The second stage peer review report on the implementation of the Action 14 minimum standard (making dispute resolution more effective) by Kazakhstan was published by the OECD’s Inclusive Framework on 13 September 2022.
Kazakhstan has a relatively large tax treaty network of more than 50 tax treaties, with a small mutual agreement procedure (MAP) inventory and a small number of new cases submitted each year. The stage 1 peer review found that Kazakhstan met less than half of the elements of the Action 14 minimum standard, and the stage 2 peer review report notes that Kazakhstan has not solved the identified deficiencies.
The report notes that all Kazakhstan’s tax treaties contain a provision relating to the MAP, and generally the MAP articles are in line with paragraphs 1 to 3 of Article 25 of the OECD Model Tax Convention.
Kazakhstan’s treaty network is mainly in line with the requirements of the Action 14 minimum standard, but almost 15% of the treaties do not include a provision for mutual agreements to be implemented regardless of any time limits in domestic law; or the alternative provisions for Article 9(1) and Article 7(2) to set a time limit for transfer pricing adjustments. Almost 18% of the treaties do not contain a provision allowing the competent authorities to consult together to eliminate double taxation in cases not provided for in the treaty.
Kazakhstan has signed and ratified the multilateral instrument (MLI) to implement treaty-based provisions arising from the OECD project on base erosion and profit shifting (BEPS). The MLI can be used to update some of the treaties to bring them in line with the minimum standard. In the case of treaties that cannot be modified using the MLI, Kazakhstan intends to update the treaties through bilateral negotiations. However, apart from one treaty, Kazakhstan does not have a plan in place for the renegotiation of the relevant treaties.
The peer review report considers that Kazakhstan does not meet the minimum standard with regard to the prevention of disputes. Kazakhstan has an advance pricing agreement (APA) program in place but this does not make any provision for roll-back of bilateral APAs to previous periods.
The report notes that it is not clear if Kazakhstan provides access to the MAP in all eligible cases. Where treaties do not include a filing period for making a MAP request, the domestic time limits may lead to a filing period of less than three years from the date of first notification of the action that may lead to taxation not in accordance with the treaty.
Kazakhstan has put in place a documented bilateral consultation process for situations where the competent authority considers that the issue raised by taxpayers in a MAP request is not justified, but this process is not documented. Kazakhstan has not issued guidance on the availability of the MAP and its practical application.
In the years from 2016 to 2020 Kazakhstan completed MAP cases in an average time of 26.37 months, outside the time period of 24 months required by the minimum standard. A number of other countries reported difficulties in arranging meetings, obtaining position papers or responses to their position papers, or receiving timely responses on other communications on MAP cases. The peer review report notes that this indicates that adequate resources need to be made available to Kazakhstan’s competent authority to ensure a timely resolution of MAP cases.
The organisation of the competent authority function is adequate and appropriate performance indicators are used for the MAP. The report notes however that tax administration personnel directly involved in the adjustment may influence the resolution of MAP cases. Input from peers indicates that Kazakhstan’s competent authority may not have the authority to resolve MAP cases under the terms of an applicable tax treaty. Kazakhstan did not submit or match MAP statistics under the MAP Statistics Reporting Framework within the deadline in the years under review.
In principle Kazakhstan meets the Action 14 minimum standard as regards the implementation of MAP agreements, but no MAP agreement required implementation in the period under review.
