According to the author's observations, since the introduction of administrative justice in Kazakhstan , the quality of tax dispute resolution has been steadily improving. This is not only reflected in the favorable court statistics for businesses and citizens, but also in the evolving status of administrative courts. Much of this progress is driven by judges adopting new, and at times quite bold, approaches to resolving longstanding legal conflicts.

  In this article, we will explore this non-standard and groundbreaking approach to assessing the value of the mutual agreement procedure with a foreign state, which represents a breakthrough in judicial practice.

  A mutual agreement procedure (MAP) is a mechanism outlined in double tax treaties (DTTs) that allows taxpayers to request assistance from the competent authorities of their home state to resolve tax disputes resulting from the improper application of tax treaties by the other state. Typically detailed in Article 25 of DTTs, the MAP enables the competent authorities of both contracting states to engage in discussions and reach a mutually acceptable solution, thereby eliminating double taxation or correcting tax inconsistencies with the provisions of the treaty.

  The mutual agreement procedure enables taxpayers to safeguard their rights when the actions of one state lead to taxation that is inconsistent with the provisions of international agreements.

  According to official statistics from the Organization for Economic Cooperation and Development (OECD) , as of the beginning of 2022, 31 MAPs were in progress in Kazakhstan. Throughout the entire year, only one of these 31 procedures was completed.

  It is important to note that the speed of MAPs in Kazakhstan is significantly slower compared to countries such as Hungary, Latvia, Chile, Hong Kong, Croatia, Bulgaria, Liechtenstein, and Estonia. While the total number of MAPs in Kazakhstan in 2022 was higher than in these jurisdictions, the number of completed procedures in these foreign jurisdictions far exceeded Kazakhstan’s. In 2022, only one MAP was finalized in Kazakhstan, compared to 14 in Hungary, 4 in Latvia, 6 in Chile, 4 in Hong Kong, 6 in Croatia, 5 in Bulgaria, 4 in Liechtenstein, and 5 in Estonia.

  In contrast, countries such as Germany, Italy, France, Switzerland, Belgium, the Netherlands, Sweden, Denmark, and Norway handle and complete hundreds of MAPs annually, highlighting the high level of development in MAP implementation.

  Kazakhstan, however, holds a record for the slowest MAP processing times. The average duration of one MAP in Kazakhstan is 67 months. Slovenia and Vietnam take second and third places, with average durations of 63 and 58 months, respectively. For comparison, the average duration in Germany is 26 months, Spain 23 months, Switzerland and the UK 20 months, and Canada and the Netherlands 19 months.

  Despite the inefficiency of Kazakhstan's state bodies in implementing MAPs, individual cases illustrate the practical value of this mechanism.

  In 2020, a branch of a Polish company operating in Kazakhstan (the Branch) faced additional corporate income tax assessments following a tax audit. The additional assessments were imposed due to the Branch’s failure to timely submit the tax residency certificates of its Polish parent company (the Company). As a result, the tax authority excluded general administrative and management expenses from the Branch’s deductions and denied the application of a reduced 10% tax rate on the Company's net income.

  The Company's legal position in its dispute with the tax authority was based on the following points:

  1)	Article 7(3) of the DTT between Kazakhstan and Poland  (the Convention) states that, in determining the profits of a permanent establishment, a deduction is allowed for expenses incurred for the purposes of the permanent establishment, including management and general administrative expenses, regardless of whether these expenses were incurred in the state where the permanent establishment is located or elsewhere;

  2)	Article 10(6) of the Convention stipulates that a company which is a resident of one Contracting State and has a permanent establishment in the other Contracting State may be subject to tax in that other state, in addition to income tax. However, such tax must not exceed 10% of the share of the company's profits that are taxable in the other Contracting State;