Updated June 25, 2022
Closing a business in Kazakhstan has much to do with solvent dissolution or liquidation bankruptcy. In the first case a company is able to pay debts and taxes, in other case business is insolvent. Solvent dissolution is an easier process than bankruptcy mainly processed and controlled by court.
In this article we’ll be discussing about solvent dissolution when you may immediately proceed with a tax audit if you sure no violations have been committed during the last 5 years in tax and accounting.
In such cases, business relies on opinion of their accountants, however, even experienced bookkeepers often make mistakes in tax and accounting revealed later by tax inspections led to multi-million tax charges and penalties.
To avoid such consequences, we propose to conduct a preliminary non-governmental tax audit to identify and eliminate possible violations before filing out liquidation tax returns and balance sheets.
Another no less important factor is availability of complete accounting documentation covering business activity for the last 5 (five) years.
Lack of accounting documentation will lead to an increase in the tax base and additional tax charges and penalties. This fully applies not only to legal entities, but also to branches and representative offices, despite the widespread misconception regarding a non-commercial nature of representative office.
Several other steps prior to initializing state tax audit is corporate assets disposal and liquidation tax reporting. Assets disposal impose 20% CIT on assets’ cost determined by sale and purchase agreement. Liquidation tax returns should reflex zero debt obligations and liability both from government and third parties. All debts should be settled before starting state tax audit.
Based on state tax audit results and payment of taxes, if they are additionally charged, fiscal authority will provide a free-from-tax debt certificate – a pre-requisite to apply for final dissolution stage of business’ removal registrar’s records.
Solvent dissolution also known as a voluntary liquidation may be suspended for while should a taxpayer challenge state tax audit results. Overall suspension time may not exceed period required for petition review to an upper tax authority and court dispute.
Before doing that it’s important to determine arguments you will use to challenge state tax audit results and dispute with tax department. In most cases, not every credible argument in your opinion may convince a court how wrong is tax authority. Court is dealing here with tax proceeds to government budget and every flimsy evidence you provided to court will work in favor of your opponent in trial.
Therefore, returning to a stage preceding filing of an application for a state tax inspection, it should be emphasized the importance of a preliminary tax audit, which is capable of identifying controversial issues.
In practice, many of our clients, whom we were able to convince to conduct a pre-tax audit, had the opportunity to assess the situation and make an inform decision to continue a solvent dissolution, or suspend business activity, to put on hold a dissolution process followed by tax report suspension application to let limitations period expire for tax violations revealed by pre-tax audit.
Voluntary liquidation, which at first glance looks like a quite common procedure, may turn into an insoluble issue for the taxpayer, in order to avoid which we always recommend contacting professionals.
BOND STONE attorneys will provide you with qualified assistance in closing a business in Kazakhstan and liquidation bankruptcy.