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

of August 26, 2013 No. NK-13-YuL-E-883-NK-6539

The Tax Committee of the Ministry of Finance of the Republic of Kazakhstan (further - MF RK Oil Company), having considered your letter of July 30, 2013 No. 364-07/13 concerning application of regulations of the Convention on the legal assistance and legal relations on civil, family and criminal cases concluded by state members in Chisinau on October 7, 2002 reports that by the matter of MF RK Oil Company inquiries are sent to foreign states, being participants of the specified convention.

In this connection, the answer on the above-stated question will be provided to you after receipt of replies to the requests.

Letter of Association of taxpayers of Kazakhstan of July 30, 2013 No. 364-07/13

The association of taxpayers of Kazakhstan (further - ANC), in connection with addresses of taxpayers, asks to explain question concerning legalization of certificates of residence.

According to the letter of the Tax Committee of the Ministry of Finance of the Republic of Kazakhstan No. HK-13-55-4256 of June 07, 2013 (further - the Letter) the regulation of the Convention "About Legal Assistance and Legal Relations on Civil, Family and Criminal Cases" signed by State members in Chisinau of 07.10.2002, and ratified by the Law of the Republic of Kazakhstan of March 10, 2004 No. 531 (further - the Chisinau Convention), are applicable only within legal assistance on civil, family and criminal cases. In this connection, application of provisions of article 212 of the Code "About taxes and other obligatory payments in the budget" (further - the Tax Code) based on the provided copy of the certificate of residence certified by the notary of foreign state - the member of the Chisinau Convention, is illegal without carrying out the corresponding legalization according to the procedure, established by the legislation of the Republic of Kazakhstan.

It should be noted that the Letter caused rough discussion among members of ANC, and most of taxpayers do not agree with the conclusions and the conclusions containing in the Letter.

We below include reasons for line item of taxpayers about applicability of the Chisinau Convention and Minsk Convention [1] to form of certificates of residence.

1. According to Item 5 of article 2 of the Tax Code if the international treaty ratified by the Republic of Kazakhstan establishes other rules, than those which contain in the Tax Code are applied rules of the specified agreement.

Item 2 of the Normative resolution of the Supreme Court of the Republic of Kazakhstan of February 27, 2013 No. 1 "About court practice of application of the tax legislation" (further - the Normative resolution) provides similar regulation, with some amendments. Namely, if the international treaty ratified by the Republic of Kazakhstan establishes other rules, than those which contain in the Tax code are applied rules of the specified agreement (Item 5 of article 2 of the Tax Code). According to Item 3 of article 4 of the Constitution of the Republic of Kazakhstan such agreements are applied directly, except cases when follows from the agreement that its application requires the publication of the law.

At the same time neither the Tax Code, nor the Normative resolution provides clauses that the international treaty which is subject to application shall regulate tax legal relationship.

Thus, proceeding from literal interpretation of Item 5 of article 2 of the Tax Code and Item 2 of the Normative resolution, taxpayers have the right not to legalize the certificates of residence issued by tax authorities of the states - participants of the Chisinau Convention and Minsk Convention.

Besides, we consider illegal to draw conclusion about inapplicability of the Chisinau Convention only based on its preamble.

First, does not follow from preamble that the Chisinau Convention is applied only to civil, family and criminal cases. In it it is only said that the parties attach "importance to development of cooperation in the field of rendering justice of legal assistance by organizations on civil, family and criminal cases".

Secondly, in preamble it is told that the parties aim to provide reliable legal protection of the property and non-property rights of citizens and legal entities in the territories of all parties. Release from legalization of the certificate of residence is directed, including, on protection of valuable and non-property interests of citizens and legal entities. Such release saves for citizens and legal entities significant amount of time and the costs required in case of observance of the procedure of legalization.

