Amendments to the procedure for appealing against decisions of the tax authorities

The new Kyrgyz Tax Code came into force on 1 January 2022. There have been many changes to the tax legislation, starting with tax regimes. All of these changes are jokingly called a “revolution” by accountants, and they are partly right.

But in this article we would like to update the issue of the procedure for appealing the decisions and actions of the tax authorities and their officials, so we will consider all the significant changes in it, which are established by the new tax legislation of the Kyrgyz Republic.

1) A taxpayer's complaint against the decision of the tax authorities shall be lodged with the authorised tax authority within 30 calendar days from the day following the day on which that decision was delivered to the taxpayer, in accordance with Article 167(1) of the Tax Code. There is no change in this provision, but the legislator has established the possibility of appealing the decision to appoint and/or extend, and/or suspend, and/or resume an on-site audit.

There were cases in practice in the past when a taxpayer did not agree to an unscheduled field audit because there was no legal basis for it, and when the tax authorities appealed the decision to set it up, they argued that the decision was not subject to appeal because it did not have any legally significant consequences. For the most part, such disputes have been decided by the court in favour of the Tax Service's arguments.

However, now under Article 167(2) of the Tax Code, an appeal against the decision to appoint and/or extend and/or suspend and/or resume an on-site audit must be lodged within 5 working days of service.

There is also a time limit for re-submitting such a complaint if it is returned. The taxpayer, in accordance with paragraph 5 of Article 167 of the Tax Code, after eliminating the reasons that led to the return of his complaint, has the right to re-submit a complaint to the competent tax authority, in cases stipulated by paragraph 2 of this article, within 2 working days following the day of receipt of the returned complaint.

2) The new Tax Code gives taxpayers the possibility to appeal against decisions of the authorised tax authority on their complaints not only through the courts of general jurisdiction, but also through an arbitration court. This possibility has been sought by the business community for many years, due to a loss of confidence in the state courts, and it has finally happened.

The taxpayer, who disagrees with the decision of the authorized tax authority on a complaint filed, may appeal this decision in the Kyrgyz Republic through administrative proceedings or in an arbitration court in accordance with Kyrgyz law, pursuant to Article 169, Paragraphs 7 and 8 of the Tax Code. When appealing the decision of the authorized tax authority to the court of arbitration, the arbitrators considering the appeal shall be appointed by the chairman of the court of arbitration among three arbitrators.

But it should be noted that these rules on arbitration will not come into force until 1 January 2023, according to Article 23 of the Law of the Kyrgyz Republic “On Enactment of the Tax Code of the Kyrgyz Republic”.

3) The legislator has closed an important gap that had raised many questions. Under the old version of the Tax Code, enforcement of an appealed decision was suspended until a decision was issued by the authorised tax authority, which came into force from the date of delivery to the taxpayer. Then it was suspended again from the day of filing a lawsuit in court, if there was one.

According to Article 171(2) of the new version of the Tax Code, execution of a decision shall be suspended from the date of filing a complaint with the authorised tax authority until the expiry of the period established by the procedural legislation for appealing against the decision of the authorised tax authority in court, and in the event of an appeal to the court - until the court decision enters into force.

4) Whereas previously the actions or omissions of tax authorities and their officials were appealed in accordance with the legislation of the Kyrgyz Republic, which is the Law of the Kyrgyz Republic "On the Basis of Administrative Activity and Administrative Procedures", now under Article 172 of the Tax Code, actions and/or inactions of tax authorities and/or their officials are appealed under the procedure provided for in Chapter 20 of the Tax Code.

This means that the legislator has brought the procedure of appeal to a unified practice. Whether it is good or bad will be seen in each specific situation, but it is definitely right, because the implementation of the provisions of the Law of the Kyrgyz Republic “On the basis of administrative activities and administrative procedures” could cause difficulties for the tax authorities, due to different procedures of appeal.

At the same time, since the tax service has been added with certain powers of law enforcement agencies, under Article 173 of the Tax Code, appeals against decisions and actions (inaction) taken (carried out) under the criminal procedure law are made in accordance with the procedure provided for in the Criminal Procedure Code of the Kyrgyz Republic.

5) There is also a rather important change in the tax law, or more accurately, an amendment.

The designated public authority is the authority that determines fiscal policy. The Tax Service implements it. The authorised state authority gives explanations on the application of tax legislation, but before, such explanations were only advisory in nature, as they were not binding. When the tax authority's decisions were challenged in the courts, the explanations provided to the court were simply taken into account, but had no force as such.

But according to Article 20(2) of the new Tax Code, explanations of the authorised state authority on the application of tax legislation are binding on the tax authorities and may be accepted by law enforcement and judicial authorities as evidence in tax disputes and proceedings.

We believe that the amendments to the procedure for appealing the decisions of the tax authorities close many gaps, which provides legal certainty. In addition, there are positive moments for taxpayers, but, as they say, we'll see, and all will show practice.