In challenging the notification and compensation for moral damage, the Tax Authority, in violation of the Tax Code, proceeded from the indicators of the density of crude oil indicated in the Russian quality certificates at the Samara refinery, which led to an incorrect determination of the volume of oil in barrels, its value and the illegal additional payment of rent tax to the company for exports from organizations in the oil sector, which led to an incorrect resolution of the dispute

Company "A" has filed a lawsuit against the State Institution "Tax Administration for the city of Aktobe" (hereinafter referred to as the tax authority) to challenge the notification and compensation for moral damage. The statement is motivated by the fact that the tax authority unlawfully issued a disputed notice regarding the accrual of export rent tax from oil sector organizations in the amount of 818,481,113 tenge and penalties in the amount of 143,849,501 tenge, since the tax authority incorrectly determined the oil barrel utilization coefficient based on the oil density indicated in the quality certificates and oil acceptance certificates, issued at the Samara acceptance point (hereinafter referred to as - Samara PSP), whereas it was necessary to be guided by the data of the quality certificates issued on Kenkiyak PSP in accordance with the standards of the Republic of Kazakhstan.

          Subsequently, having increased the stated claims, the company also asked to collect compensation for moral damage from the tax authority. By the decision of the specialized interdistrict Economic Court of Aktobe region, the company's application was denied. The decisions of the appellate and cassation judicial boards of the Aktobe Regional Court left the decision of the court of first instance unchanged. The Supervisory Judicial Board for Civil and Administrative Cases of the Supreme Court amended the contested judicial acts and declared illegal notification No. 1494 dated November 12, 2013 on the accrual of rent tax in the amount of 818,481,113 tenge and penalties in the amount of 143,849,501 tenge, issued by the State Institution "Tax Administration for the city of Aktobe" to the Company "A", in view of the following. It follows from the case file that, based on order No. 1494 dated June 19, 2013, a comprehensive audit of the Aktobe branch of the company was conducted on the correctness of the calculation and timely payment of taxes and other mandatory payments to the budget for the period from January 01, 2009 to December 31, 2012. According to the results of the audit, additional taxes were accrued, of which the company disputes the additional assessment of export rent tax from oil sector organizations in the amount of 818,481,113 tenge and penalties of 143,849,501 tenge. It follows from the inspection report that the Company underestimated the barrelization coefficient used to convert tons per barrel for the purpose of calculating rental tax. The company did not submit oil quality certificates for the tax audit, and therefore the calculation was made using an indirect method based on the oil acceptance and transfer certificates to the Samara Gas processing Plant. In rejecting the Company's application, the local courts proceeded from the fact that the calculation of rental tax is carried out at the moment when the goods cross the customs border of the Republic of Kazakhstan, since only from that moment Bulletin of the Supreme Court of the Republic of Kazakhstan No. 6/2015 23 the goods sold by the taxpayer can be reliably determined as exported and not intended for the domestic market. The barrelization coefficient calculated by the tax authority and the specified coefficient according to the Samara oil quality certificates, used to convert tons to a barrel, for the purpose of calculating the rental tax comply with the norms for calculating the rental tax on crude oil exports determined by tax legislation.    As a result, the additional payment of rent tax and penalties made by the tax authority using an indirect method was recognized by local courts as lawful, the disputed notification was recognized as issued in accordance with the law, within the authority of the state body, and not violating the rights, freedoms and legally protected interests of the Company. The court of first instance misinterpreted the norms of tax legislation, the appellate and cassation instances did not eliminate these violations. According to Article 302 of the Tax Code of the Republic of Kazakhstan (hereinafter - NC), the tax base for calculating the rental tax is the value of exported crude oil, calculated based on the volume of crude oil actually exported and the world price.

                                                  In accordance with paragraph 3 of Article 334 of the Tax Code, in order to determine the world price of crude oil, it is necessary to convert units of measurement from a barrel to a metric ton, taking into account the actual density of produced crude oil indicated in the oil quality certificate issued in accordance with the national standard approved by the authorized body in the field of technical regulation. There is no disagreement between the parties on the volume of exported oil in tons. A dispute arose over the application of the barrel utilization coefficient, when the exported volume of oil in tons, for the purpose of calculating the rental tax on exports, is converted into barrels. Also, the tax authority does not deny that the quality of the delivered oil at the Samara PSP differs from the quality of the oil received at the Kenkiyak PSP at the beginning of the route, since the oil of other oil producing companies is mixed in the main pipeline, whose oil is lower or higher in quality than that of the applicant and at the final point of the route the quality of the oil, including its density, is the average value. When calculating the rental tax on exports, the Company was guided by oil quality certificates issued on Kenkiyak PSP, the form and order of filling of which correspond to the national standard of the Republic of Kazakhstan ST RK 1474-2005 "Main oil pipelines. The procedure for accounting for oil during transportation and storage", as stipulated by the norm of paragraph 3 of Article 334 of the Tax Code. The taxpayer submitted to the tax authority the specified oil quality passports, issued at the Kenkiyak oil storage facility at the place of oil departure and transfer to JSC "K" for transportation via the main pipeline. However, the specified oil quality certificates were not taken into account by the inspectors and the additional assessment of the rent tax was unreasonably carried out using an indirect method, despite the absence of grounds provided for in Article 639 of the Tax Code for using this method. The conversion of units of measurement from a barrel to a metric ton is carried out taking into account the actual density of the extracted crude oil indicated in the oil quality certificate issued in accordance with the national standard. Thus, in this case, the determining criterion is the actual density of the extracted crude oil, which can be determined from the quality certificates issued at the oil production site in accordance with the national standard, rather than the density of the exported oil Bulletin of the Supreme Court of the Republic of Kazakhstan No. 6/2015 24, which is averaged due to oil mixing in the main pipeline.

The oil quality certificates at the Samara refinery are drawn up in accordance with the state standards of the Russian Federation, and not the national standards of the Republic of Kazakhstan. The oil received at the Samara oil Refinery is impersonal and its qualitative characteristics cannot meet the requirements of the tax legislation of the Republic of Kazakhstan regarding the use of information on the actual density of extracted oil to calculate the tax base. In addition, there is no information about the applicant in the specified passports issued at the Samara PSP, and JSC "K" is indicated as the depositing party. In these circumstances, the supervisory board found the arguments of the petition to be justified. The Supervisory Board indicated that the exported volume would be the amount of oil (using the appropriate barrel reduction coefficient) recorded at the places of departure of the goods based on meter readings in accordance with paragraph 6 of Article 447 of the Customs Code. In violation of paragraph 3 of Article 334 of the Tax Code, the tax authority proceeded from the indicators of the density of crude oil indicated in the Russian quality certificates at the Samara refinery, which led to an incorrect determination of the volume of oil in barrels, its value and the illegal additional assessment of the Company's rent tax on exports from organizations in the oil sector. 

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