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Specialist Inter-District Economic Court of Nur-Sultan does not disclaim the Eurasian Economic Union?

    The first instance consideration of a civil case on the claim of the State Institution “Ministry of Industry and Infrastructure Development of the Republic of Kazakhstan” to “AZIA AVTO” JSC for the recovery of a “loss” of 173.9 billion tenge was completed in the Specialist Inter-District Economic Court of Nur-Sultan

    The Ministry of Industry and Infrastructure Development of the Republic of Kazakhstan justified its claims by the termination of the Industrial Assembly Agreement from 07.04.2017. through judicial procedures, in connection with which it requested to recover from “AZIA AVTO” JSC as a loss the amount of benefits received for customs duty and VAT for import for a period from 2012 to 2020. During the consideration of the case by “AZIA AVTO” JSC presented enough evidences and arguments that indicate the frivolousness of the claim:

    • Industrial Assembly Agreement from 24.06.2010 which was valid earlier, was terminated in April of 2017. by mutual consent of the parties, without any violations on the part of “AZIA AVTO” JSC, in this regard, initially, claims regarding the benefits received until April of 2017 do not have any reasons.

    • The Agreement from 07.04.2017 was terminated only from 21.10.2020 and was considered to be a valid contract until this date. At the same time, neither the current legislation of the Republic of Kazakhstan nor the Agreement provides for additional taxes and duties in the event of termination of the Agreement. The agreement defines only one type of violations on the part of manufacturers — the misuse of the obtained automotive components. There were no violations on the part of “AZIA AVTO” JSC: all imported automotive components were used exclusively for the production of vehicles.

    • The court decision supported the additional assessment of taxes and customs duties to “AZIA AVTO” JSC, referring to the norms of civil legislation that provide for compensation for losses in the event of termination of the contract. But the court ignored that according to paragraph 4 of Article 1 of the Civil Code of the Republic of Kazakhstan, civil law does not apply to property relations based on administrative or other authority subordination of one party to the other, including tax and other budgetary relations. Issues related to the calculation of taxes and customs duties are governed only within the framework of tax and customs legislation, which provides all reasons for the occurrence, performance and termination of tax and customs obligations.

    • During the period of validity of Industrial Assembly Agreements, the amount of taxes paid by the company is many times higher than the total amount of preferences obtained. The term “loss” in this case cannot be applied in the context of the activities of a large investor. Thanks to the taxes paid by “BIPEK AVTO-AZIA AVTO” group of companies, the state budget increased by more than $536 million.

    Anatoly Balushkin, Chairman of the Board of Directors of “BIPEK AVTO-AZIA AVTO” group of companies:

    — To return something, firstly you must obtain it. We did not receive this money. All the benefits and preferences that were previously provided by the government were directed to the buyers in the form of reasonable price for vehicles. Essentially, the customers were deprived of the preferences, not manufacturer.

    If you receive benefits physically, on the account, then they can be credited to the asset of the company and talk about the return in the same physical quantities. But when these are hypothetical and virtual charges, and estimated calculations, then what kind of return can we talk about? We were exempted from VAT, we, in turn, removed it from the price, gave an reasonable price to the customer. Where is the VAT? In the customer’s pocket. That is, money CANNOT be monetized! These are protective measures for importers. They provide an opportunity to develop production within the country, create рабочие места, and pay taxes.

    Why elementary inspections and industry expertise have not been carried out yet? They WERE NOT conducted!

    The staff is shocked by such misunderstandings!

    To obtain tax and customs benefits that are the subject of claims, manufacturers do not need to conclude Industrial Assembly Agreements. Since 2003, “AZIA AVTO” JSC, being the owner of a free warehouse, has been applying the appropriate customs procedure to imported automotive components, which, in accordance with the legislation of the EAEU, exempts goods from customs duties and taxes in the free warehouse mode.

    In justification of the amount of loss, the Ministry of Industry and Infrastructure Development of RK referred to the response of the Committee of state revenues. At that, the lawyers of “AZIA AVTO” drew the court’s attention to the fact that neither the request of Ministry of Industry and Infrastructure Development of RK, nor in the response of the Committee of state revenues of RK, Industrial Assembly Agreement from 04.04.2017 is not mentioned, as a basis for the given benefits specified in this document. The court ignored this circumstance and did not begin to understand on what basis, in fact, the benefits were granted, satisfying the claims of the Ministry of Industry and Infrastructure Development of the Republic of Kazakhstan to “AZIA AVTO” in full.

    At the same time, most of the imported automotive components were produced and delivered from the territory of the Russian Federation, and since 2010, within the framework of the Customs Union (later transformed into the Eurasian Economic Union), free movement of goods and, accordingly, exemption from customs duties are provided for goods traded within the Union. However, the court’s decision, ignoring the basic principles of the creation and functioning of the EAEU, added and collected from “AZIA AVTO” JSC customs duties and taxes for goods produced and moved within the Customs Union (produced in the Russian Federation and delivered to the Republic of Kazakhstan).

    Vladimir Shevchenko, representative of “AZIA AVTO” JSC:

    — The consideration of such a complex case was limited to one short court session, during which the court ignored all our arguments.

    This decision will be complained of on appeal.