Customs administration of the Republic of Kazakhstan

Lazzat DaniyarovaSenior ExpertRisk Management Unit

Ankara, 2018

I. General Information

Geographical location

Geographical locationKazakhstan general facts (The heart of Eurasia)

• Kazakhstan origin of name: land of the Kazakhs, ethnic name “kazak”: free.

• Kazakhstan total area: 1,051,693 sq. miles (2,723,890 sq. km).

• Kazakhstan land area: 1,030,809 sq. miles (2,669,800 sq. km).

• Kazakhstan comparatives:

• Four times the size of Texas;

• Five times the size of France.

• Kazakhstan is the world's largest landlocked country by land area and the ninth largest country in the world. Its territory is larger than all of Western Europe. By 2006, Kazakhstan had become the dominant nation of Central Asia economically, generating 60% of the region's GDP, primarily through its oil/gas industry. Kazakhstan has vast mineral resources.

• It shares borders with Russia, China, Kyrgyzstan, Uzbekistan, and Turkmenistan, and also adjoins a large part of the Caspian Sea.

• The northern border with Russia, which spans 6,846 kilometers (4,030 miles), is the longest continuous bi-national border in the world.

• Kazakhstan major trade partners: Russia, EU, USA, China.

• Kazakhstan natural resources: The world’s largest reserves of barite, lead, tungsten, and uranium; second largest reserves of chromite, silver, and zinc; third largest of manganese, significant deposits of copper, gold, and iron ore.

• Kazakhstan current oil reserves: 35 billion barrels (twice as much as the North Sea).

Customs posts

Uzbekistan

Turkmenistan

Алаколь

Коргас

Калжат

Жибек ЖолыКапланбек

Казыгурт

ст. Сарыагаш

Бейнеу

Тажен

Темир-баба

Морпорт Актау

Майкапчагай

Бахты

Достык

Им. Б. Конысбаева

Automobile port – 12Railway port – 6Sea port – 3Airports – 16

Карашекпен

Алтынколь

Болашак

Мактаарал

Атамекен

State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan

Актау

Атырау

Уральск

Актобе

Кызылорда

ШымкентТараз

Алматы

Талдыкорган

Павлодар

Караганда

Астана

Кокшетау

Петропавловск

Костанай

Усть-Каменогорск

Курык

Russia

Russia

Kyrgyz Republic

Performance (2017)

• The total number of customs declarations – 396 113

• Declarations under risk management system –around 64 026 (16,16%), in 2016 (19,3%)

Organizational structure

Headquarters

Regional State Revenue

Departments, Astana city,

Almaty city (16) Training Center

State Revenue Offices

for cities, districts

(219)

Central Customs

Laboratory

396,3 thsLegal Entities

16,8 mlnIndividuals

1,17 mlnIndividual

EntrepreneursCustoms

posts (76)

Dog Training

center

Organizational structure

Internal security department

Law department State secret protection department

Human resources department

Сhairmanships secretariat

Analysis, statistics and risk management

department

Risk management unit

Analysis and statistics unit

On-line monitoring unit

Cameral control unit

Development and Modernization department

Organizational and financial unit

Public Relations unit

Informational technologies unit

Modernization unit

Departmental control unit

Tax control

department

Audit unit

VAT administration

unit

Administration of excises unit

Administration of individuals

unit

Methodology of taxation

department

Methodology unit

Non-productive payments unit

Non-residents taxation unit

Consideration of preliminary

acts of inspections unit

Work with taxpayers department

Specialized department

Rehabilitation and bankruptcy department

Customs control

department

Organization of customs

controls unit

Integrated control and

customs infrastructure

unit

Tariff regulation and

PCA unit

Customs methodology department

Customs procedures and declaring unit

Tariff and non-tariff regulation

unit

The methodology of

non-trading turnover unit

The methodology of

non-trading turnover unit

Work with debt department

Export Controls department

International cooperation department

Pre-trial investigation department

1 Investigation unit

2 Investigation unit

3 Investigation unit

4 Investigation unit

4 Investigation unit

Forensic Science Department department

Operational-search activity department

1 Operational unit

2 Operational unit

3 Operational unit

4 Operational unit

Administrative and strategic goals

• Goals: Promote trade by reducing barriers, improvement

of foreign trade administration and security of the customs border;

Ensure completeness of income taxes, fees and other mandatory payments;

The adoption of effective measures to minimize the "shadow" economy;

Increased public satisfaction with government revenue bodies.

