On transfer pricing and official information on market prices in similar comparable conditions, the comparable uncontrolled price method should be applied without additional use of a differential.
This was the conclusion reached by the courts when considering the case at the request of Ts LLP. The Partnership challenged the notification of the results of the audit of the Department of State Revenue for the North Kazakhstan region dated April 5, 2016 No. 333 on the accrual of KPI in the amount of 92,823,690 tenge and penalties in the amount of 73,859,636 tenge. The application was refused by the local courts. In the case, it was established that the tax authority conducted a thematic tax audit on transfer pricing issues for the period from January 1, 2010 to December 31, 2014. The Partnership carried out activities related, among other things, to international business operations for the export of grain. The tax authority has established the facts of deviation of prices of wheat and barley grain export transactions on the terms of supply of DAP Sary-Agash (Incoterms-2010) by more than 10% from the market prices published by the Grain Union of Kazakhstan. In accordance with article 12 of the Law on Transfer Pricing, in order to determine the market price, the method of comparable uncontrolled price is used primarily, which was done by the tax authority. According to paragraph 1 of Article 13 of the Law, the method of comparable uncontrolled price is applied by comparing the transaction price for goods (works, services) with the market price, taking into account the range of prices for identical (and in their absence - homogeneous) goods (works, services) in comparable economic conditions, unless otherwise provided by this article. At the same time, this standard does not provide for the use of a differential. The applicant sold wheat and barley on the terms of supply of DAP Sary-Agash, and the Grain Union of Kazakhstan provided information on market prices for grain crops under similar comparable conditions of the same supply of DAP Sary-Agash. That is, the terms of the applicant's delivery of DAP Sary-Agash are similar to comparable terms of delivery of DAP Sary-Agash, the market price of which is officially available, including all components of the differential, including risks and costs associated with the delivery of goods.
On transfer pricing and official information on market prices in similar comparable conditions, the comparable uncontrolled price method should be applied without additional use of a differential.
Therefore, an additional calculation of the differential was not required in this case. It should also be noted that the Partnership stated an additional argument that if the transaction price is less than the market price by more than 10%, then 10% should be deducted from the percentage deviation and the transaction price should be increased only by the difference, followed by income adjustment and tax accrual. The courts correctly recognized the applicant's argument as unfounded. In accordance with the Law on Transfer Pricing, income adjustments are made for the entire amount of the deviation, and a 10% reduction in the amount of the adjustment is not provided. In 2017, the courts of the North Kazakhstan region considered two similar civil cases on the applications of LLP "M" and LLP "B". They challenged the tax authorities' notifications on similar grounds – the discrepancy between the price of exported wheat and the market prices published by the Grain Union of Kazakhstan by more than 10%. The applicants exported wheat on the terms of delivery to the Sary-Agash DAP station. In both cases, the courts recognized the additional charges as legitimate, the income adjustment based on the results of tax audits was carried out in accordance with the provisions of the Law on Transfer Pricing, and the source of information was chosen correctly.
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