Exclusion of general and administrative expenses from deductions of the Head Office

As a result of tax audit in Kazakhstani branch of nonresident company tax authorities excluded general and administrative expenses from deductions and assessed due taxes. Tax inspectors had opinion that the Branch had to provide primary supporting documentation in order to substantiate its right for deductions of general and administrative expenses. In addition, tax inspectors requested to provide translation of financial reports that were certified by notary in the year when expenses were deducted. However, nonresident company applies proportional method of deduction that does not oblige the Branch to keep primary supporting documentation. Moreover, Kazakhstani Tax Code does not require certification by notary translation of financial reports in the year when general and administrative expenses were deducted.

Nonresident company appealed notification to higher level tax authorities that disallowed the appeal. TILAWYERS attorneys, lawyers of the Branch appealed to court. First level court and appellate court partially sustained the claim. Resolution inured and has legal force.