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published on 30 July 2020 | reading time approx. 10 minutes
Tax audits have the major role in the tax control system, they are carried out only by the tax authorities in order to execute the regulations and standards of the Tax Legislation of the Republic of Kazakhstan (hereinafter referred to as the “RoK”), and other legislation of the Republic of Kazakhstan, except for executing of the tax liabilities on payment of the environmental emissions (except for the tax liabilities on payment of the environmental emissions of pollutants from the mobile sources).
According to the Tax Legislation of Kazakhstan, the tax audits are carried out in the following forms:
Comprehensive tax audit is carried out by the tax authority in relation to the tax-payer (tax agent) in terms of execution of the tax liabilities on all types of taxes, payments to the budget and social transfers. Tax audit is carried out for the period not exceeding the action limitation period on the tax liabilities and tax assets. Tax audit for the period of five years is carried out in relation to the tax-payers subject to the tax monitoring, and tax-payers operating under the subsoil use contract. In relation to the other tax-payers, tax audit is carried out for the period of three years. Comprehensive tax audit may cover the matters of lawfulness for applying the provisions of the international contracts (agreements), transfer pricing and other matters on compliance with the legislation of the Republic of Kazakhstan which implementation and enforcement control is entrusted to the tax authorities. In addition, the comprehensive audit is carried out during liquidation of the tax-payer.
As opposed to the comprehensive tax audit, implementation of the thematic tax audit does not envisage auditing of fulfillment of a liability on all types of taxes and payments to the budget. This type of tax audit is carried out by the tax authority in relation to the tax-payer (tax agent) on the matters of fulfillment of the tax liabilities on specific types of taxes and (or) payments to the budget; it can be carried out on the matters, as follows:
Counter tax audit is an audit held by the tax authority in relation to the entities/persons those effecting transactions with a tax-payer (tax agent) which is subject to the comprehensive or thematic tax audit held by the tax authority. This tax audit is carried out in order to obtain the additional information on such transactions, confirm the fact and subject-matter of transactions, on matters arising in the course of auditing of the said tax-payer (tax agent). Counter tax audit is an auxiliary audit in relation to the comprehensive or thematic tax audits. Audit shall also be considered to be the counter tax audit, if it is held:
Pursuant to the Article 144.1 of the Tax Code of the Republic of Kazakhstan, Time Examination is carried out by the tax authority in order to determine the actual income of a tax-payer and actual expenses related to the profit-oriented activities for the period when such examination (audit) is carried out. The Presidential Decree No. 229 dated 26 December 2019 “On Introduction of Moratorium on In-house Audits, Routine Inspections and Supervision in the Republic of Kazakhstan” established the moratorium to auditing from 1 January 2020 to 1 January 2023 in relation to the small business entities, including the self-employment entities, except for the customs inspections, counter tax audits and thematic tax audits on the matters of determining the mutual settlements between the tax-payer and its debtors, registration with the tax authorities, execution of orders for suspending the debit transactions on cash issued by the tax authority.
There are two types of tax audits distinguished in the Tax Legislation of the Republic of Kazakhstan, as follows: unscheduled tax audits and tax audits carried out according to the special procedure based on the risk degree assessment.
Unscheduled tax audits are carried out against the tax application or individual complaint of a tax-payer (tax agent), including those related to:
Tax audits carried out based on the risk degree assessment shall be appointed by the tax authorities in relation to the tax-payers (tax agents) after reviewing the analysis results of the tax reporting, information obtained from the competent governmental authorities, as well as other documents and information on the activities of the tax-payers (tax agents). Based on such analysis results, the tax authorities categorize the tax-payers (tax agents) by classifying their activities as low, medium, or high risk categories. Risk management system is based on the risk assessment, it includes the measures developed and (or) applied by the tax authorities in order to identify and prevent the risk to be determined by the probability of non-fulfillment and (or) incomplete fulfillment of the tax liability by a tax-payer (tax agent) who might and (or) may inflict harm to the state. Information on a risk degree the tax-payer is classified to according to the results of the risk management system is available on the official website of the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan4 (hereinafter referred to as the “website”) and the web-based application “Taxpayer’s Web-room”. Tax-payer shall be informed not later than the first day of the first month of the half-year period for which the tax-payers are categorized: from 1 January 2019 through the web-based application “Taxpayer’s Web-room”, and 1 July 2019 through online processing application request at website5. Application request shall be processed online within a period not exceeding one business day. Criteria of the risk degree are the combination of indicators used to assess the tax-payers (tax agents) and their subsequent categorization by the risk degrees. Criteria of the risk degree which are not the confidential information are, as follows:
According to the Tax Legislation of the Republic of Kazakhstan, the tax authorities shall notify the tax-payer (company) about the start date of a tax audit according to the special procedure based on the risk degree assessment not less than 30 calendar days prior to start of the audit by forwarding a notice.
