On the issue of the correctness of the calculation and timely payment of the mining tax
This conclusion was made by the court of appeal of the Kyzylorda Regional Court, overturning the decision of the court of first instance of September 30, 2016 and issuing a new decision to dismiss the application of SP "K" LLP. The tax authority conducted a thematic audit in relation to the Partnership on the correctness of the calculation and timely payment of mineral extraction tax (hereinafter – MET) from organizations in the oil sector for the period from January 1, 2014 to December 31, 2014. Based on the results of the audit, notification No. 643 dated May 27, 2016 was issued on the additional assessment of the MET amount in the amount of 9,918,513 tenge and penalties in the amount of 2,264,199.96 tenge. The basis for the additional MET was the establishment by the tax authority of discrepancies between the LKU-2 reporting data and the daily information on oil and associated gas production, which amounts to the following amounts: the volume of oil production in 2014 – 2,329.01 tons, the volume of associated gas in 2014 – 3 190.5 thousand cubic meters. During the inspection, a specialist from the State Institution "Kyzylorda Regional Inspectorate of Geology and Subsoil Use" was involved. At the same time, the specialist used information on the actual production of oil and gas from the beginning of the month to the last day of each month, which are reflected in the "Daily information on production and delivery of oil and gas condensate" and "Daily information on associated gas and natural gas production" provided by the partnership to JSC "Information and Analytical Center for Oil and Gas" (hereinafter - IACNG). In satisfying the partnership's application, the court of first instance concluded that the physical volume of oil and gas produced, as determined by the expert's opinion, was unreliable and, accordingly, the tax charge was unjustified.
On the issue of the correctness of the calculation and timely payment of the mining tax
The appellate instance did not agree with the conclusions of the court of first instance and, by a decision of January 18, 2017, overturned this court decision with a new decision rejecting the application. According to the board, a single database of oil production and turnover is formed by the dispatcher based on information provided by authorized persons. Paragraph 2 of Article 627 of the Tax Code states that a specialist who is not interested in the outcome of a tax audit may be involved in the tax audit in order to investigate issues requiring special knowledge and skills and obtain advice from a tax authority. In accordance with this norm, based on the information provided by the Partnership to the IACNG, pursuant to subparagraph 1 of paragraph 5 of the Rules for Maintaining a unified database of oil production and Turnover, approved by Resolution No. 1183 of the Government of the Republic of Kazakhstan dated November 10, 2010 (effective at the time of providing the information), the specialist drew up an opinion dated May 4, 2015, which states that in 2014 the volume of oil production amounted to 665,388. 59 tons, gas – 245,793,291 thousand m3 . In the opinion of the Partnership, these daily information data should not be used as a basis for calculating the mineral extraction tax, since this information is preliminary. According to the Partnership, the basis for calculating the mineral extraction tax should be the data of the monthly information submitted to the IACNG before the 5th day of the month following the reporting month in accordance with the established forms, according to Appendices No. 3, 4,5 and 6 to the Rules. However, the imperative norm of the Tax Code, namely Article 332 of the Code, provides for the taxation of the extraction of minerals on the physical volume of extracted crude oil, gas condensate and natural gas during the extraction of minerals from the subsurface to the surface, before the procedure of primary processing of raw materials (elimination of so-called defects), and even more so, in no case after eliminating losses of a part of the raw materials on the way from the moment of oil and gas extraction to the conversion of the extracted raw materials into commercial oil.
Crude oil, according to subparagraph 11) of Article 1 of the Law of the Republic of Kazakhstan dated June 24, 2010 No. 291-IV "On Subsoil and Subsoil Use", means any hydrocarbons, regardless of their specific gravity, extracted from the subsoil in a liquid state at normal atmospheric temperature and pressure, including those formed from natural gas by natural condensation. Therefore, the appellate instance declared the arguments of the Partnership on the calculation of the mineral extraction tax, based on the specified volume of oil and gas, untenable. In this regard, the board came to the conclusion that the tax authority reasonably took into account the expert's conclusion based on the data of daily information on crude oil, gas condensate and natural gas produced by the Partnership at the end of the last day of each month provided by IATNG.
Attention!
Law and Law Law Law draws your attention to the fact that this document is basic and does not always meet the requirements of a particular situation. Our lawyers are ready to assist you in legal advice, drawing up any legal document suitable for your situation.
For more information, please contact a Lawyer / Attorney by phone: +7 (708) 971-78-58; +7 (700) 978 5755, +7 (700) 978 5085.
Attorney at Law Almaty Lawyer Legal Services Legal Advice Civil Criminal Administrative Cases Disputes Protection Arbitration Law Firm Kazakhstan Law Office Court Cases
