ADMINISTRATIVE CLAIM FOR ANNULMENT OF THE NOTICE ON ELIMINATION OF VIOLATIONS WITH A MEDIUM DEGREE OF RISK IDENTIFIED BY THE STATE REVENUE AUTHORITIES FOLLOWING THE RESULTS OF CAMERAL CONTROL

Specialized Inter-District Administrative Court of Almaty

Almaty, Almaly District, Karasai Batyr Street, 85.

Plaintiff: Individual Entrepreneur “M”, represented by Moy P Abdrakhimovna

IIN ...

Almaty, microdistrict ...

Representative under Power of Attorney:

Law Office “Zakon i Pravo”

BIN 201240021767

Almaty, 79 Abylai Khan Avenue, Office 304

info@zakonpravo.kz / www.zakonpravo.kz

+7 708 971 78 58; +7 727 971 78 58.

Defendants:

• Republican State Institution “Department of State 

• Revenues for the Auezov District of the Department of State 

• Revenues for the City of Almaty of the State Revenue Committee of 

• the Ministry of Finance of the Republic of Kazakhstan”.

BIN 910740000113

Almaty, Auezov District, Microdistrict 8, Building 4A.

• Republican State Institution “Department of State Revenues 

• for the City of Almaty of the State Revenue Committee of the Ministry 

• of Finance of the Republic of Kazakhstan”

BIN 141140001547

Almaty, Bogenbai Batyr Street, 132 / Panfilov Street, 110.

+7 (727) 270-07-05.

ADMINISTRATIVE CLAIM

for annulment of the notice on elimination of violations with a medium degree of risk identified by the state revenue authorities following the results of cameral control

M P Abdrakhimovna (hereinafter – the Plaintiff) is a taxpayer – an individual entrepreneur registered for tax purposes with the tax authority at her place of residence in the city of Almaty, and duly fulfills her tax obligations within the scope of her entrepreneurial activity.

In the taxpayer’s account in the information system of the state revenue authorities, the Plaintiff became acquainted with the document posted under the title “Notice on Elimination of Violations with a Medium Degree of Risk Identified by the State Revenue Authorities Following the Results of Cameral Control” No. 6003HF400156 dated 24.07.2024 (hereinafter – the Notice). The Notice concerns the tax period from 01.01.2023 to 31.12.2023 and contains a statement concerning an allegedly established fact of disposal of property with receipt of income from an increase in value upon disposal of property in the absence of a submitted individual income tax return or in the event of understatement of information in such return.

At the same time, the text of the Notice posted in the taxpayer’s account is incomplete, since it does not indicate the amount of the tax liability, bank details, the requirement to fulfill the tax liability, the specific legal basis for issuing the Notice, or the procedure for appealing it. These details are expressly provided for by paragraph 3 of Article 114 of the Code of the Republic of Kazakhstan “On Taxes and Other Obligatory Payments to the Budget” (hereinafter – the Tax Code) for a tax authority notice as an administrative act addressed to a taxpayer, and the absence thereof makes the Notice inconsistent with the requirements for the form and content of a tax notice.

In fact, the contents of the Notice were explained to the Plaintiff orally by telephone by employees of the Department of State Revenues for the Auezov District of the Department of State Revenues for the City of Almaty, who stated that the basis for issuing the Notice was the sale by the Plaintiff of non-residential premises located at the following address: Almaty, Auezov District, Microdistrict 8, Building 79, Non-Residential Premises 61, and the alleged non-payment of tax on income from an increase in the value of property. Due to disagreement with the conclusions of the tax authority, the Plaintiff, guided by subparagraph 2) of paragraph 2 of Article 96 of the Tax Code, submitted to the Department of State Revenues for the Auezov District a reasoned explanation concerning the absence of violations of tax legislation on her part and set out her legal position regarding the disputed Notice.

In the explanation, it was stated that the disputed non-residential premises had been acquired on 2 October 2006 under a sale and purchase agreement for KZT 20,625,000. The acquisition was made using a bank loan secured by the said property, with annual interest accrued, as a result of which the actual purchase cost, taking into account loan payments, significantly exceeded the initial price and amounted to approximately KZT 70,000,000. After more than sixteen years of ownership (from 02.10.2006 to 30.03.2023), the taxpayer sold the property for KZT 48,000,000. The difference between the purchase price and the sale price would have amounted to KZT 27,375,000, and even if a taxable increase in value were hypothetically to arise, a rate of 10 percent could have resulted in tax of only KZT 2,737,500, and not KZT 4,800,000, as incorrectly indicated in the Notice. In addition, the property itself does not fall within the objects subject to Article 331 of the Tax Code and had been owned for significantly more than one year, as a result of which there is no taxable object.

