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    ARTICLE - Kazakhstan

    Updates to Kazakhstan’s VAT Refund Rules

    08 Apr

    Updates to Kazakhstan's VAT Refund Rules: Introduction

    On 12 March 2024, the Kazakhstani finance ministry announced significant revisions to the VAT Refund Rules, marking an important change in how businesses interact with tax authorities for VAT refunds. This article looks at these crucial modifications.

    Overview of the changes

    The essence of these updates lies in addressing the controversies surrounding the VAT refund validation process. Courts have recently highlighted the improper practice by tax authorities of demanding exhaustive supplier chain reports, or "Pyramid" reports, extending through numerous levels. The revised VAT Refund Rules aim to streamline this process, albeit with nuances that may conflict with existing Tax Code provisions. These changes became effective on 26 March 2024.

    Key changes

    Specifying Conditions for Pyramid Reports

    A noteworthy modification is to paragraph 45-1 of the VAT Refund Rules, which now delineates specific scenarios for the creation of Pyramid reports. Notably, these reports will encompass all direct suppliers involved in horizontal monitoring, moving away from the previous broader scope. Exceptions to this requirement have been clarified, simplifying compliance for businesses.

    Enhanced Definition and Procedure for Pyramid Reports

    The procedure for generating Pyramid reports has been refined, with a clear focus on direct suppliers. The amendment provides a precise definition of "direct supplier" and introduces the concept of "related parties," aiming to mitigate tax evasion by tracing transactions to their origin.

    Risk-based Generation of Pyramid Reports

    The rules now prioritize the generation of Pyramid reports based on potential tax evasion risks identified among suppliers. This shift focuses on concrete indicators of risk, such as restrictions on e-invoices or legal challenges against the supplier, enhancing the tax authorities' ability to detect and address evasion schemes.

    Clarification of Risk Exemptions

    With the introduction of paragraphs 52-1 and 52-2, the VAT Refund Rules now clearly outline situations where identified risks are disregarded. This update aims to ensure that discrepancies are not automatically equated with tax evasion, providing a fairer framework for businesses.

    Broader Scope for Counter-Audits

    Lastly, the amendments expand the circumstances under which tax authorities can conduct counter-audits on suppliers, including intermediaries and freight forwarders. This broadened scope is intended to tighten scrutiny and ensure compliance throughout the supply chain.

    Updates to Kazakhstan's VAT Refund Rules - Conclusion

    The recent amendments to Kazakhstan's VAT Refund Rules represent a significant shift in the regulatory landscape. By refining the conditions under which Pyramid reports are generated and clarifying procedures, the changes aim to balance the need for effective tax collection with the operational realities of businesses. As these changes unfold, businesses operating in Kazakhstan must stay informed and compliant to navigate the evolving tax environment successfully.

    Final thoughts

    If you have any queries about this article on the Updates to Kazakhstan's VAT Refund Rules, or Kazakh tax in general, then please get in touch.
    UncategorisedVAT

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