Customs disputes
Legal entity
Other customs issues
The Ministry of Finance of the Republic of Kazakhstan (hereinafter - the authorized body) received a complaint from the Company "T" about the notification of the results of the audit of the territorial Department of State Revenues (hereinafter - the customs authority) on the accrual of customs payments and taxes.
As follows from the case file, the customs authority carried out a customs check on the issue of compliance with the requirements of customs legislation governing the conditions for placing goods under the customs procedure of processing outside the customs territory, according to the results of which a notice was issued for a total of 8,701.3 million tenge.
The T company, disagreeing with the conclusions of the customs authority, filed an appeal in which it asks to cancel the decision of the customs authority, while the complaint does not indicate the circumstances on which it bases its requirements, as well as information confirming these circumstances.
After checking the arguments of the foreign economic activity participant, examining the materials submitted by the customs authority, the authorized body came to the following conclusions.
In accordance with Article 395 of the Code of the Republic of Kazakhstan "On Customs Regulation in the Republic of Kazakhstan" (hereinafter referred to as the Code of Customs Regulation), the customs authority exercises customs control over compliance with the conditions for the use of goods in accordance with the customs procedure.
Article 396 of the Customs Regulation Code establishes that when conducting customs control of the customs value of imported goods declared during customs declaration, the customs authority checks the correctness of determining and declaring the customs value of goods.
Article 89 of the Customs Regulation Code stipulates that the limitation period for claims of customs authorities and payers is three years from the end of the goods being under customs control. The customs authority has the right to calculate the payer or revise the amount of customs duties, taxes, customs duties calculated by the payer, as well as the amount of accrued penalties, interest during the limitation period.
At the time of customs declaration of goods of the inspected period until 31.12.2017. The Code of the Republic of Kazakhstan "On Customs in the Republic of Kazakhstan" No. 298-IV of 30.06.2010 was in force. (hereinafter referred to as the Customs Code), and from 01.01.2018. the Customs Regulation Code is currently in force.
In this case, the Company "T" for the audited period from 2017 to 2019. on the basis of the processing agreement dated 03.09.2016 and dated 11.08.2017. customs declaration of goods for 832 diesel fuel was made.
Of these, 14 diesel fuel were exported to China - "artificial leather for shoe production" with placement under the customs procedure "processing of goods outside the customs territory" (Ek-21), customs value 34 151.3 million tenge and classification in the commodity position "5903" CNFED EAEU.
The purchase of raw materials by T Company was carried out on the basis of the Agreement of 01.09.2016 concluded with N Company (Russian Federation), with further export to China for processing and production of footwear.
The export of raw materials to the PRC for processing and production of footwear was carried out on the basis of permits on the conditions for processing goods outside the customs territory of 13.10.2016. and 26.09.2017 issued by the state authorized body of the Republic of Kazakhstan.
The customs procedure for processing outside the customs territory was completed by importing finished products - "artificial leather shoes, leatherette" with placement under the customs procedure for release for domestic consumption under 818 DT and assignment to the commodity item "6402" of CNFED. The total customs value of imported goods amounted to 40,803.3 million tenge, TPiN accrued in the amount of 1,073.6 million tenge.
Subsequently, after the release of goods by the customs authority, an audit was carried out based on the results of which the following was established.
According to the processing agreement dated 03.09.2016 normative calculations made by the Contractor for the cost of processing in the context of the assortment of manufactured goods are established, the calculation of the standards for the yield of finished products, agreed and approved by T and the Contractor in Appendices No. 1 and 3, according to which T provides the Contractor with raw materials with a total value of 63.6 million US dollars.
According to clause 2 of the processing contract, the cost of work is 11.0 million US dollars.
In accordance with the Document on the conditions for processing goods outside the customs territory dated 13.10.2016. the rate of yield of processed products from artificial leather (leatherette) is 10.0 million pairs.
In the course of customs inspection, guided by the requirements of paragraph 2 of Article 423 of the Code on Customs Regulation, the customs authority analyzed bank information regarding the flow of funds within the framework of the processing agreement under consideration.
In accordance with the information provided by the bank, transfer of funds according to the processing agreement dated 03.09.2016. was US $ 12.8 million, with a difference of US $ 1.8 million (US $ 12.8 million - US $ 11.0 million) set off against the 11.08.2017 refining contract.
Thus, the obligations of the parties in terms of fulfillment of clause 2 of the processing agreement dated 03.09.2016. fully executed and completed.
