Authors: Ravil Kassilgov, Managing Partner; Madina Mazhitova, Junior Associate
Starting from 2024, Kazakhstan has intensified its tax administration efforts for large businesses through a mechanism known as tax monitoring.
Purpose and Subjects of Tax Monitoring
Tax monitoring is a form of tax administration that involves analyzing a company’s financial and economic activities to determine:
a) Compliance with tax legislation and accuracy of tax calculations;
b) The actual taxable base; and
c) The application of arm’s length pricing in transfer pricing transactions.
Tax monitoring applies to large taxpayers that meet specific criteria such as revenue, asset value, and number of employees. The list of large taxpayers subject to monitoring for 2025 and 2026 was approved by an order of the Minister of Finance of the Republic of Kazakhstan and includes 356 companies.
Tax Monitoring Procedure
The State Revenue Committee (SRC) is responsible for conducting tax monitoring of large taxpayers. The process consists of the following stages:
- Document Request: The SRC sends a request to the taxpayer, demanding documents and written explanations to verify the accuracy of tax calculations and timely payments. The request may include financial statements, including those of subsidiaries. The taxpayer has 30 calendar days to comply. Additionally, the SRC may collect information from third parties, such as banks, government agencies, and other organizations.
- Analysis and Identification of Violations: The SRC reviews the submitted documents and, if discrepancies or violations are identified, issues a formal notification to the taxpayer.
- Submission of Explanations: The taxpayer must provide a written explanation within 15 calendar days from the day following the receipt of the notification.
- Discussion and Additional Requests: If the SRC finds the explanations unsatisfactory, it may invite the taxpayer for discussions and request further documents or clarifications.
- Issuance of a Reasoned Decision: Upon completion of the review, the SRC issues a reasoned decision in writing and delivers it to the taxpayer within two working days of the decision date.
- Acceptance of the Decision: If the taxpayer agrees with the decision, they must submit a notice of acceptance within five working days. The procedure for expressing disagreement with the reasoned decision is not explicitly regulated.
Consequences of a Reasoned Decision by the SRC
Typically, a reasoned decision provides a detailed account of the monitoring subject matter and outlines the tax authority’s findings regarding identified violations or discrepancies.
If the taxpayer does not accept the decision, the SRC initiates a thematic tax audit, as provided under subparagraph 24, paragraph 1, Article 142 of the Tax Code. In practice, however, the scope of such an audit, as stated in the audit order, may differ from (and often exceed) the scope of issues reviewed during tax monitoring.
For example:
- The reasoned decision following monitoring may address a specific issue:
- "Monitoring of discrepancies between zero-rated turnover in the VAT return and data from the SRC information system for the year 2021."
- However, the thematic audit order may state a broader subject:
- "Audit of compliance with tax obligations for certain types of taxes and other mandatory budget payments: value-added tax."
Such discrepancies can be legally challenged. According to established court practice, expanding the scope of a tax audit beyond the issues serving as its grounds is generally deemed unlawful.
Can a Reasoned Decision Be Challenged in Court?
In our view, a reasoned decision issued after tax monitoring cannot be challenged in court, as it is considered an interim act. Legal consequences, such as additional tax assessments, may only arise from the subsequent audit results, which are subject to judicial review.
This position was confirmed during the Investment Forum held on February 7, 2025, organized with the support of the Supreme Court of the Republic of Kazakhstan and the European Business Association of Kazakhstan (EUROBAK).
Representatives of the Supreme Court’s administrative panel clarified that a reasoned decision following tax monitoring is not an enforceable act and, therefore, is not subject to judicial appeal.
As of today, judicial practice regarding challenges to reasoned decisions resulting from tax monitoring has not yet been established.