What Happened
The situation where a supplier counterparty has officially ceased operations and is excluded from the state register is familiar to many accountants in Kazakhstan. The question is: if the supplier has been liquidated, can corporate income tax (CIT) be reduced for transactions with them, that is, can expenses be included in deductions? The answer depends not on the fact of liquidation itself, but on whether the transaction was real and supported by proper primary documents at the time it was made.
The key principle of Kazakhstan's tax accounting is simple: the right to deduct CIT arises not because the supplier exists today, but because the expense was actually incurred, is related to activities aimed at generating income, and is documented during the transaction period. The subsequent liquidation of the counterparty does not retroactively negate this fact.
Who It Concerns
This topic is relevant for a wide range of taxpayers:
- Companies on the general taxation regime, which form deductions for CIT based on purchased goods, works, and services.
- Accountants and tax consultants who accompany transactions with a large number of counterparties.
- Organizations undergoing tax audits, where inspectors pay attention to transactions with already liquidated or inactive suppliers.
Particular attention is drawn to this issue by those who worked with the supplier shortly before their liquidation: such transactions are most often at risk during audits.
What Is Important to Understand About Deductions
The subsequent liquidation of the supplier itself is not an automatic basis for excluding the expense from CIT deductions. What matters is:
- The reality of the transaction. The goods were indeed supplied, the service was rendered, the work was completed. This is confirmed by the movement of goods, acts, invoices, and the use of the acquired items in activities.
- The presence of primary documents issued at the time of the transaction: contracts, acts of completed work, invoices, tax invoices.
- The status of the counterparty at the date of the transaction. If at the time of the transaction the supplier was active and legally capable, this strengthens the taxpayer's position.
Risks increase if the transaction had signs of being fictitious (no movement of goods, absence of documents, the counterparty was recognized as a shell company, or the transaction was contested in court). In such cases, deductions may be excluded, and tax liabilities may be reassessed.
What the Accountant Should Do
1. Check the set of primary documents for transactions with the liquidated supplier — contracts, invoices, acts, tax invoices must be available and properly executed.
2. Gather evidence of the reality of the transaction: confirmations of receipt and further use of goods, business correspondence, payment documents.
3. Document the status of the counterparty at the date of the transaction (active, registered taxpayer). This can be confirmed by information from open state registers.
4. Do not adjust deductions "just in case" solely due to the fact of liquidation — if there are supporting documents, the expense is legitimately accounted for.
5. Assess risks separately for disputed transactions, especially if the supplier was later recognized as unscrupulous, and consult a tax advisor if necessary.
Deadlines and Subsequent Steps
Adjustments to deductions and tax liabilities are tied to the period for which tax reporting is submitted and to the statute of limitations for tax obligations. If, following an audit, part of the deductions is deemed unjustified, the tax authority will reassess CIT for the relevant period. Therefore, it is important to keep documents for each transaction for the entire established retention period, not just while the counterparty is active. Apply specific rates, deadlines, and procedures according to the current version of the Tax Code and clarifications from the authorized body.
Frequently Asked Questions
If the supplier is liquidated, should their transactions be automatically removed from CIT deductions? — No. The mere fact of liquidation does not negate previously legitimately accounted expenses if the transaction was real and supported by documents at the time of execution.
What does the auditor primarily look at in transactions with a liquidated counterparty? — The reality of the transaction and the presence of correct primary documents: contracts, invoices, acts, tax invoices, as well as the status of the counterparty at the date of the transaction.
What to do if the documents for such a transaction are lost? — Try to restore them (request duplicates from remaining parties, retrieve payment and warehouse data). The absence of supporting documents increases the risk of exclusion of the deduction.
Does the recognition of the supplier as a shell company affect deductions? — Yes. If the transaction is recognized as fictitious or the counterparty is recognized as unscrupulous in the established manner, deductions for such transactions may be excluded.
Can an expense be accounted for if the counterparty was active at the time of the transaction but was liquidated later? — Generally, yes, provided the transaction is real and there are documents. Subsequent liquidation is not an independent basis for denying the deduction.