Judicial practice in cases related to pseudo-entrepreneurship

When considering tax disputes arising from pseudo-entrepreneurship, the courts should also be guided by the Regulations for the Application of Measures of Influence to counterparties of pseudo-enterprises, approved by the Order of the Chairman of the Tax Committee of the Ministry of Finance of the Republic of Kazakhstan No. 69 dated 05.02.2008 and the Law of the Republic of Kazakhstan No. 237 dated 29.06.1998 "On Payments and Money Transfers". In addition, when considering civil cases arising from tax disputes, judges are advised to be guided by the Review of Judicial Practice by the Supreme Court of the Republic of Kazakhstan on the application of tax legislation by courts.

In addition, when considering cases in this category, courts should be guided by the Review of Judicial Practice by the Supreme Court of the Republic of Kazakhstan on the application of tax legislation by courts.

In accordance with Article 192 of the Criminal Code (in the old version), pseudo-entrepreneurship, that is, the creation of a private business entity or the acquisition of shares (stakes, units) of other legal entities, which grants the right to determine their decisions, as well as their management, without the intention to carry out entrepreneurial activities, provided that all transactions pursue illegal goals and caused major damage to a citizen, organization, or state.

In the new Criminal Code, the punishment for this crime is provided for in Article 215, according to which pseudo-entrepreneurship, that is, the creation of a private business entity or the acquisition of shares (stakes, units) of other legal entities, granting the right to determine their decisions, without the intention to carry out entrepreneurial activities, in order to illegally obtain loans or tax exemption, or conceal prohibited activities, or the extraction of other property benefits, or in order to facilitate the commission of such actions, as well as their management, if these acts have caused major damage to a citizen, organization, or State.

According to the commentary to the Criminal Code, the public danger of this crime is expressed in the fact that the founders of a commercial organization have no intention of engaging in the type of entrepreneurial activity for which permission was obtained and which was registered in accordance with the procedure established by law, entailing significant damage to the economy of our state.

The object of the crime in question is public relations regarding the implementation of law-based entrepreneurial activities. The objective side of the crime is formed by actions to create a commercial organization without the intention to carry out entrepreneurial or banking activities, the purpose of which is to obtain loans, tax exemption, other property benefits or cover up prohibited activities that have caused major damage to citizens, organizations or the state.

Pseudo-entrepreneurship is understood as the creation of enterprises and other business organizations for the purpose of extracting illegal income and other property benefits without the intention to carry out statutory activities.

The creation of a commercial organization is understood as the commission of actions to formalize the state registration of a legal entity and obtain a license to carry out entrepreneurial or banking activities aimed at making a profit as the main purpose of its activities (Article 34 of the Civil Code).

A commercial organization is recognized as established from the moment of its registration and inclusion in the unified state register (Article 42 of the Civil Code). But at the same time, its founders should have no intention of carrying out entrepreneurial or banking activities determined by the license obtained.

If, at the time of the establishment of a commercial organization, a person did not intend and does not intend to carry out those types of activities specified in the constituent documents or the license obtained, then there is a false enterprise. The objective side of the crime is the creation of a fictitious organization in order to obtain various benefits and advantages (loans, credits) under its cover.

Criminal liability for false entrepreneurship occurs only on condition that the infliction of major damage was the result of fictitious activities of a commercial organization.

Major damage is damage caused to a citizen in the amount of one hundred times the monthly calculation index, or damage caused to an organization or state in the amount of five hundred times the monthly calculation index established by the legislation of the Republic of Kazakhstan at the time of the commission of the crime (note to Article 189 of the Criminal Code in the old version).

An obligatory sign of the objective side of this crime is the presence of a causal relationship between the creation of a fictitious commercial organization and the consequences in the form of causing major damage.

The subject of the crime is a sane individual who has reached the age of 16. On the subjective side, the crime being analyzed is committed with the direct intent and purpose of "using false entrepreneurship" to obtain a loan or to get rid of taxes, to extract some other property benefit or to cover up prohibited activities.

             Pseudo-entrepreneurship is one of the types of crimes committed by the shadow economy, which has become widespread in the context of the development of market relations, and therefore it has become necessary to adopt new laws that will help eliminate pseudo-entrepreneurship from the shadow economy and replenish the state budget. As a rule, tax evasion is carried out in the form of illegal use of tax benefits, late payment of taxes and concealment of income, failure to submit or late submission of documents required for the calculation and payment of taxes. In other words, tax evasion occurs when taxpayers underestimate their tax obligations in ways that are directly or indirectly prohibited by law, or do not pay taxes at all, or do not pay them properly.

