Tax due diligence 2024

Dear colleagues,

We would like to inform you that by the Regulation of the Government of Kazakhstan No.609 dated 26 August 2022 and provided for consideration to the Majilis of the Parliament of Kazakhstan a project law on introduction of changes and additions to the Tax Code of Kazakhstan (hereinafter - the Project).

The Project is introducing besides other interesting and obligatory norms for the purpose of additional tax control and administrations, so called “tax due diligence”.

As such, from 1 January 2024 it is planned that a taxpayer for proper tax compliance at conduction of transactions has to follow tax due diligence norms, including obtaining a report from information system, allowing to get a complex information on subjects of entrepreneurship with which a taxpayer is in cooperation.

Such report will prove the compliance of a taxpayer’s due diligence and should be formed not earlier than 10 working days before the date of a transaction. What will be this system? Will it be incorporated in tax cabinet? And how often should such due diligence report be requested if there are several transactions with one counterparty at the same contract? These information is not yet available at open resources.

At that, based on the Project official representatives of tax authorities within a tax audit will be eligible inter alia to obtain from a taxpayer a data on taxpayer’s fulfillment of due diligence related to its transactions (operations).

Also, it is planned, that for corporate income tax deduction will not be subject inter alia expenses connected with a transaction (operation) at substance of execution transactions without due diligence. Such norm also will touch provisions of tax legislation in part of VAT. As such, amounts of VAT, earlier offset, will be excluded inter alia in respect of transactions (operations) at circumstances, proved that such transactions (operations) were conducted with proper tax due diligence.

In addition, we would like to address to your attention that due to the planned introduction of tax due diligence principle, in accordance with the Project of changes, article of the Tax Code on execution of tax obligations starting from 1 January 2024 will be added with new provisions establishing a restriction to reduce a tax obligation inter alia for the amount of tax to be paid via misrepresentation of information about the facts of economic activity in tax and accounting records, or tax reporting.

Below we provided conditions, which it is planned to be treated as circumstances, proving an unlawful reduction of tax obligation:

1)?????impossibility of actual carrying of transactions, taking into account time, location of property or a volume of material resources required for a production and (or) supply of goods, performance of work or provision of services;

2)????lack of sufficient labor resources, fixed assets, production assets, warehouses, vehicles and other resources;

3)????transactions with goods that were not produced (purchased) or could not be produced (purchased) in the volume specified in the accounting documents;

4)???the use for tax purposes of transactions (operations) for which there is no economic substance.

Therefore, in order to confirm the circumstances of compliance with the conditions for reduction of tax obligations, the tax authorities will carry out cross-checks of the counterparty or tax surveys in its absence.

Our tax team consists of experienced experts with available required resources, skills and experience in both the Big Four companies and the state revenue authorities, who are ready to help you - in checking your counterparties for integrity and reliability, in order to apply measures for proactive tax due diligence. The result of such work will be a report, according to which a company will get an opportunity to assess its counterparty and identify possible tax risks, approach confidently making business decisions, thereby reduce the risks of paying undesirable administrative fines and preventing the risks of criminal liability and legal proceedings. For risk-free counterparties a company will receive a defensive file for further provision to the tax authorities at their request.

We will be happy to answer any questions you may have and / or if additional information is needed, we are ready to provide any assistance required.

Sincerely,

SCHNEIDER GROUP tax team in Kazakhstan