Thirdly, if restriction of action of Art. 12 only with the documents relating to civil, family or criminal cases was intention of the parties of the Chisinau Convention, this Article would contain direct specifying on it. The majority of other provisions of the Chisinau Convention on these or those documents contain specifying on nature of these documents. As such specifying in Art. 12 is absent, it extends to all documents issued by competent organizations.

Besides, it is important to note that Art. 12 speaks about the documents issued by competent organizations. At the same time she does not speak about the documents issued by organizations of justice which are determined in Article 1 as "organizations of other Contracting Parties within which competence civil, family and criminal cases are". Thus, Art. 12 obviously extends to all documents, and not just to those which belong to civil, family or criminal cases.

2. In the Letter it is specified that "In view of the specified Code provisions, the questions connected with confirmation of residence for the purposes of the taxation will be regulated within the tax legislation or the international treaty raising the tax matters and ratified by the Republic of Kazakhstan".

At the same time, as appears from the content of the letter the Chisinau convention does not raise the tax matters.

In turn, taxpayers note, as the Convention canceling the requirement of legalization of foreign official documents (the Hague, on October 5, 1961) [2], (further - the Hague Convention) does not raise the tax matters.

Thus, it is possible to draw conclusion that if certificates of residence are provided by tax authorities - the countries of participants of the Hague Convention, then these certificates of residence are also subject to legalization, otherwise, the certificate of residence with apostille will not be considered as properly by the drawn-up certificate of residence tax authorities of the Republic of Kazakhstan.

The single international treaties which are directly regulating tax legal relationship are the international agreements on avoidance of double taxation and prevention of evasion from the taxation of the income and property (further - the Convention on avoidance of double taxation).

But, any of Conventions on avoidance of double taxation which participant is the Republic of Kazakhstan does not regulate questions of execution of certificates of residence.

Conclusion follows that any international treaty, whether it be the Convention on avoidance of double taxation, or other other international treaty, does not regulate questions of execution of certificates of residence.

Respectively, there is question for what changes, concerning possibility of application of international treaties to procedure for execution of certificates of residence were made to Item 5 of article 219 of the Tax Code.

3. On March 17, 2010 commission session on economic problems under CIS Economic Council on which the question of rules of administration of agreements on avoidance of double taxation in the State Parties of the CIS was considered took place.

By results of this meeting the information and analytical collection (appendix to item 2 of the protocol No. 3 (152) commission sessions on economic problems was issued under CIS Economic Council of March 17, 2010), (further - the Collection). Source of http://www.nalog.ru/html/docs/pravila_08072011.pdf.

In the Collection it is said that in general in the State Parties of the CIS there are no essential distinctions on administration of agreements which would distinguish procedure for their application from the commonly accepted approaches. At the same time the features created by practice of each of tax administrations take place. For clarification of requirements of procedure for the taxation in case of the international transactions tax authorities of the states are in permanent contact with each other.

With respect thereto on the agenda the question of feasibility of connection in the single document of the normative instructions regulating administration of the agreements issued by all State Parties of the CIS was raised. For row of years of the state acquired certain practice, introduced the national rules and procedures relating to application of agreements. These circumstances caused interest of all tax administrations in forming of the information collection on this subject which shall include information on conditions of application of agreements in the State Parties of the CIS, samples of the references and documents necessary for receipt of preferences of agreements, confirmations of the amounts of the taxes paid abroad, requirements for filling and conditions of submission of documents.

All these data are necessary for informing taxpayers on requirements imposed by the State Parties of the CIS to the foreign organizations and citizens gaining income and owning property in their territory for elimination of double taxation.

In Item 6 of the Collection the question of is considered whether legalization (apostilization, etc.) confirmations of the tax residence certified by the signature of Tax Service of foreign state is required.

The Azerbaijan Republic, the Russian Federation, Ukraine referring to the Chisinau convention claim that they the supporting document the tax residence coming from member countries of the Chisinau convention of legalization are not subject.