Pseudo-entrepreneurship is one of the common schemes used by unscrupulous taxpayers to evade taxes. It is impossible to identify such companies in advance, since they are registered with government agencies in accordance with the requirements of the legislation. And such enterprises are identified, as a rule, after several years of their activity.

False enterprises are created to illegally obtain loans, including targeted loans, to provide services for tax evasion to commercial entities by providing them with fictitious invoices and other accounting documents, and so on. As mentioned above, in accordance with the Criminal Code, a false entrepreneur is a person who initially created an enterprise not for the purpose of engaging in entrepreneurial activity, but for the purpose of cashing out.

Due to the particular relevance of this issue, the Supreme Court of the Republic of Kazakhstan adopted a Regulatory Resolution on 12.01.2009 "On certain issues of the application of legislation on pseudo-entrepreneurship", according to which pseudo-entrepreneurship should be understood as the deliberate creation of a legitimate commercial organization without the intention to carry out entrepreneurial or banking activities, pursuing goals contrary to current legislation and causing major damage to a citizen, organization, or state.

The goals of a pseudo-enterprise may be: obtaining loans, tax exemption, obtaining other property benefits, or covering up prohibited activities. In the case of a false enterprise, the counterparty of the false enterprise is illegally exempt from taxes. Tax relief is also an understatement.

In addition, if it is established in a criminal case that the person who created the false enterprise sold on his behalf goods that were not accounted for according to accounting and tax accounting rules, but purchased from unknown persons without proper documentation, his actions are subject to qualification as a false enterprise.

In turn, the tax authorities, on the basis of a court verdict that has entered into force, which found a person guilty of false entrepreneurship, lawfully take measures against the counterparties of false enterprises to exclude their VAT amounts previously included in the offset, as well as expenses from corporate income tax deductions for transactions made with false enterprises.

Since the invoices of the false enterprise are considered fictitious after the relevant court decision, and the obligations of the offender to the budget are unfulfilled. As a result, one single pseudo-enterprise pulls all its counterparties into the tax loop. As for the issue of notifying taxpayers about fake enterprises, the tax legislation provides for the posting of a list of fake enterprises on the websites of tax authorities.

Web portal address www.salyk.kz "Lists of taxpayers", "List of false enterprises". To view the specific verdict of the court, it is enough to go to the judicial website. sud.kz "Handbook of court cases".

In accordance with Article 587 of the Tax Code, if violations are detected based on the results of desk control, a notice of elimination of violations is issued. Such notification is executed by the taxpayer (tax agent) within thirty working days from the date of its delivery (receipt).

If the taxpayer has not fulfilled the notification on the elimination of violations within the prescribed period, the tax authority has the right to suspend spending operations on the taxpayer's bank accounts in accordance with Article 611 of the Tax Code upon the expiration of five working days from the date of expiry of the deadline for the execution of the notification.

This form of control has become more effective with the use of information systems. It can be said that today information systems enable tax authorities to automatically identify unscrupulous business entities. And for taxpayers who do not respond to the legitimate demands of the tax authorities or evade them in various ways, measures are already being taken jointly with the financial police.

If violations of taxpayers' mutual settlements, recognized by the courts as false enterprises, are not eliminated on their own, the tax authority has the right to conduct documentary inspections, including extraordinary inspections for the verified period. Paragraph 10 of the Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan dated 02/27/2013 "On judicial practice of applying tax legislation" establishes that Article 585 of the Tax Code defines desk control as control carried out by tax authorities based on the study and analysis of tax reports submitted by a taxpayer (tax agent), information from authorized state bodies, as well as other documents and information about the taxpayer's activities (item 1).

The purpose of desk control is to provide the taxpayer with the right to independently eliminate violations identified by the tax authorities based on the results of desk control by registering with the tax authorities and/or submitting tax reports in accordance with Article 587 of the Code and/or paying taxes and other mandatory payments to the budget (paragraph 2).

It follows from Article 587 of the Tax Code that the execution of a notification based on the results of desk control is recognized as the submission of either tax reports for the tax period to which the violations relate, or explanations on them that comply with the requirements of paragraph 2-1 of this article, or complaints about the actions (inaction) of tax officials in sending such a notification.