In accordance with the processing agreement of 11.08.2017 T Company shall provide Contractor with raw materials with a statistical value of USD 349.6 million. The cost of work for processing amounted to 66.2 million US dollars
In accordance with the Document on the conditions for processing goods outside the customs territory dated 13.10.2016. the output rate of processed products from artificial leather (leatherette) will be 65.0 million pairs.
According to the inspection report, within the framework of two processing contracts, T Company imported goods - "artificial leather shoes, leatherette," with a total statistical value of 101.1 million US dollars.
Based on the above data, based on the results of customs inspection, the customs authority accrued TPiN in the amount of 8,701.3 million tenge, minus the amount of import customs duties for work in the amount of 1,073.6 million tenge.
In accordance with article 356 of the Customs Code and article 256 of the Code on Customs Regulation of Processing Outside the Customs Territory, it is a customs procedure, applicable to goods of the Eurasian Economic Union, according to which such goods are exported from the customs territory of the Eurasian Economic Union in order to receive products of their processing as a result of processing operations outside the customs territory of the Eurasian Economic Union, intended for subsequent import into the customs territory of the Eurasian Economic Union, without paying export customs duties in respect of such goods of the Eurasian Economic Union, subject to the conditions for placing the goods under this customs procedure and their use in accordance with such customs procedure.
In addition, in accordance with Article 357 of the Customs Code and Article 257 of the Customs Regulation Code, one of the conditions for placing goods under the customs procedure for processing outside the customs territory is the presence of a document on the conditions for processing goods outside the customs territory of the Eurasian Economic Union, issued by the authorized state body of the Republic of Kazakhstan and containing information defined by Article 261 of the Customs Regulation Code.
Upon completion of processing outside the customs territory of the EAEU in accordance with Article 264 of the Code on Customs Regulation, the operation of this procedure ends with the placement of processed products under the customs procedure "release for domestic consumption" (Im-40).
Also, Article 366 of the Customs Code and Article 266 of the Customs Regulation Code stipulate that when placing processed products under the customs procedure for release for domestic consumption, import customs duties are calculated based on the cost of processing operations outside the customs territory
During the customs inspection, the customs authority sent a request to the state authorized body of the Republic of Kazakhstan dated 05.03.2019.
State authorized body of the Republic of Kazakhstan by the response dated 11.04.2019. confirms the issuance to T of the Documents on the conditions of goods processing dated 13.10.2016. and dated 26.09.2017. with a fixed period of processing of goods - 2 years.
At the same time, the customs authority sent a request dated 15.10.2018. to the State Tax Administration of the People's Republic of China (hereinafter referred to as GNU PRC) regarding settlements between T Company and B Company
In the PRC GNU response dated 02/02/2019, reports that during the investigation, Company "B" stated that it did not conduct any business with Company "T," but Company "B" admitted that it helped an employee of Company "T" transfer to China in the amount of 9.8 million US dollars through the account of Company "B."
Also, the customs authority sent a request dated 29.05.2019 to the State Customs Service under the Government of the Kyrgyz Republic (hereinafter referred to as the GTS under the RCC) regarding confirmation of the actual departure of goods under the customs procedure of processing outside the customs territory (EK-21) through the road checkpoint of the Kyrgyz Republic.
In the response of the GTS at RCC dated 10.06.2019. informs that the information system does not contain information about the actual departure of goods through the road checkpoint.
In addition, the customs authority sent a request dated 01.11.2018. to the Federal Tax Service of the Russian Federation (hereinafter referred to as the Federal Tax Service of the Russian Federation) in relation to the Company "N."
According to the response of the Federal Tax Service of the Russian Federation, Company "N" was registered in 14.08.2013. and its main activity is "processing and preserving fish, crustaceans and mollusks."
Company "H" ceased operations on 18.10.2016.
The latest tax statements of the Company "H" are presented for the 1st quarter of 2015 with zero indicators. Information on export of Company "H" products to Company "T" for the period from 01.01.2017 to 31.12.2017 the tax authority of the Russian Federation does not have.
Based on the above, it follows that T Company has not complied with the requirements of the customs legislation governing the conditions for placing goods under the customs procedure for processing outside the customs territory, due to the absence of an operation for processing goods outside the customs territory of the Eurasian Economic Union.
In connection with the violation of the conditions of Article 366 of the Customs Code and Article 266 of the Customs Code in the case under review, customs duties and taxes should be calculated based on the customs value of the goods indicated in column 42 of the DT.
By the decision of the Appeals Commission, the results of the customs inspection were recognized as legitimate.