Some countries (the Republic of Armenia, the Republic of Belarus, the Kyrgyz Republic, the Republic of Moldova) declare lack of need of legalization, without making the direct reference to the Chisinau convention. But, that the Collection is prepared by heads of Tax Services of the CIS countries we assume that these countries declare lack of need of legalization in view of availability of the Chisinau convention.

The single state of the CIS requiring legalization of confirmation of the tax residence is the Republic of Tajikistan.

The Republic of Kazakhstan, expressed the line item as follows, we quote: "If the nonresident applicant is resident of the State Party of the Convention on legal assistance and legal relations on civil, family and criminal cases of October 07, 2002, according to article 12 of this Convention implementation of diplomatic or consular legalization of the sign and seal of the body which certified residence of the nonresident and foreign notary in case of submission of notarially attested copy of the document confirming rezidenstvo is not required." (p. 19).

This line item of the Republic of Kazakhstan has huge value in the context of observance of the Vienna convention "About the Right of International Treaties" of May 23, 1969 (became effective for RK on February 4, 1994). This convention regulates rules of interpretation of international treaties. In Item 3 of Art. 31 of the Convention it is said that in case of interpretation of provisions of the international treaty are considered:

a) any subsequent agreement between participants concerning interpretation of the agreement or application of its provisions;

b) the subsequent practice of application of the agreement which establishes the agreement of participants concerning its interpretation.

From the commission session mentioned above on economic problems under CIS Economic Council, and also (see below) obviously follows from explanations of tax authorities of the different CIS countries that between the Republic of Kazakhstan and other CIS countries the agreement and practice of application of the Chisinau Convention were developed in such a way that certificates of residence are not subject to legalization. Therefore, owing to provisions of Art. 31 of the Vienna convention "About the Right of International Treaties" the Chisinau Convention shall be interpreted thus. Departure from this practice will mean violation by the Republic of Kazakhstan of the undertaken international obligations under the Chisinau Convention and can entail disputes with other agreeing countries of the Chisinau Convention.

4. There are explanations of official organs of the states of the CIS in what cases legalization (apostilization) are not required. In particular, according to the letter of Office of the Federal Tax Service in г.Москва of June 9, 2009, No. 16-15/058821: "… Within Article 3 of the Hague Convention the Ministry of Finance of the Russian Federation, including, on behalf of the authorized representative (FNS of Russia), on mutual basis approved the procedure of adoption of the official certificates confirming the permanent residence (residence) without legalization or apostilization with competent authorities (their authorized representatives) of number of foreign states. The Republic of Belarus, the Republic of Ukraine, the Republic of Moldova, the Republic of Kazakhstan … treat such states" (the letter of FNS of Russia is attached). It should be noted that information base FNS of Russia contains the complete list of the states with which the agreement on adoption of the documents confirming the tax residence without apostille or consular legalization which includes is reached, including, and the Republic of Kazakhstan (the list is attached).

Also there are explanations of Ukraine concerning references of the tax residence according to which, the certificates of the status of the tax residence issued by tax authorities of Kazakhstan are accepted in the territory of Ukraine without any additional certificate (without legalization and the certificate by apostille) based on agreements of Ukraine on legal relations and legal assistance in civil and criminal cases.

Is important the fact that some taxpayers conducted negotiations with the partners from the Russian Federation, and also addressed to the Ministry of Justice of the Russian Federation concerning apostilization of certificates of residence on what was received the answer according to which, the requirement of apostilization as the simplified form of legalization of documents, is illegal for member countries of the Minsk Convention, proceeding from regulations of article 13 of the called convention. The article 13 "Validity of documents" of the Minsk Convention states:

"1. Documents which in the territory of one of Contracting Parties are made or attested organization or specially on that the authorized person within their competence and in the established form and are sealed by official, are accepted in the territories of other Contracting Parties without any special certificate.

2. Documents which in the territory of one of Contracting Parties are considered as official documents use evidential force of official documents in the territories of other Contracting Parties.".