Since, when the Notice was posted in the taxpayer’s account, the Plaintiff was not informed of the procedure for appealing it, and the document itself did not contain the amount of the tax liability or other mandatory details, the Plaintiff considered that submitting written explanations within a reasonable period constituted a sufficient method of complying with the Notice within the meaning of subparagraph 2) of paragraph 2 of Article 96 of the Tax Code and resulted in termination of any claims by the tax authority.

However, at the end of January 2026, employees of the Department of State Revenues for the Auezov District contacted the Plaintiff again and began clarifying the issue of “compliance” with the Notice, in fact insisting on the necessity to pay the tax. In this regard, the Plaintiff exercised her right to pre-trial appeal and applied to the higher authority – the Department of State Revenues for the City of Almaty – with a pre-trial complaint against the Notice pursuant to Article 91 of the Administrative Procedural and Process-Related Code of the Republic of Kazakhstan (hereinafter – the APPC).

In the pre-trial complaint, the Plaintiff states that the Notice does not comply with the requirements of paragraph 3 of Article 114 of the Tax Code, does not contain the amount of the tax liability, the grounds for its issuance, or the procedure for appealing it; that the disputed non-residential premises were acquired under a sale and purchase agreement dated 2 October 2006 for KZT 20,625,000 and were sold only on 30 March 2023 for KZT 48,000,000, i.e. after 17 years of ownership; that in the taxpayer’s account, the “amount of violation” field unreasonably indicates KZT 4,800,000, whereas even a hypothetical tax on an increase in value at a rate of 10 percent of the positive difference between the sale price and the purchase price could not amount to the specified sum; and also that the disputed property was acquired not with the taxpayer’s own funds but with bank credit funds, in connection with which the actual acquisition cost, taking into account credit payments and interest, exceeds KZT 70,000,000 and excludes the existence of actual economic income from its subsequent sale.

Having considered the pre-trial complaint, the Department of State Revenues for the City of Almaty sent the Plaintiff a response No. ЗТ-2026-00413492 dated 23.02.2026. In the said response, the Department confirmed the fact that the disputed Notice No. 6003HF400156 dated 24.07.2024 had been issued by the Department of State Revenues, indicated the legal grounds for conducting cameral control and formalizing its results, and also referred to the provisions of Article 96 of the Tax Code concerning the procedure for formalizing violations with a high and medium degree of risk, while concluding that the Notice is considered “complied with” “within the framework of subparagraph 2) of paragraph 2 of Article 96 of the Tax Code” due to the Plaintiff’s submission of a response on the substance of the identified violations.

Despite the fact that the Department effectively acknowledged compliance with the Notice and did not provide any calculations of the tax base or the amount of tax payable, the disputed Notice continues to be recorded in the information system, employees of the Department of State Revenues continue to refer to the necessity of its “compliance,” and the “amount of violation” of KZT 4,800,000 continues to be displayed in the taxpayer’s account. These circumstances create legal uncertainty for the Plaintiff, undermine the principle of certainty and legality of taxation, impede the free conduct of entrepreneurial activity, and entail the risk of application of measures to secure and enforce a tax liability in the future.

The Plaintiff considers the Notice, as well as the decision of the higher tax authority expressed in the said response of the Department, to be unlawful and subject to annulment on the following grounds.

First, the Notice does not comply with the requirements of paragraph 3 of Article 114 of the Tax Code. The updated tax legislation expressly provides that a tax notice as an administrative act must contain the taxpayer’s identification number, its full name, the name of the tax authority, the date, the amount of the tax liability, the necessary bank details, the requirement to fulfill the tax liability, the grounds for issuing the notice, and the procedure for appealing it. The absence in the disputed Notice of the amount of the tax liability, requirements for its fulfillment, an indication of the legal grounds, and the procedure for appealing it makes the Notice formally and materially inconsistent with the requirements of the law and violates the Plaintiff’s right to receive a clear, understandable and reasoned administrative act subject to appeal in accordance with the established procedure.

Second, the disputed conclusions of the tax authority contradict the provisions of Article 331 of the Tax Code regulating taxation of income from an increase in value upon disposal of property by individuals. This provision establishes that income from an increase in value arises upon the disposal of strictly defined types of property (dwellings, summer houses, garages, parking spaces, personal subsidiary farming facilities, etc.) that have been owned for less than one year from the date of registration of ownership rights. The disputed property – non-residential premises acquired by the Plaintiff in 2006 and sold only in 2023, i.e. after 17 years – does not fall within the list of objects specified in paragraph 1 of Article 331 of the Tax Code and does not meet the criterion of ownership for less than one year, and therefore does not constitute a taxable object for income from an increase in value. In its response, the tax authority did not cite a single legal provision permitting the assessment and collection of tax on income from an increase in value in the circumstances described and thereby failed to fulfill the obligation imposed upon it to prove the legality of the administrative act.