Notice shall specify the following data:
Order delivered to the tax-payer and approved by the competent authority is a basis for the tax audit.
Order must include the following information:
Term of the tax audit (duration) specified in the Order shall not exceed 30 (thirty) business days upon the date of Order delivery, however this period may be extended. Term for extending the tax audit depends on the activities performance by the tax-payer – from 45 to 180 business days. Term extension shall be executed in the form of additional order. Audit term may be suspended by the tax authorities. c) Conduction of the Tax Audits During Quarantine According to the Governmental Decree of the Republic of Kazakhstan No. 141 dated March 27, 2020 “On Measures for Executing the Presidential Decree of the Republic of Kazakhstan No. 287 dated March 16, 2020 “On Further Measures of the Economical Stabilization” Concerning the Tax Policy”, terms of the audits held by the State Revenue Authorities has been suspended for the period of State of Emergency. For the purposes of this Decree, the terms for executing notices for elimination of violations detected by the tax authorities according to the results of in-house audit (which enforcement period was during the period of State of Emergency, from March 15, 2020 to April 15, 2020) have been extended until June 01, 2020; except for the high risk tax-payers. According to the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan, the terms for conducting tax audits, customs inspections and enforcement of notices of in-house audits have been renewed from June 01, 2020 due to completion of period of the State of Emergency. Moreover, forwarding notifications to the tax-payers about payment of the taxes payable and arrears of the social payments (transfers) has been resumed in the automatic mode which will be used as a basis to apply further methods and coercive recovery measures. Notices of in-house audits may be executed by submitting the tax declarations or explanations in electronic form via the web-based application “Taxpayer’s Web-room”. If the company-taxpayer is under quarantine, then the tax audits and customs inspections may be suspended until resumption of the business activities by the delivery of request for submitting documents. The tax-payer must provide an appropriate explanation, if this is impossible to submit the documents due to being under quarantine. Remote working mode of employees of the company-taxpayer is not a reason for refusal from receiving an order. Since during the quarantine regime, officials of the company-taxpayer may work from home ensuring the self-isolation regime, an audit order may be delivered to the specified location of the tax-payer.
For the purpose of business support, the State Revenue Committee refused from developing the schedule of tax audits for the second half-year period of 2020; however unscheduled audits will be carried out in relation to the specific violations. In order to avoid the situation of entering the schedule of tax audits at the end of 2020, the companies are recommended to minimize the tax risks and prevent the possibility of being assigned the high-risk assessment. To do this, first of all, it is recommended to verify the outstanding tax liabilities, and existence of the taxes payable. It is also relevant to check, if the primary accounting documentation complies with the requirements of the Tax Legislation of the Republic of Kazakhstan and the Law of the Republic of Kazakhstan “On Accounting and Financial Reporting”. Moreover, it is recommended to exclude closure of transactions and making of the mutual settlements with the non-operating tax-payers and bankrupts. It is advised to check the existence of any outstanding notices of the tax authorities. If the notices have been issued, then such notices of the tax authorities must be executed in a timely manner. Avoiding of multiple modifications in the tax reporting will also help to avoid negative impact on the indicator of the risk assessment system. These measures will minimize the risk of detecting violations by the tax authorities, additional charges of taxes, and eliminate the risk of bringing the tax-payer to responsibility. In case of tax evasion and a failure to pay to the budget, the tax-payer’s management can be brought both to the administrative and criminal liability8.
1 Paragraphs 1 and 2 of the Article 142 of the Tax Code of the Republic of Kazakhstan
2 Article 143 of the Tax Code of the Republic of Kazakhstan
3 Article 145.3 of the Tax Code of the Republic of Kazakhstan
4 Website of the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan
5 Chapter 2 of the Order issued by the Minister of Finance of the Republic of Kazakhstan No. 252 dated 20 February 2018 “On Approval of the Rules for Applying the Risk Management System by Criteria which are not the Confidential Information”
6 Article 137.1 of the Tax Code of the Republic of Kazakhstan
7 Article 147 of the Tax Code of the Republic of Kazakhstan
8 Article 245.1 of the Criminal Code of the Republic of Kazakhstan
Sabina Ultanbayeva
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