in the framework of criminal cases submitted by the defendant (taxpayer) in support of the actual execution of transactions, in the absence of a final procedural decision on them.

Regulatory and legal framework

In accordance with Article 2 of the Code of the Republic of Kazakhstan dated December 25, 2017 "On Taxes and other mandatory payments to the Budget (Tax Code)", the tax legislation of the Republic of Kazakhstan is based on the Constitution of the Republic of Kazakhstan, consists of this Code, as well as regulatory legal acts, the adoption of which is provided for by this Code.

If an international treaty ratified by the Republic of Kazakhstan establishes rules other than those contained in the Tax Code, the rules of the said treaty shall apply.

The main regulatory legal acts that courts should follow when considering cases related to the application of tax legislation are:

1. The Constitution of the Republic of Kazakhstan dated August 30, 1995;

2. The Code of the Republic of Kazakhstan "On Taxes and other Mandatory Payments to the Budget (Tax Code)" (hereinafter – NC);

3. The Civil Code of the Republic of Kazakhstan (hereinafter referred to as the Civil Code) (General Part) dated December 27, 1994, (Special Part) dated July 1, 1999;

4. The Civil Procedure Code of the Republic of Kazakhstan (hereinafter – CPC) dated October 31, 2015;

5. The Business Code of the Republic of Kazakhstan (hereinafter referred to as the Business Code) dated October 29, 2015;

6. The Law of the Republic of Kazakhstan "On Permits and Notifications" dated May 16, 2014;

7. The Law of the Republic of Kazakhstan "On Accounting and Financial Reporting" dated February 28, 2007;

8. The Law of the Republic of Kazakhstan "On State Registration of Legal Entities and Registration of branches and representative Offices" dated April 17, 1995;

9. Regulatory rulings of the Supreme Court of the Republic of Kazakhstan (hereinafter – NP):

- "On judicial practice of tax legislation application" dated June 29, 2017 No. 4;

- "On the application by courts of certain norms of civil procedure legislation" dated March 20, 2003 No. 2;

- "On some issues of the invalidity of transactions and the application by courts of the consequences of their invalidity" dated July 7, 2016 No. 6;

- "On some issues of application by courts of the norms of Chapter 29 of the CPC" dated December 24, 2010 No. 20;

Resolutions of the Government of the Republic of Kazakhstan, regulatory legal orders of the authorized body in the system of state revenue bodies.

Summary from the Supreme Court of the Republic of Kazakhstan on the judicial practice of applying tax legislation for 2020 and 3 months of 2021 dated July 9, 2021

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