Legislation
The Inclusion of Dividends in Customs Valuation: Analysis of Legal Practice and Practical Guidance for Importers
Ravil Kassilgov, Managing Partner at KP Disputes
Lidiya Martynova, Associate
Relevance of the Issue
In recent months, customs authorities have increasingly sought to take dividend payments into account when determining the customs value of imported goods. This issue primarily arises in transactions between related parties—for instance, between a Kazakhstani subsidiary-importer and its foreign parent company acting as the supplier. In such cases, scrutiny over the justification of the transaction price is significantly heightened. Suspicions of price understatement may prompt a thorough examination of financial flows, including dividend distributions. This approach often leads to reassessments and additional imposition of customs duties, thereby exposing companies to considerable financial risks.
This article provides an analysis of the regulatory framework and enforcement practices concerning the potential inclusion of dividends in the customs value of goods, along with practical guidance for importers. The analysis and recommendations are based on the customs legislation of the Eurasian Economic Union (EAEU) and the Republic of Kazakhstan (RoK), the guiding instruments of the World Customs Organization (WCO), as well as relevant judicial precedents.
Legal Framework
The determination of customs value in the Republic of Kazakhstan is governed by the Code of the Republic of Kazakhstan “On Customs Regulation in the Republic of Kazakhstan” (the Customs Code), the Customs Code of the Eurasian Economic Union (the EAEU Customs Code), and is based on the principles of the WTO Agreement on the Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (the WTO Agreement).
Pursuant to the customs legislation of the EAEU and the Republic of Kazakhstan, various payments associated with the importation of goods must be taken into account when calculating the customs value. The most applied valuation method is the transaction value method (Method 1), which is based on the price actually paid or payable for the imported goods.
This method presumes that the customs value of imported goods is determined on the basis of the transaction price, adjusted as necessary in accordance with Article 7 of the General Agreement on Tariffs and Trade (GATT). It is important to emphasize that the Commentary to Article 39 of the EAEU Customs Code and Explanatory Note 4 to Article 1 of the WTO Agreement on Customs Valuation explicitly provide that payments from the buyer to the seller which are not related to the imported goods (such as dividends) shall not be included in the customs value.
However, Article 40 of the EAEU Customs Code (corresponding to Article 8 of the WTO Agreement) provides for the possibility of adding certain elements to the transaction value. Central to the risk under consideration is subparagraph 3 of paragraph 1 of Article 40 of the EAEU Customs Code (and paragraph 1(d) of Article 8 of the WTO Agreement), which allows for the inclusion of:
«a portion of the proceeds of any subsequent resale, disposal, or use of the imported goods that accrues directly or indirectly to the seller».
Under the aforementioned provisions, customs authorities tend to focus on situations in which a Kazakhstani company, acting as a subsidiary of a foreign parent entity (or another related party), imports goods from such a related supplier, derives the majority of its profit from the resale of those goods on the domestic market, and subsequently adopts a corporate resolution to distribute its net profit in the form of dividends to the same foreign counterparty.
In such circumstances, customs authorities may challenge the declared customs value by asserting that the dividends paid must be added to the customs value of the goods.
Approaches to the Inclusion of Dividends in Customs Value: Practice and Risks
Legal Uncertainty in the Republic of Kazakhstan
As of today, there is no established judicial practice in the Republic of Kazakhstan addressing the issue under consideration. The existing regulatory resolution of the Supreme Court of the Republic of Kazakhstan concerning customs disputes deals with other aspects, such as the classification of goods, the legal effect of preliminary decisions issued by customs authorities, and general principles governing the accuracy of customs valuation. However, it does not cover the treatment of dividends.
Similarly, there are currently no published official clarifications issued by the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan that would outline the competent authority’s position on this matter in sufficient detail.
This situation gives rise to significant legal uncertainty for participants in foreign economic activity. Companies facing additional customs assessments due to the alleged failure to include dividends in the customs value are compelled to challenge the actions of customs authorities without the benefit of precedential decisions from administrative or judicial bodies in similar cases. As a result, the outcome of such disputes remains highly unpredictable.
A potentially positive development is the Decision of the Court of the Eurasian Economic Union dated 12 February 2025 (Minsk), On the recognition of inaction by the Eurasian Economic Commission, expressed in its failure to resolve the legal uncertainty concerning the inclusion of dividends in the customs value of goods, as being inconsistent with the Union’s international treaties. The ruling confirmed the absence of established practice in Kazakhstan regarding the inclusion of dividends in customs value. Nevertheless, this observation does not eliminate the broader legal uncertainty and associated business risks.
Judicial Practice in the Russian Federation: divergent Approaches
In the absence of established domestic practice in the Republic of Kazakhstan, as of the date of this publication, there appears to be a discernible trend whereby Kazakhstani customs authorities refer to the enforcement practice of the Russian Federation when conducting audits and imposing additional assessments. However, the judicial practice in Russia on this matter is itself inconsistent and does not provide a definitive legal position.
On the one hand, since the end of 2021, several judicial rulings in the Russian Federation have set out conditions under which payments formally classified as dividends may be included in the customs value. As a general rule, this occurs where a combination of factors indicates a close nexus between the dividends and the imported goods or their subsequent resale. Key precedents in this regard include:
- Case № A40-20123/2021 (Arbitrazh Court of the Moscow District, Ruling dated 29 November 2023): the court concluded that the dividends received by the seller-shareholder from the distribution of net profit by the buyer (LLC “Chanel”) were related to the imported goods and should be included in the transaction value. This was justified as part of the proceeds from the subsequent resale of the goods accruing directly or indirectly to the seller (pursuant to subparagraph 3, paragraph 1, Article 40 of the EAEU Customs Code).
- Case № A09-1129/2021 (Arbitrazh Court of the Bryansk Region, Decision dated 17 October 2023): the court rejected the claim of the applicant (LLC “Pull & Bear CIS”) and upheld the legality of the customs authority’s decision. The court’s key arguments were that royalty payments for know-how and other intellectual property were related to the imported goods and constituted a condition of sale within the corporate group. The dividends paid to the related party supplier were also to be included in the customs value, as the applicant failed to demonstrate that the relationship had no influence on pricing or that the transaction reflected arm`s length terms.
- Case № A06-3555/2023 (Arbitrazh Court of the Astrakhan Region, Decision dated 9 October 2023): the court denied the claim of the applicant (LLC “MASCHIO-GASPARDO RUSSIA”), finding that the applicant had not proved that the relationship with the seller-shareholder did not affect the price of the imported goods. Accordingly, the court held that the customs authority was justified in including a portion of the paid dividends—calculated in proportion to the revenue derived from those goods—into the customs value as part of the seller’s subsequent income.
- Position of the Ministry of Finance of the Russian Federation (Letter № 27-00-04/34151): the Ministry clarified that where a buyer imports goods from a single party that is also its sole shareholder, the dividends paid to the seller may, in effect, be regarded as proceeds from the subsequent sale of the goods and therefore subject to inclusion in the customs value (in accordance with subparagraph 3, paragraph 1, Article 40 of the EAEU Customs Code).
These examples illustrate situations in which Russian courts and regulatory authorities have treated dividends not as investment income, but rather as part of the revenue from the resale of imported goods that accrues to the seller—thus providing grounds for their inclusion in the customs value.
On the other hand, there is also case law to the contrary, where decisions by customs authorities have been found to be unlawful.