Mukhtar Bekzhigitov, Partner of MinTax Group, in his article tells about the importance of the Tax Accounting Policy (TAP) for taxpayers.
On 1 January 2018 the new Tax code[1] was put into effect in the RK[2]. Significant innovations in the system of taxation and tax administration have been enacted. In this regard, the need to elaborate TAP adequate to the requirements of the new Tax code is an important issue for all taxpayers.
In addition, it should be borne in mind that, some norms of the new Tax Code refer to the provisions and methods provided for by IFRS, which in turn, have undergone significant changes since 1 January 2018. In particular, IFRS 15 ”Revenue from Contracts with Customers’ comes into effect as a replacement of IAS 11 “Construction Contracts”, IAS 18 “Revenue”. The consequences of these changes should be properly reflected in the TAP.
TAP is intended to form the procedure for maintaining tax accounting and informing users, including supervisory bodies, about the selected accounting principles. Since the Tax Code is a document common for all categories of taxpayers in the sphere of taxation, it cannot reflect all possible industry specifics of tax accounting. Therefore, the taxpayer must independently develop and approve TAP, taking into account his industry specifics when recognizing income and expenses and when determining taxable items. In this case, the taxpayer, guided by the current tax legislation and other regulations, should establish the procedure for setting up taxable items and items related to taxation, determine methods, in those cases when the Tax Code offers to choose between them, select the most acceptable methods for the calculation and payment of taxes, accounting for other indicators that are important for determining the amount of tax liabilities.
The completeness, clarity and quality of TAP approved by the taxpayer affects the validity of his position on the assessment of tax liabilities, which would allow to avoid tax disputes and claims being raised by the state revenue authorities.
Thus, in the current situation, taxpayers need TAP not only to reflect the methods of tax accounting, or simply because it is so required by the Tax Code, but also in order to protect the business from possible risks that usually arise as a result of multiple interpretations of certain provisions of the Tax Code by taxpayers and tax authorities.
Since Kazakhstan’s independence, our tax legislation has undergone many changes, but the Tax Code, which came into force on 1 January 2018, is the most progressive in this sense.
Thus, for example, now the Tax Code provides for the presumption of innocence, and when reviewing an appeal on the notice of audit results, all uncertainties and unsettled tax-related issues will be construed in favour of the taxpayer. And this without exaggeration may be considered as a giant step in the development of the tax system that is appropriate to a democratic society.
As we understand, now all disputed issues can be regulated in a well-organized TAP which would allow to eliminate most of the issues without bringing them to pre-trial examinations and litigations.
Given our many years’ experience in the development of TAPs for our clients, we are pleased to offer you cooperation on consulting issues to ensure that your company’s tax accounting is consistent with the provisions of the new Tax Code.
[1]Code of the RK #120-VI dated 25 December 2017 “On Taxes and Other Obligatory Payments to the Budget” effective from 1 January 2018.
[2] Republic of Kazakhstan