Vision and Mission

• Vision:

State Revenue Committee - customer-oriented service with high performance management system that provides economic security of the country, creating the conditions for international free trade and voluntary payment of taxes and fees.

• Mission:

Economic shield of the country

Major challenges• Oil crisis

• Smuggling

• Importation of counterfeits / IPR violations

• Frequent changes of departmental policies due to the changes of government policies

• Corruption

12

Foreign trade turnover (2017)

Foreign trade turnover

17,1 15,5

43,2

32,8

60,3

48,3

billion USD

IMPORT EXPORT TRADE TURNOVER

Import17,1 billion USD6,3 million tons

Export43,2 billion USD99,6 million tons

2017 2016

60,3 billion USD,

6,3 6,5

99,6 95,2

105,9 101,7

million tons

12

13

2017

mineral products

others

metals

animal and vegetable products

chemical products

machinery, equipment, transport

15,1 млрд.

10,9%

4,3%

12,6%

2016

17,1 billion

13

2017 2016

rate of growth,% ($)

value, billion USD

weight, million tons

value, billion USD

weight, million tons

7,9 0,8 7,0 0,6 12,9

3,0 0,9 2,5 0,8 20,0

1,7 0,7 2,0 0,6 -15,0

2,1 0,9 1,7 0,7 23,5

1,8 1,9 1,7 1,9 5,9

0,6 1,1 0,7 1,8 -14,3

+ 9,6%17,5%

46,4%3,8%

9,8%

11,8%

10,7%

15,8%

11,1%

45,3%

15,5 billion

Name

The commodity structure of imports (2017)

2017

mineral products

others

metals

chemical products

animal and vegetable products

machinery, equipment, transport

2016

43,2 billion

32,8 billion

2017 2016

rate of growth,% ($)

value, billion USDweight,

million tonsvalue, billion USD

weight, million tons

31,3 85,4 22,6 81,838,5

6,9 4,2 5,1 4,735,3

1,8 0,5 1,9 0,4-5,3

1,9 9,0 1,7 8,111,8

0,4 0,1 0,5 0,1-20,0

0,9 0,4 1,0 0,2-10,0

31,7%

14

72,5%

16,1%

4,1%

4,5%

0,9%

1,9%

68,7%

3,1%

1,5%

5,2%

5,8%

15,7%

Name

The commodity structure of exports (2017)

IMPORT

EXPORT

Italy 5,5%945,3 million USD9*5,1 thousand tons

France 3,1%535,2 million USD38,7 thousand tons

Italy 20,1%8 669,3 million USD21 692,1 thousand tons

China 13,4%5 777,7 million USD6 980,5 thousand tons

Netherlands 11,0%4 748,2 million USD12 697,7 thousand tons

Switzerland 7,2%

3 100,7 million USD8 222,9 thousand tons

France 6,6%2 861,1 million USD7 033,8 thousand tons

China 27,5%4 692,2 billion USD2 011,6 thousand tons

USA 7,3%1 244,2 million USD173,2 thousand tons

Germany 8,7%1 484,1 million USD185,9 thousand tons

*3,9 p. *0,6 p. *0,9 p. *0,2 p. *1,1 p.

*2,7 p. *0,5 p. *1,1 p. *0,3 p. *1,2 p.

15

Main foreign trade partners (2017)

II. Specific Subjects

1. Customs Reform and Modernization Program

State Revenue Committee of the Ministry of Finance of the

Republic of Kazakhstan was established in October 2014

3Carrying through the

product control

2 Selection on the basis of

the total RMS

5Optimization of the

infrastructure

1 Uniform database of

taxpayers

4A single personal receipts

account

Positive effect

Information systems of 3 servicesare at the same state authority

19

Customs systems

Tax systems

Financial police systems

State Revenue Committee

systems

Mutual use of data on traders and taxpayers

Mutual use of data on traders and taxpayers

Risk Management System (RMS)

