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Can the Cabinet of Ministers' Decision No. 55 be referenced during a field tax audit?
Can the Cabinet of Ministers' Decision No. 55 be referenced during a field tax audit?
Based on the changes that came into effect on January 1, 2024, Articles 67.14 and 83.9 of the Tax Code have been repealed. As a result, the Cabinet of Ministers’ Decision No. 55, dated March 1, 2001, "On the Rules for Calculating the Profit (Income) of a Taxpayer When It Is Not Possible to Determine the Profit (Income) Directly," which was prepared based on Article 83.9 of the Tax Code, has also been invalidated.
So, is it possible to refer to this decision during field tax audits for previous years? Sirac Piriyev clarified this question during a panel discussion at the III Tax and Accounting Summit. According to him, the Cabinet of Ministers’ Decision No. 55, which reflects the conditional profitability norm, was repealed on January 1, 2024: “For audits of periods prior to 2024, although the decision has been repealed, it can still be applied by tax authorities because it was in force during that period. However, it is important to note that the tax authorities must first determine the taxpayer’s income or expenses using other sources, in accordance with the requirements of Article 67 of the Tax Code. If such information cannot be obtained, the conditional profitability norm can be applied as a last resort. In other words, despite the adoption of new norms starting from 2024, the Cabinet of Ministers' Decision No. 55 may still be applied during field tax audits for previous periods. However, for periods after 2024, in accordance with Article 67.3-1 of the Tax Code, a 50% profitability is taken into account for expenses. Based on the transition provisions of the law, only for 2024, a 50% conditional profitability will be applied. From January 1, 2025, profit (income) will only be declared based on actual income and expense requirements.”
According to Article 67.3-1, which was added to the Tax Code last year, when the income subject to taxation is not officially documented, but there is related information about the expenses deducted from the income, the taxable profit (income) will be calculated with a 50% profitability starting from January 1, 2024:
M = X : 100 x R
Where:
M – Profit of the taxpayer;
X – Expenses related to the taxpayer’s activity;
R – Conditional profitability norm.
Based on the changes that came into effect on January 1, 2024, Articles 67.14 and 83.9 of the Tax Code have been repealed. As a result, the Cabinet of Ministers’ Decision No. 55, dated March 1, 2001, "On the Rules for Calculating the Profit (Income) of a Taxpayer When It Is Not Possible to Determine the Profit (Income) Directly," which was prepared based on Article 83.9 of the Tax Code, has also been invalidated.
So, is it possible to refer to this decision during field tax audits for previous years? Sirac Piriyev clarified this question during a panel discussion at the III Tax and Accounting Summit. According to him, the Cabinet of Ministers’ Decision No. 55, which reflects the conditional profitability norm, was repealed on January 1, 2024: “For audits of periods prior to 2024, although the decision has been repealed, it can still be applied by tax authorities because it was in force during that period. However, it is important to note that the tax authorities must first determine the taxpayer’s income or expenses using other sources, in accordance with the requirements of Article 67 of the Tax Code. If such information cannot be obtained, the conditional profitability norm can be applied as a last resort. In other words, despite the adoption of new norms starting from 2024, the Cabinet of Ministers' Decision No. 55 may still be applied during field tax audits for previous periods. However, for periods after 2024, in accordance with Article 67.3-1 of the Tax Code, a 50% profitability is taken into account for expenses. Based on the transition provisions of the law, only for 2024, a 50% conditional profitability will be applied. From January 1, 2025, profit (income) will only be declared based on actual income and expense requirements.”
According to Article 67.3-1, which was added to the Tax Code last year, when the income subject to taxation is not officially documented, but there is related information about the expenses deducted from the income, the taxable profit (income) will be calculated with a 50% profitability starting from January 1, 2024:
M = X : 100 x R
Where:
M – Profit of the taxpayer;
X – Expenses related to the taxpayer’s activity;
R – Conditional profitability norm.