Vessel Freight
The claimant includes freight in the differential based on publications from the official information source Argus Freight, which publishes average tanker expenses under time charter terms or Dirty Tanker Wire Basic Service for a vessel with a deadweight of 30,000 tons, where the Worldscale rate is recalculated per 1 ton of actual cargo weight.
The respondent, due to the absence of primary documents confirming that the Company actually incurred these expenses, excluded such costs when calculating the market price of petroleum products for certain destinations. Under delivery terms DAP Posin for destinations to the Russian Federation and Lithuania, as well as DAP Dina Nurpeisova/Kigash for Cyprus, the Clean Tanker Wire Basic Service data were applied.
According to the expert opinion of A.K. Aguanova and explanations of both parties, the Dirty Tanker Wire Basic Service publication by The McGraw-Hill Companies (Platts) is intended for calculating freight rates for crude oil, whereas the Clean Tanker Wire Basic Service determines freight rates for petroleum products.
Expert A.K. Burambayeva, in her opinion, agrees with the claimant and states that according to Global Freight specifications:“S&P Global Commodity Insights assesses open market freight rates for dry bulk vessels, dirty tankers, clean tankers, and barges. Dirty tankers are those transporting crude oil, fuel oil, or other ‘dirty’ products such as vacuum gas oil or dirty condensate. Clean tankers transport light fractions such as gasoline, middle distillates, or naphtha.”
However, the judicial panel in this case cannot apply the Dirty Tanker Wire Basic Service data to fuel oil based on the Global Freight specifications. Thus, subparagraphs 3 and 4 of Resolution No. 292 directly define, with reference to the source The McGraw-Hill Companies (Platts, UK), the following:
The judicial panel considers the position of the Department on applying Clean Tanker Wire Basic Service justified, since petroleum products, not crude oil, were sold.
Deliveries to Russia, Belarus, and Latvia are considered undocumented.
The judicial panel finds the claimant’s position justified, since official sources such as Platts, Argus Media, and Refinitiv (Thomson Reuters) do not publish quotations for petroleum products at the specified destinations.
Accordingly, the market price was determined by the Company in accordance with subparagraph 2) of paragraph 4 of Article 13 of the Law, based on European quotations for European markets, adjusted to comparable economic conditions, namely to the relevant sales market under contract terms, by applying the appropriate differential from official sources.
Tax Law Provisions
According to subparagraph 4) of paragraph 2 of Article 19 of the Tax Code, tax authorities are obliged, within their competence, to provide explanations and comments regarding the emergence, execution, and termination of tax obligations. Such explanations, comments, and methodological recommendations, including those of the authorized body, are not нормативные legal acts and are subject to evaluation by the court for compliance with tax legislation.
Tax policy (a set of measures to introduce or abolish taxes and budget payments, change rates, taxable objects, and tax bases) is carried out by the authorized body in the field of tax policy.
If an international treaty ratified by the Republic of Kazakhstan establishes rules different from those contained in the Tax Code, the provisions of the treaty shall apply (Article 2(5) of the Tax Code). According to Article 4(3) of the Constitution, the procedure and conditions for the operation of international treaties in Kazakhstan are determined by national legislation.
If a ratified international treaty grants taxation rights to Kazakhstan but such rights are not implemented in national legislation (e.g., due to tax exemptions), national legislation shall apply.
Interpretation of double taxation treaties follows general rules consistent with the Vienna Convention on the Law of Treaties, to which Kazakhstan has acceded.
Judicial Practice and Procedural Issues
The issue of conducting tax control in case of liquidation (invalid registration/re-registration of a legal entity) falls within the competence of tax authorities. Counterparties may protect their rights by challenging actions or decisions of tax authorities.
Courts may order liquidation of a legal entity under subparagraph 3) of paragraph 2 of Article 49 of the Civil Code if the entity is absent from its registered or actual address, along with its founders and officials, for one year.
State re-registration is an administrative act; therefore, claims challenging it are subject to administrative proceedings.
Since January 1, 2020, a three-year limitation period applies (instead of five years), unless otherwise provided by the Tax Code.
Tax authorities cannot impose claims beyond the limitation period, although penalties may still accrue.
The total limitation period, including suspension during transfer pricing audits, cannot exceed seven years.
Requests sent by tax authorities must:
- be addressed to a competent authority of a foreign state;
- be personalized;
- relate to the subject of the audit.
Otherwise, such requests are considered invalid.
Expiration of the limitation period does not terminate tax obligations if they were assessed within the allowed timeframe.
The right of tax authorities to assess taxes must be distinguished from the taxpayer’s right to claim refunds. For refunds, the relevant date is the filing date of the application, not the audit decision.
Procedural Clarifications
If state duty is paid incorrectly or insufficiently, the court gives time to correct deficiencies.
Submission of explanations within the statutory deadline is considered compliance with a notice following desk audit results.
Claims challenging notices from desk audits are subject to administrative proceedings.
Courts must assess whether the taxpayer actually received goods/services from entities whose registration was later invalidated.
Tax authorities may declare a notice unfulfilled if:
- explanations are not required but violations persist;
- deadlines are missed;
- court denies the claim and violations remain uncorrected.
Appeals must be filed within 10 working days.
Penalty is not accrued on recalculated property, land, and vehicle taxes for individuals.
Courts should encourage settlement of disputes at all stages.
Appeals should not worsen the applicant’s position.
A decision of a higher authority on a complaint is not subject to judicial review if it has no independent legal consequences.
A tax audit order may be challenged in court.
Unscheduled audits without legal grounds must be declared invalid.
Tax Audit and Burden of Proof
Only tax audit notifications (not conclusions alone) are subject to judicial appeal.
Audit reports must contain:
- legal references;
- justification;
- factual circumstances of violations.
Tax authorities bear the burden of proof.
Courts must assess whether procedural violations affected legality of the audit.
Audits conducted without proper authorization or registration are unlawful.
Abbreviations
- APPC – Administrative Procedural and Process Code
- CPC – Civil Procedure Code
- Tax Code – Code “On Taxes and Other Mandatory Payments to the Budget”
- DGD – Department of State Revenues
- UGD – Directorate of State Revenues
- CC – Criminal Code
- CPC (Criminal) – Criminal Procedure Code
- CIT – Corporate Income Tax
- VAT – Value Added Tax
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