Today, tax disputes over low probability of settlements are the most common issues between taxpayers and tax authorities. Typically, fiscal authorities see optimization and unjustified expense inflation, arguing that transactions are fictitious.
Since 2024, the practice of declaring transactions invalid through court proceedings has been suspended. However, tax authorities now point to artificial expense inflation based on tax audit and desk control results.
To protect your interests and prove the validity of goods, works, and services acquisitions, you need to build a competent defense strategy. Let's examine the key elements of such a strategy.
1.Documentary Confirmation of Transaction Execution
The first and most important defense element is having a complete set of properly executed documents:
- Contracts with counterparties including all appendices and additional agreements
- Primary documentation (waybills, work completion certificates, invoices)
- Electronic invoices and confirmation of their registration in the EI system
- Payment documents confirming actual payment
- Settlement reconciliation acts, etc.
Documents must not only formally comply with legal requirements but also reflect actual movement of goods, works, or services.
2. Confirming Actual Fulfillment of Transaction Obligations
Besides documentation, it's important to gather evidence of actual transaction execution:
- Cargo waybills and route sheets (for goods delivery)
- Hidden work certificates, construction facility commissioning documents (for construction transactions)
- Photo and video materials of delivered goods or completed work
- Witness testimony from persons directly involved in transaction implementation
- Expert conclusions on quality and quantity of received goods/works/services, etc.
3. Proving Business Purpose of Transaction
Tax authorities often challenge transactions, claiming they're fictitious or lack economic feasibility (business purpose). To refute this, prepare economic justification for transaction feasibility. For example, demonstrate how received goods/works/services were used in business activities or sold to subsequent buyers.
4. Verifying Counterparty Good Faith
To defend against accusations of participating in tax evasion schemes, gather information about the origin of acquired goods, works, services (import, purchase from factories or reliable suppliers, supplier's own production capacity). Evidence of counterparty having necessary resources (material, labor) to fulfill obligations is also important. Additionally, present counterparty licenses, certificates, and permits if required for goods, works, services realization.
5. Using Tax Audit Results
If the company previously underwent tax audits, definitely cite tax audit reports that found no violations regarding disputed transactions - these are strong defense arguments. Also use positive conclusions obtained during desk control when available.
6. Using Judicial Practice
Kazakhstan operates under the principle of courts maintaining uniformity in law application and interpretation. Therefore, referring to established judicial practice significantly strengthens your position. Specifically, reference Supreme Court regulatory resolutions and use similar cases decided by the Supreme Court in taxpayers' favor.
We have several positive cases both from judicial practice and complaints considered by the Ministry of Finance Appeals Commission.
Thus, a comprehensive defense approach based on documentary transaction confirmation, evidence of actual execution, and refuting tax authority arguments will most effectively defend disputed transaction validity and avoid unjustified assessments.
Nurlan Zekenov, Partner at GK and Partners
