Filed objections to the preliminary decision on an unscheduled audit — the tax authority withdrew the audit after our arguments

← All cases 01Tax audit declared unlawful — protected CIT and VAT deductions of 36 million tenge 02Error in VAT taxpayer account — recovered 60.7 million tenge of unlawfully withheld balance 03Unlawful VAT write-off during reorganisation — court reversed 48 million tenge of assessments and interest 04Customs authority's decision on non-execution of notice reversed by court 05Filed objections to the preliminary decision on an unscheduled audit — the tax authority withdrew the audit after our arguments 06Reversal of IIT on sale of inherited apartments — the tax authority incorrectly determined the holding period 07Supreme Court reversed CIT and VAT assessments — tax audit conducted before the court ruling entered into force 08CIT and VAT assessments of 296 million tenge overturned — tax authority breached audit deadlines 09Assessments of 1 billion tenge overturned — audit appointed without an order of the authorised body 10Unscheduled transfer pricing audit cancelled — КГД order issued without specific facts of breaches 11CIT assessments of 1.1 billion tenge overturned — audit appointed without specific grounds 12CIT and VAT assessments of 43 million tenge overturned — audit conducted for a period outside the instruction

Situation

The tax authority issued a preliminary decision to appoint an unscheduled thematic documentary audit on mutual settlements with counterparties. The claims against the client effectively were: VAT of 10,573,823 tenge, CIT of 23,258,749 tenge and interest of over 15 million tenge — more than 48 million tenge in total. The grounds in the preliminary decision: references to "blocking of e-invoices (ЭСФ)" at suppliers, a conclusion of "absence of origin" of goods for several counterparties, and formal marks on the economic doubtfulness of operations. The preliminary decision was sent to the client's representatives via WhatsApp late in the evening.

Our actions

We analysed the preliminary decision and identified four independent grounds for its unlawfulness. First: the document lacked the period under review — a mandatory element of the order under sub-clause 8) of art. 148(1) of the НК РК. Without specifying the period, the order is initially invalid, and the audit results are subject to reversal as obtained with a gross breach (art. 156 of the Entrepreneurial Code of Kazakhstan). Second: the subject matter of the audit was not specified — only the names of counterparties and aggregate turnover amounts were given, without references to specific contracts, invoices and primary documents. An unscheduled audit under art. 144(4) of the Entrepreneurial Code is appointed only on specific facts and circumstances, not on general assumptions. Third: the conclusion of "absence of origin" of goods was not justified by any specific fact — no data on suppliers' production capacity, no discrepancies in customs statistics, no other objective information. Declarative wording without an evidence base contradicts art. 129 of the Administrative Procedure Code (АППК РК). Fourth: by the time of review of the preliminary decision, the blocking of e-invoices (ЭСФ) for the listed counterparties had already been lifted — the tax authority's arguments relied on outdated data. We prepared and filed a formal written objection with detailed legal grounds for each of the four points.

Result

After receiving the objection the tax authority (ДГД) decided not to proceed with the unscheduled audit. The administrative procedure for appointment of the audit was terminated. Assessments of VAT of 10,573,823 tenge, CIT of 23,258,749 tenge and interest of over 15 million tenge were prevented without court proceedings.

Project team

Alibayev Yerkebulan

Director

Khassanov Yerbolat

Managing partner

Similar situation?

Tell us about the matter — we'll analyse your situation.

Часто задаваемые вопросы

Yes. At the stage of the preliminary decision to appoint an audit the taxpayer has the right to file an objection. If the preliminary decision lacks mandatory elements — period under review, specific facts and circumstances — the tax authority is obliged to take them into account. A timely objection may exclude the audit altogether.

Under art. 156 of the Entrepreneurial Code of Kazakhstan, gross breaches include: absence of grounds for the audit, absence of the period under review, audit by an unauthorised body. Audit results obtained with such breaches are deemed invalid.

No. A conclusion that operations are doubtful must be based on specific facts: data on the supplier's production capacity, discrepancies in customs statistics, absence of staff and resources. Declarative wording without an evidence base breaches art. 129 of the АППК РК and cannot serve as grounds for an unscheduled audit.

By itself — no. Blocking of e-invoices (ЭСФ) does not mean the transaction is fictitious. If by the time of the audit review the blocking has been lifted, this argument becomes irrelevant. Moreover, a bona fide purchaser does not bear responsibility for the supplier's actions when a complete set of primary documents is available.

All cases