In case of agreement with the violations indicated in the notification, the taxpayer (tax agent) submits tax reports; in case of disagreement, he submits an explanation to the tax authority that sent the notification or a complaint to a higher tax authority. Failure to comply with the notification within the prescribed period (30 business days) entails the suspension of spending operations on the taxpayer's bank accounts in accordance with Article 611 of the Tax Code.

In any case, the taxpayer is required to submit either a tax report, an explanation, or a complaint.

In case of non-fulfillment of the specified notification, the above-mentioned method of ensuring the fulfillment of a tax obligation not fulfilled on time is applied.

In addition, according to subparagraph 2) of paragraph 5 and subparagraph 2) of paragraph 9 of Article 627 of the Tax Code, the tax authority conducts an unscheduled thematic tax audit.

Consequently, notifications based on the results of desk control relate to the actions of state bodies provided for in Article 279 of the CPC, which are subject to judicial challenge.

When considering such civil cases, taking into account the above-mentioned provision of the Tax Code, it is necessary to resolve the issue of the legality of the grounds indicated in the notifications without verifying their validity on the merits.

Otherwise, the results of future tax audits will be predetermined, including an unscheduled thematic audit on the issue of non-compliance with the notification on the elimination of violations identified by the tax authorities based on the results of desk control.

             Therefore, it is enough for the courts to find out whether the tax authority had the legally prescribed grounds for issuing the specified notification.

For example, notification based on the results of desk control is justified by the norms of the Tax Code regarding deductions and offsetting of VAT amounts for transactions with a fake enterprise or for transactions made without the intention to carry out business activities. Both false entrepreneurship and the commission of a transaction (transactions) without the intention to carry out entrepreneurial activity are criminally punishable acts provided for in articles 192 and 192-1 of the Criminal Code, respectively.

Therefore, a notification can be recognized as legitimate if there is a final decision in a criminal case that establishes the fact of a crime. However, there is no need to examine any evidence of these transactions.

If there is no such decision, the notification of the tax authority must be considered illegal. According to paragraph 2 of Article 8 of the Law of the Republic of Kazakhstan "On Administrative Procedures", a legal act of a state body is terminated from the moment its requirements or instructions contained therein are fulfilled by the persons to whom this legal act is addressed.

In this regard, taking into account part 1 of Article 279 of the CPC, the taxpayer's application to challenge the notification based on the results of desk control performed by him using one of the above methods is not subject to consideration and resolution in civil proceedings.

The judge refuses to accept such an application (subparagraph 1) of part 1 of Article 153 of the CPC), and in the event of a civil case, the court terminates proceedings on it (subparagraph 1) of Article 247 of the CPC).

There are no difficulties or problems in law enforcement practice. Thus, by sending notifications to taxpayers about the elimination of violations of tax legislation, the tax authorities excluded the latter from VAT offsetting the amount of tax on invoices issued, as well as from deductions for CPN expenses for the purchase of goods and services and offered them to make adjustments on their own. VAT, excluding it from the offset by submitting an additional declaration.

Taxpayers apply to the court to appeal these notices. In refusing to satisfy the applicants' claims for recognition of the tax authority's notifications as illegal, the courts proceeded from the prejudice of the judgments that had entered into force, court decisions that established that there had been false entrepreneurship since the formation of the legal entity, which means that there were actually no transactions.

So, the applicants are Zhapalak LLP, Astyk Dauir LLP, Altyn Sapa Kurylys LLP, Sevolona LLP, Syrym Bleke Company LLP, KazStroyIndustria Company LLP, Ryspan LLP, Binom LLP, Vertical Taraz LLP, Binom Snab LLP", Binom Stroy Detail LLP and others asked to recognize as illegal and cancel notifications from the tax authority on the elimination of violations based on the results of desk control when preparing tax reports on goods, works and services purchased during the tax period for VAT offset on mutual settlements with enterprises., whose registration with the judicial authorities has been canceled on the basis of court decisions, and individual enterprises have been sentenced and court orders recognizing them as false enterprises.