Third, even assuming purely hypothetically that taxable income arose, the amount of KZT 4,800,000 reflected in the taxpayer’s account as the “amount of violation” is arithmetically and legally unjustified. The acquisition value of the disputed property amounted to KZT 20,625,000, while the sale value amounted to KZT 48,000,000; thus, the possible increase in value would have amounted to KZT 27,375,000. Applying an individual income tax rate of 10 percent provided for an individual who does not carry out activities under a special tax regime in this case, the tax amount on such hypothetical income would have amounted to KZT 2,737,500, but not KZT 4,800,000. The tax authority did not provide any methodology for calculating the amount of KZT 4,800,000, did not indicate which provisions of the Tax Code were applied in determining the tax base and rate, and thereby violated the principles of legality and certainty of taxation established by the Tax Code.

Fourth, the disputed property was acquired by the Plaintiff not with her own funds, but with borrowed funds obtained under a credit line of Halyk Bank of Kazakhstan JSC, with the designated purpose of acquiring commercial real estate, for a term of 10 years at an interest rate of 12 percent per annum. During the period from 2006 to 2016, the Plaintiff repaid the principal amount of the loan and significant amounts of interest, taking into account changes in the exchange rate of the US dollar, as a result of which the actual cost of acquiring the property, taking into account all credit obligations and overpayments, confirmed by the loan repayment schedule, exceeds KZT 70,000,000. Under such circumstances, the tax authority’s assertion that the Plaintiff received economic income in the form of an increase in the value of the property is unfounded and does not reflect the actual economic consequences of the transaction, contradicts the basic tax principle of taxation of actual rather than nominal income, and violates the principle of fairness of taxation.

Fifth, pursuant to Article 94 of the Tax Code, cameral control is control carried out by tax authorities on the basis of an analysis of tax reporting and information provided by authorized bodies, while the purpose of cameral control pursuant to paragraph 2 of this Article is to provide the taxpayer with the right to independently eliminate identified violations by submitting reports or paying taxes. Article 96 of the Tax Code establishes that compliance with a notice on elimination of violations identified during cameral control means either elimination of the identified violations or submission by the taxpayer of reasoned explanations confirming the absence of violations. Given that the Plaintiff submitted detailed written explanations within the prescribed period with legal and factual arguments confirming the absence of violations, the disputed Notice should have been recognized as complied with and could not serve as a basis for further demands for “compliance” and the actual imposition of an obligation to pay a non-existent tax.

Finally, pursuant to the APPC, any administrative act must be lawful, substantiated and reasoned, contain references to the legal provisions applied and the factual circumstances that served as the basis for its adoption, while the burden of proving the legality of an administrative act in judicial proceedings lies with the administrative body. The Notice contains no proper legal or calculation-based substantiation, while the Department’s response was limited to a general excerpt from the Tax Code concerning the purposes of cameral control without any specific analysis of the legal nature of the disputed income, the taxable object, the tax base, or the Plaintiff’s rights, which taken together indicates the unlawfulness of the contested administrative acts.

Thus, the disputed Notice and the subsequent decision of the Department of State Revenues for the City of Almaty, expressed in the response to the pre-trial complaint, do not comply with the requirements of the Tax Code and the APPC, violate the rights and legitimate interests of the Plaintiff as a taxpayer, and are subject to being declared unlawful and annulled in judicial proceedings.

Pursuant to paragraph 1 of Article 156 of the APPC, if a claim challenging an adverse administrative act affecting the rights, freedoms and legitimate interests of the Plaintiff is well-founded and the court recognizes its unlawfulness, the court shall annul it in full or in part.

Based on the foregoing, guided by the Tax Code of the Republic of Kazakhstan and the Administrative Procedural and Process-Related Code of the Republic of Kazakhstan, within the time limit established by Articles 84 and 122 of the APPC,

I ASK THE COURT TO:

· Annul Notice No. 6003HF400156 dated 24.07.2024 of the Republican State Institution “Department of State Revenues for the Auezov District of the Department of State Revenues for the City of Almaty of the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan” on elimination of violations with a medium degree of risk identified by the state revenue authorities following the results of cameral control.

· Annul Administrative Act No. ЗТ-2026-00413492 of the Department of State Revenues for the City of Almaty dated 23.02.2026.

· Recover from the Republican State Institution Department of State Revenues for the Auezov District of the Department of State Revenues for the City of Almaty in favor of Moy P Abdrakhimovna the expenses for payment of the state duty in the amount of KZT 2,595.

Respectfully,

Representative under Power of Attorney: Kengesbek I.M.

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