LETTER OF THE TAX COMMITTEE OF THE MINISTRY OF FINANCE OF THE REPUBLIC OF KAZAKHSTAN

of July 15, 2010 No. HK-1522/8379

The Tax Committee of the Ministry of Finance of the Republic of Kazakhstan (further - MF RK Oil Company), reports the following.

According to item 4 of Article 46 of the Civil code of the Republic of Kazakhstan (further - RK Group), in case of allocation from the list of the legal entity of one or several legal entities according to the separation balance sheet the rights and obligations of the reorganized legal entity pass to each of them.

According to Item 1 of Article 47 of RK Group, property rights and obligations of the reorganized legal entity pass to again arisen legal entity: in case of merge and accession - according to the transfer act, in case of separation and allocation - according to the separation balance sheet.

Based on the above, in case of separation and allocation the legal successor of the reorganized legal entity acquires property rights and obligations according to all obligations according to the separation balance sheet.

Proceeding from regulations of the Code of the Republic of Kazakhstan "About taxes and other obligatory payments in the budget" (Tax code) follows that exceeding on the value added tax (further - the VAT) is VAT amounts, carried in offsetting, over the amount of the accrued tax, developed according to the declaration with the accruing result for the end of accounting tax period.

Item 1 of article 256 of the Tax Code provides that in case of determination of the tax amount which is subject to budget payment, the receiver of goods, works, services has the right to offsetting of the VAT amounts which are subject to payment for the received goods including fixed assets, intangible and biological assets, real estate investments, works and services if they are used or will be used for the purpose of leviable turnover.

Thus, exceeding on the VAT is formed as a result of purchase of goods (works, services), that is from financial and economic activities, and, respectively, is not transferred to the legal successor of the reorganized person in case of lack of data transmission of goods (works, services) further used for the purpose of leviable turnover.

Tax departments on areas, Almaty and Astana need to pay special attention on the above when implementing tax administration.

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