In these cases, the subject matter, the grounds for the stated claims, as well as the circumstances are identical, and therefore the review of these cases is summarized. In almost all of these cases, the applicants based their claims on the following:

- notification of the elimination of violations is illegal, since there is no data on the cancellation of the certificate of removal from VAT registration of suppliers;

- the transactions have not been challenged or invalidated;

- as recipients of the goods, applicants should not be responsible for the tax obligations of suppliers, i.e. false enterprises;

- the applicant entered into transactions with a supplier who was subsequently recognized as a false enterprise before the relevant verdict was passed and could not have assumed that the supplier would be recognized as such, which means that the fulfillment of a tax obligation by one taxpayer should not be made dependent on the improper fulfillment of an obligation by another taxpayer.;

- the damage has already been compensated by the founders of these false enterprises by court verdicts (Kokumov K.A.);

- applicants, as recipients of goods, do not have the opportunity and the right to control the supplier for compliance with the requirements of the legislation, the fulfillment of the tax obligation is performed by the taxpayer independently;

- the registration of these enterprises with the judicial authorities was not invalidated, but canceled by a court decision, therefore, the issuance of notifications is illegal.

The tax authorities issued the notices disputed by the applicants based on the results of desk control, due to the fact that the applicants included VAT amounts and CPN deductions on invoices for goods received from suppliers recognized by verdict, court decision No. 2 of Taraz in criminal cases against Kokumov K.A., Bilal T.K., Pikalova D., while the applicants were not entitled to set off and deduct these amounts.

In refusing to satisfy the applications of all these applicants, the courts proceeded from the prejudice of the circumstances established by the court's verdict that in the period from 01.01.2011 to 30.09.2012, Kokumov K.A. there was a criminal intent aimed at making transactions without the intention to carry out business activities, by providing invoices to business entities, without actually performing work, providing services, shipping goods, in order to obtain material benefits and personal enrichment, exempting the latter from paying value-added tax, by increasing the offset part of this type of tax, and causing major damage to the state.

Kokumov K.A. realizing his criminal intent aimed at extracting property benefits without intending to carry out business activities, for a fee, knowing that there were no inventory items in the assets of IP "Beisenova A.A.", which were accounted for according to accounting and tax accounting rules, he made transactions without actually performing work, rendering services, or shipping goods during the reporting period. from 01.01.2011 to 30.09.2012, with the illegal purpose of increasing the offset part of the value added tax. Having the seal of "IP Beisenova AA", he issued accounting documents on behalf of Beisenova AA to various business entities without actually performing work, providing services, or shipping goods.

The actions of Kokumov K.A. caused major damage to the state in the form of unpaid taxes to the budget in the amount of 100,761,926 tenge. By the decision of the Specialized Interdistrict Economic Court of the Zhambyl region dated 19.11.2013, the registration of Ulbi LLP was canceled due to the fact that since the registration this legal entity has not been engaged in entrepreneurial activity in this regard by the Department for Combating Economic and Corruption Crimes in the Zhambyl region upon the establishment of a commercial organization without the intention to carry out entrepreneurial activities aimed at exemption from taxes, extraction of other property benefits, On 05/02/2013, a criminal case was opened against Ulbi LLP under part 1 of Article 192 of the Criminal Code. Based on this decision, the Tax Administration cancelled the certificate of registration for value added tax of Ulbi LLP from 01.10.2009.

In accordance with subparagraph 4) of Article 571 of the Tax Code of the Republic of Kazakhstan, when the registration of an individual entrepreneur or a legal entity is declared invalid on the basis of a court decision that has entered into force, the value-added tax is removed from registration by decision of the tax authority from the date of registration.

Thus, in accordance with Articles 585-587 of the Tax Code, the Tax Administration issued notices on the elimination of violations of tax legislation in order to compensate for the damage caused to the State.

Thus, according to subparagraph 2) of Article 115 of the Tax Code, expenses related to transactions with a taxpayer recognized as a false enterprise on the basis of a court verdict or decision that has entered into legal force, incurred from the date of commencement of criminal activity established by the court, are not deductible, with the exception of expenses related to transactions with taxpayers not specified in the verdict or court decision, or recognized by the court as valid in a civil procedure.

In accordance with subparagraph 1) According to paragraph 3 of Article 257 of the Tax Code, the amount of value-added tax is not subject to offset for transactions with a taxpayer recognized as a false enterprise on the basis of a judgment or court order that has entered into force, with the exception of the amounts of value-added tax offset for transactions recognized by the court as valid. In connection with the above, the counterparties of the pseudo-enterprises appealed to the courts with lawsuits against the pseudo-enterprises to recognize the transactions as valid.

It follows from judicial practice that the Specialized Interdistrict Economic Court of Astana refuses to accept such claims on the basis of subparagraph 1) of part 1 of Article 153 of the CPC due to the fact that the application is not subject to consideration and resolution in civil proceedings. The appellate judicial Board found this refusal to be essentially correct.