Tax RMSCustoms

RMS

The project of tax

administrationreforming

Data store

As a part of

ASYCUDA

Logistics

GoodSubject

Score

Green Channel

Yellow Channel

Red Channel

Risk area

2 stage

Adding the criteria for risk

areas called “Good" and "Logistics"

Opening Blue channel with the

transfer to the post-entry control

Transfer of the automated categorization process on the

platform of ASYCUDA

3 stage

4 stage

Stages of reforming the customs RMS

Declaration

Traders

Blue Channel

22

Gained a low score + investors, large taxpayers, producers

Gained a middle score

Blue Channel

High-risk trader (having a criminal record, etc.)

1 stage

Application the criteria for risk

areas called "Subject"

Gre

en

C

han

ne

l

Categorization

Yello

w

Ch

ann

el

Re

d

Ch

ann

el

Traders

Categorization of Traders

Low risk traders (selective sampling method, 26% of the legal entities, declarations share of 46.5% and imports 55.8%)

Middle risk traders (control on the recommendations of the risk profiles, 73% of the legal entities, declarations share

51.5%, the share of imports 41,6% )

Middle risk traders (control measures after the release of the goods, 0.5% of legal entities, the share of declarations 0.5% and imports 0.2%)

High risk traders (special profile with the mandatory physical examination, 0.6% of legal entities, the share of declarations 1.5% and imports 2.4%)

Tax authorities data:

- The level of the tax burden;- Information on employees and

salary fund;- Information on tangible and

intangible assets;- other

Using Databasesfor Categorization of Traders

Customs authorities data:

- History of customs clearance;- Foreign trade structure;- Information on customs

representatives;- other

Categorization of Traders

Low Risk (investors, large manufacturers,

AEO, and others)Middle Risk High Risk

Audit division

Risk division

The target group

VerificationDesk audit

control

Blue Channel (operational

analysis)

Analysis of Traders

(regardless of the channel)

There is the possibility of supplementing/matching and recognition of tax and customs inspections, which allows in practice to apply the principle of "walk-

through“ control

Shifting of customs control to the stage after the release of the goods

“Walk-through“ control conduction

Акция «ТРЕБУЙ ЧЕК –ВЫИГРАЙ ПРИЗ!» при

поддержке НПП «Атамекен»

Declaration

Electronic invoices

Е-ККМ

Retailer

Maximum trust

Maximum facilitation

Possible irregularities in the declaration of goods will beidentified inside of the country with the help of tax control to final retailing.

Current approach Perspective approach

“Walk-through” control

Professionalism of Traders

Risk Profiling through the risk

indicators

Customs toCustoms

Системные подходы к контролю таможенной стоимости

Systems approaches to the control of customs value

Customs control

Risk management

Tax control

Application of risk profiles, including cost indicators

Risk: VAT evasion by understatement of customs value

Direction notices/notifications on desk audit control

Time study

Tax audits

Investigative and operational measures

Construction of analytical model that evaluates the likelihood of undervaluation of goods

Analysis of the customs value, the results of valuation risk profiles, cost of sales inside of the country, goods structure, and others.

Selection of control objects

Goods valuation control

стоимость реализаци

и

A comparison of the value of imported goods (including price indicators) with a turnover for the

implementation within the country

Risks analysis

Goods specificatio

n

Customs value

History of shipper

High risk

Middle risk

No risk

- notices/notifications on

desk audit control

- time study (depending on

the structure of the goods)

- joint inspections (customs/tax)

- Investigative-operational

measures

Tax payments

Retailing price

• Declaration;

• The application for the import of goods and payment of indirect taxes;

• Certificate of origin of goods in the Republic of Kazakhstan.

electronic labeling and virtual tags, excise stamps.

product tracking from the time of import (production) and to the end of its retailing or export from the Republic of Kazakhstan, will allow to identify the risk of traders.

