Litigation Notes: Tax Trends on deals

Recognition of transactions invalid

The tax authorities are consistantly modifying their popular to recognize a taxpayer's transactions as invalid and charge additional taxes on them. For example, the tax authorities are trying to exclude expenses from deductions and from VAT offset on transactions with a counterparty, and charge CIT and VAT (about 190 million tenge). In this case, the basis for exclusion is the invalidation of transactions concluded between the taxpayer's counterparty and third parties. An additional "argument" of the tax authorities is the fact that a criminal case has been initiated under Article 216 of the Criminal Code (issue an invoice without actually performing work, providing services, or shipping goods) against a person at the third-fourth level in the taxpayer's supply chain.

The tax authorities simply ignore the Tax Code provisions that establish the grounds for excluding expenses from deductions or excluding turnover from offset. They do not take into account the confirmation of the actual performance of works and services provided by the end customer – these are usually large infrastructure objects (hydroelectric power stations, railways, etc.).