Results of the Year
KEBCO: Disputes Over the Taxation of Shipments
At present, the level of controversy surrounding the use of the KEBCO quotation between business and government agencies has subsided somewhat. This is particularly evident in the context of tax audits related to transfer pricing and determining the cost of raw materials on international markets.
Meanwhile, the disputes over other transfer pricing issues related to crude oil exports remain intense. For example, the details of oil companies’ discounts for traders from cargo insurance to quality adjustments are under close review.
We explored the reasons behind this shift in focus in tax disputes and examined current audit approaches with PwC Kazakhstan’s legal team: Timur Zhursunov, Partner in Tax, Legal and People Services, and Nursultan Nurbayev, Director.
What is the current approach to using the KEBCO quotation, and what changes are companies anticipating under the new Tax Code?
Timur Zhursunov: When the Kazakhstani quotation (KEBCO) was introduced, it triggered disagreements between the State Revenue Committee and oil exporters over how supplies should be taxed.
There have been some changes in this regard—for example, the Committee has reduced the duration of tax audits from four to two years. The current audits cover 2020–2021, i.e. the period leading up to the introduction of the KEBCO quotation in 2022. This came as an unexpected relief to taxpayers, since potential additional assessments on KEBCO run into the billions, a significant amount for many companies.
As a result, a significant portion of the audits have now been completed, and businesses are ready to accept their results, considering the ratio between actual additional assessments and the initial evaluation.
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In your view, what explains this stance taken by the tax authorities?
Nursultan Nurbayev: market participants generally agree that government agencies have opted to pause in order to develop a more balanced justification for their position and to test it on smaller taxpayers to establish case law. Thus, the first dispute concerning the application of KEBCO quotations may be heard by the Ministry of Finance's Appeals Commission in the near future. The decision in this case will likely set a precedent for similar disputes in the future, and the Ministry of Finance's Appeals Commission should take it into account when resolving all subsequent similar disputes.