5. According to representatives of the Ministry of Justice of the Russian Federation, provision of Items 1 and 2 of article 13 of the Minsk Convention it is necessary to understand in such a way that the agreeing countries in legal relations among themselves do not make demands for legalization of documents, and stamp and the signature of the notary are good cause for giving to the document of legitimacy.

6. Item 5 of article 219 of the Tax Code till January 01, 2013 was effective in the following edition: "5. The sign and seal of the body which certified the document confirming residence of the nonresident, and also the sign and seal of the foreign notary in case of the notarial attestation of the copy of the documents specified in subitems 1), 2) and 4) of Item 1 of this Article are subject to diplomatic or consular legalization according to the procedure, established by the legislation of the Republic of Kazakhstan, or to apostilization according to the international treaty of the Republic of Kazakhstan."

The law of the Republic of Kazakhstan "About modification and amendments in some legal acts of the Republic of Kazakhstan on the tax matters" of December 26, 2012, Item 5 of article 219 of the Tax Code was changed, and stated in the following edition: "If other is not established by this Item or the international treaty which participant is the Republic of Kazakhstan, the sign and seal of the body which certified the document confirming residence of the nonresident, and also the sign and seal of the foreign notary in case of the notarial attestation of the copy of the documents specified in subitems 1), 2) and 4) of Item 1 of this Article are subject to diplomatic or consular legalization according to the procedure, established by the legislation of the Republic of Kazakhstan. If within the international treaty the authorized body and competent authority of foreign state will come to the mutual agreement providing other procedure for legalization of the documents confirming residence, the specified procedure is applied."

Changes in Item 5 of article 219 of the Tax Code, were dictated by need of refining of its edition since international treaties which participant is the Republic of Kazakhstan establish different requirements to legalization of official documents.

In particular the Hague Convention, the procedure of consular legalization is replaced with putting down of apostille, and the Chisinau and Minsk Conventions cancel any legalization in general.

Thus, having applied so-called "historical interpretation" of regulation of article 219 of the Tax Code stated in Item 5, taxpayers come to conclusion that on the basis of the Chisinau and Minsk Conventions taxpayers have the right not to legalize the certificates of residence coming from member countries of the Chisinau and Minsk Conventions.

Considering that tax authorities, up to April of the current year, performed the income tax return, withheld at payment source, from conditional bank deposit to nonresidents of the states of the neighboring countries (Russia, Ukraine) based on the certificate of residence without putting down of apostille, to taxpayers change of line item of the Tax Committee of the Ministry of Finance on the matter is unclear (see the letter of the Tax Committee of the Ministry of Finance of the Republic of Kazakhstan of April 16, 2005 No. NK-UMN-3-16/3450).

Based on the above, taxpayers do not agree with line item of the Tax Committee of the Ministry of Finance of the Republic of Kazakhstan, and ask you to review the content of the letter.

Appendix on 6 p.:

- letter of FNS of Russia of June 9, 2009, No. 16-15/058821;

- the list of the states with which mutual agreements on adoption of the documents confirming the tax residence are reached (the permanent location in the territory of foreign state) without apostille or consular legalization, constituted based on official explanations of monitoring bodies;

- letter of the Tax Committee of the Ministry of Finance of the Republic of Kazakhstan of April 16, 2005 No. NK-UMN-3-16/3450.

[1] The convention on legal assistance and legal relations on civil, family and criminal cases signed in Minsk, on January 22, 1993 between state members of the Commonwealth of Independent States. The Minsk Convention and the protocol to it continue to be applied in the relations between the State Party of the Chisinau Convention and the state, being their participant for whom the Chisinau Convention did not become effective.

[2] The Republic of Kazakhstan joined the Hague Convention the Law of the Republic of Kazakhstan of 30.12.99 No. 11-II.

The convention became effective for Kazakhstan on January 30, 2001 according to the formal notice No. 1/2001 of 29.01.2001 the Ministry of Foreign Affairs of the Kingdom of the Netherlands.

 

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