The module "Virtual Warehouse", where will be implemented the "binding"customs declaration with electronic invoice of VAT discharged within themodule and simultaneously monitoring supply chains to the retail sale ofgoods with the use of a risk management system

«Virtual warehouse»

1

2

3

1.Сведения из ДТ;

2.Заявление о ввозе из стран ТС;

3. Импорт остатков из бухгалтерских

Balance of stock in the online mode

Suppliers of the second

level

Suppliers of the first level

Suppliers of the first level

Suppliers of the second

level

Suppliers of the third level

coming outgo

Virtual

warehouse

1. Information from declaration

2. The application for the import from the CU

3. Invoice

1. Invoice

2. Retailing through the cash machine

3

1

Suppliers of the third level

* The system allows to track the movement of goods and the chain of buyers and sellers throughthe online mode

Monitoring of the movement of goods

• Tracking the movement of goods;

• Monitoring and analysis of the prices and services inside of the country;

• Standardization of names of goods and services;

• Prevention and suppression of transactions on the “no goods” invoices.

• The implementation of this module makes global turnover monitoring system on a national scale through the integration mechanisms that will import the data from the taxpayers of ERP-systems:

• balances in stock;

• production of the goods;

• write-off for the needs of production, recycling and other.

The benefits of tax administration in the implementation of the module "Virtual Warehouse":

2. Human Resource Management

Recruitment system:

Any citizen, who meets qualification requirements

Competitive commission (heads of the main departments)

Academy of Public Service (3-week training)

Promotionsystem:

Any officer, who meets qualification requirements

Competitive commission (heads of the main departments)

Promotion

3. Legal Basis

35

The Customs Code of the

Eurasian Economic

Union

The Customs Code of the Republic of Kazakhstan

Order of Minister of Finance #244 “On Approval of Rules of the Risk Management System Use in the State Revenue bodies of the Republic of Kazakhstan” dated March 31, 2015.Order of Minister of Finance #469 “On Approval of Rules of Information Collection and Processing, Risk Analysis and Evaluation, Development and Implementation of Risk Management Measures” dated October 24, 2012.

4. HS Classification

Harmonized SystemWCO

BASE

The Unified Commodity Nomenclature for Foreign Economic Activity of the Customs Union

Eurasian Economic Union

Classification of goods is carried out based on the main criteria:

• the function that the product performs;

• the material from which the goods are made.

HS CODE

5. Customs Valuation

Methods of determining customs value of goods:

1) the value of the transaction with the imported goods;2) the cost of a transaction with identical goods;3) the value of the transaction with similar goods;4) subtraction of value;5) addition of value;6) reserve.

6. Post Clearance Audit

• DESK AUDIT (is carried out by studying and analyzing the information contained

in customs declarations, commercial, transport (transportation) and other documents submitted by the audited person, information of controlling state bodies, as well as other documents and information available to customs authorities on the activities of these traders, including the results of the application of the risk management system.)

• FIELD AUDIT: Planned and Unplanned (is

carried out by the customs body with departure to the location of the legal entity, the place of the activity of the individual entrepreneur and (or) the place of actual performance of their activities.)

YELLOW CHANNEL(goods released with

guaranteeing)

GREEN CHANNEL

BLUE CHANNEL(goods released without

guaranteeing)

Risk management on customs valuation

and classification

ASYCUDAElectronic Declaration

41

Shifting towards post-audit control

7.Intellectual Property RightsFebruary 16, 1993 the

Republic of Kazakhstan announced about entry

into force of the four major international

conventions on the legal protection of industrial

property: Convention Establishing the

World Intellectual

Property Organization;

Paris Convention for the Protection

of Industrial Property;

Patent Cooperation Treaty (PCT);

Madrid Agreement

Concerning the International

Registration of Marks

Measures to protect the rights of intellectual property, taken by the customs

If the customs officers found signs of infringement of

intellectual property rights, the

release of such goods shall be

suspended for a period of ten working days.

On request of the owner or a person

representing his interests, this period may be

extended by the customs authority, but not more than ten working days.

Decisions to suspend the

release of goods and extend the

suspension of the release of goods

made in writing by the head of the

customs authority or person

authorized by him.

References

• State Revenue Committee. (2017). Kazakhstan Customs annual performance report 2017. Astana, Kazakhstan.

• Kazakhstan overview, facts and features. Retrieved June 04, 2016 from http://aboutkazakhstan.com/about-kazakhstan-overview

Thank you for your attention!

The information is the property of Lazzat Daniyarova