The justification states that the conduct of tax control in relation to a taxpayer who has carried out transactions with a false enterprise, as well as the adoption of appropriate measures against him and the subsequent occurrence of civil law disputes are the result of the recognition in criminal proceedings of a person guilty of creating a false enterprise.

In accordance with Part 3 of Article 71 of the CPC, a court verdict that has entered into legal force has a prejudicial significance when considering these disputes.

By virtue of the disposition of article 192 of the Criminal Code, a private business entity created without the intention of carrying out criminal activities cannot make valid transactions.

The courts, when considering civil cases, have no right to enter into the discussion of convictions under article 192 of the Criminal Code.

The issue of the good faith of the counterparties should be checked in criminal proceedings and, if there are grounds provided for in chapter 51 of the Code of Criminal Procedure, reopen the proceedings on the newly discovered circumstances.

You can additionally specify the following on this issue. The statements of claim list false enterprises as defendants, whereas they should be excluded from the state register of legal entities on the basis of a court decision to revoke state registration in connection with a verdict or court order that has entered into force.

In these cases, there are no defendants. Therefore, if the statement of claim is accepted by the court, the courts should demand information from the applicants from the state register of legal entities. At the same time, the civil legislation provides for the recognition of the transaction as valid only in one case.

According to paragraph 2 of Article 154 of the Civil Code, if a transaction requiring notarization is actually executed by the parties or one of the parties, its content does not contradict the law and does not violate the rights of third parties, the court, at the request of the interested party, has the right to recognize the transaction as valid. In this case, subsequent notarization of the transaction is not required.

This provision cannot in any way relate to transactions between a false enterprise and its counterparties, when a court verdict found that the false enterprise did not actually deliver goods, did not perform work, did not provide services, and the guilty person cashed out the counterparties' funds, which were subsequently returned to them, withholding remuneration in a certain amount.

It should be noted that subparagraph 2) of Article 115 and subparagraph 1) According to paragraph 3 of Article 257 of the Tax Code, a taxpayer is initially prohibited from deducting expenses and offsetting the amount of VAT on transactions with a fake enterprise, and there is no obligation to adjust them subsequently.

Regulatory framework

             General legislation:

The Constitution of the Republic of Kazakhstan;

The Civil Code of the Republic of Kazakhstan (CC), which regulates the general issues of the emergence, modification and termination of civil rights and obligations as a result of transactions. As a rule, transactions serve as a means and basis for acquiring the subjective rights and obligations of the parties in the process of fulfilling tax obligations.

The Civil Procedure Code of the Republic of Kazakhstan (CPC), which reflects the procedural issues of resolving civil disputes arising in the process of judicial challenge of non-normative legal acts, decisions and actions (inaction) of tax authorities.

Special legislation:

The Code of the Republic of Kazakhstan "On Taxes and Other Mandatory Payments to the Budget (Tax Code)", which regulates relations related to the fulfillment of tax obligations between the State and the taxpayer.

Subparagraph 16) of part 1 of Article 12 of the Tax Code defines a pseudo-enterprise as a private business entity, the creation of which and (or) the management of which is recognized by a valid verdict or court order as a pseudo-enterprise in accordance with the legislation of the Republic of Kazakhstan.

According to subparagraph 4) of part 4 of Article 571 of the Tax Code, de-registration of value-added tax on the basis of a decision of the tax authority in the form established by the authorized body is carried out without notifying the taxpayer in the following cases: recognition of the value-added tax payer by a false enterprise on the basis of a judgment or court order that has entered into force.

In accordance with subparagraph 4) of Article 115 of the Tax Code, expenses for a transaction (transactions) recognized by a court as committed by a private business entity without the intention to carry out entrepreneurial activity are not deductible.

By virtue of subparagraph 2) of part 3 of Article 257 of the Tax Code, the amount of value-added tax is not subject to offset for a transaction (transactions) recognized by a court as committed by a private business entity without the intention to carry out entrepreneurial activities.

It should be noted that civil cases related to pseudo-entrepreneurship include cases of various categories. In particular:

- cases on applications from counterparties of false enterprises to challenge tax authorities' notifications based on the results of tax audits;

- recognition of false enterprises as bankrupt;

- on claims for liquidation of false enterprises,

- on recovery of damages from persons guilty of false entrepreneurship;

- on the recognition of valid transactions concluded between applicants and their counterparties, which are false enterprises.

In this regard, the regulatory legal acts to be applied are determined taking into account the category of the case.

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