The Supreme Court adopted amendments to the normative resolution on tax disputes

The Supreme Court of the Republic of Kazakhstan on March 4, 2020 issued a regulatory resolution “On Amendments to the Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan dated June 29, 2017 No. 4 “On Judicial Practice in the Application of Tax Legislation”, which put an end to “ i” in the issue of interpretation of judicial practice not in favor of taxpayers.

Thus, by this normative resolution, the Supreme Court of the Republic of Kazakhstan excluded paragraph 4 and paragraph 3 of paragraph 6 from the above-mentioned Resolution, concerning the right of tax authorities to initiate claims for recognition of transactions as invalid in civil proceedings.

In simple terms, for an entrepreneur, this means the following: if earlier (before the said decision was made) you had relationships with many counterparties, one of which, according to the tax authorities, is unreliable, then transactions concluded between you and your counterparties, including, but not limited to, “ unreliable” counterparty, at the initiative of the tax authorities in a civil procedure, they could be declared invalid, which served as the basis for excluding invoices from the offset and additional accrual of taxes to your organization, as well as, accordingly, the amounts of penalties, sometimes the total amount of additional charges and penalties could reach such sizes that it threatened the further financial stability and, in general, the ability of your organization to function.

Among other things, in some cases, such court decisions were the basis for bringing the entrepreneur to criminal liability.

The established judicial practice, the initiation of such claims and their subsequent satisfaction by the judiciary, caused unimaginable losses to trustworthy entrepreneurs and adversely affected the business environment in the country as a whole, moreover, the burden on the judiciary increased: the percentage of such claims increased sharply against the background of other civil cases, and since the demands of most of these claims were satisfied by the courts, this undermined the authority of the judiciary and the level of trust in the courts on the part of entrepreneurs.

The growth of justified dissatisfaction among entrepreneurs who found themselves “in the field of view” of the tax authorities motivated the Supreme Court to stand up for trustworthy entrepreneurs and issue a regulatory decree that cancels the right of the tax authorities to initiate claims for recognition of transactions as invalid in civil proceedings. At the same time, as of today, the tax authorities continue to initiate claims for the recognition of transactions as invalid, but the main thing is that today, the Supreme Court has sided with entrepreneurs in such litigation.

The Supreme Court of the Republic of Kazakhstan on March 4, 2020 issued a regulatory resolution “On Amendments to the Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan dated June 29, 2017 No. 4 “On Judicial Practice in the Application of Tax Legislation”, which put an end to “ i” in the issue of interpretation of judicial practice not in favor of taxpayers. Thus, by this normative resolution, the Supreme Court of the Republic of Kazakhstan excluded paragraph 4 and paragraph 3 of paragraph 6 from the above-mentioned Resolution, concerning the right of tax authorities to initiate claims for recognition of transactions as invalid in civil proceedings. In simple terms, for an entrepreneur, this means the following: if earlier (before the said decision was made) you had relationships with many counterparties, one of which, according to the tax authorities, is unreliable, then transactions concluded between you and your counterparties, including, but not limited to, “ unreliable” counterparty, at the initiative of the tax authorities in a civil procedure, they could be declared invalid, which served as the basis for excluding invoices from the offset and additional accrual of taxes to your organization, as well as, accordingly, the amounts of penalties, sometimes the total amount of additional charges and penalties could reach such sizes that it threatened the further financial stability and, in general, the ability of your organization to function. Among other things, in some cases, such court decisions were the basis for bringing the entrepreneur to criminal liability. The established judicial practice, the initiation of such claims and their subsequent satisfaction by the judiciary, caused unimaginable losses to trustworthy entrepreneurs and adversely affected the business environment in the country as a whole, moreover, the burden on the judiciary increased: the percentage of such claims increased sharply against the background of other civil cases, and since the demands of most of these claims were satisfied by the courts, this undermined the authority of the judiciary and the level of trust in the courts on the part of entrepreneurs. The growth of justified dissatisfaction among entrepreneurs who found themselves “in the field of view” of the tax authorities motivated the Supreme Court to stand up for trustworthy entrepreneurs and issue a regulatory decree that cancels the right of the tax authorities to initiate claims for recognition of transactions as invalid in civil proceedings. At the same time, as of today, the tax authorities continue to initiate claims for the recognition of transactions as invalid, but the main thing is that today, the Supreme Court has sided with entrepreneurs in such litigation.