Not enough money to pay the tax in one go: who can get a deferral or an instalment plan, on what grounds, and when is interest charged?

Q: When is it refused and which documents are needed?

If any of the following circumstances exists, the deadline is not changed (Article 98, part one): a criminal case has been opened on signs of a crime relating to breach of tax legislation (with the exception in part two); there are sufficient grounds to assume that the person will use this option to hide money or property or will leave abroad for permanent residence; within three years before the application, a previous deferral was terminated for breach of its conditions; the person has been declared bankrupt; the person has been placed in the high-risk category under item 3² of part two of Article 100. Documents attached to the application (Article 101, part two): a certificate from the tax authority on the status of settlements for taxes, late payment interest and fines; a certificate from the tax authority listing all bank accounts; certificates from banks on monthly cash turnover for the last six months and on the file of unpaid settlement documents; certificates from banks on balances on all accounts; an undertaking to comply with the conditions of the decision and an indicative debt repayment schedule; documents confirming the chosen ground (parts three to eight of Article 101). The authorised body takes the decision within thirty days of receiving the application. The decision states the amount of the debt, the type of tax, and the procedure and deadlines for paying the debt and interest. Late payment interest accrued from the tax payment deadline until the decision takes effect is added to the debt (Article 101). A refusal must be reasoned and can be appealed.

"Ko'kcha Plast" LLC makes plastic containers. After a desk tax audit the company was assessed 84 000 000 soum of additional tax. Yet the money in its bank account this month is earmarked for wages and raw materials. The director asked: "If we don't pay it all in one go, won't late payment interest arise?" The answer is in Chapter 11 of the Tax Code: changing the tax payment deadline.

What is a change of deadline and what forms does it take?

Moving the tax payment deadline to a later date is called a change of deadline (Tax Code, Article 97). It takes two forms:

deferral: the debt is paid later in one go;
instalment plan: the debt is paid in stages.

The general rule: the term does not exceed one year, unless Article 99 provides otherwise (Article 97). A change of deadline does not cancel an existing obligation and does not create a new one. To secure it, a pledge of property, a surety or a bank guarantee may be required. These rules also apply to late payment interest and fines. However, the chapter does not apply to tax agents or to the cases provided for in Article 482 of the Tax Code (Article 97): a company cannot defer under this chapter tax it has withheld as a tax agent on behalf of another person.

Who takes the decision (Article 99):

Taxes	Authorised body	Longest term
Taxes in items 1–5 of part one of Article 17	State Tax Committee	general rule: 1 year
Taxes in items 6–8 of part one of Article 17 and turnover tax	local government authorities	up to 2 years
Taxes payable when goods are moved across the customs border	customs authorities	under customs legislation
Any tax in Article 17	Cabinet of Ministers	up to 3 years

On what grounds is it granted and when is interest charged?

The general condition: the company's financial position does not allow it to pay the tax on time, but there are sufficient grounds to believe it can pay within the term granted (Article 100, part one). The grounds are listed in part two. Interest differs depending on which of them is used (Article 100, parts five and six):

Item of part two of Article 100	Ground (briefly)	Interest
1	damage from a natural disaster, technological catastrophe or other unavoidable circumstance	not charged
2	delay in payment for work and services performed under budget financing or a state order, or for state and local government needs	not charged
3	paying the tax in one go would create a risk of signs of insolvency	equal to the refinancing rate
3¹	more than three years of activity, taxes paid on time, but unable to pay because of the financial position	equal to the refinancing rate
3²	a deferral notice sent via the personal account within three months after ownership of a land plot, building or structure was registered	50 percent of the refinancing rate
3³	a person whose total income for the previous year did not exceed ten billion soum sent a notice within one month of the debt arising	if used once in a calendar year, not charged for six months
4	an individual's property situation does not allow paying the tax in one go	equal to the refinancing rate
5	seasonal nature of the activity	equal to the refinancing rate
6	grounds for deferral exist under customs legislation	equal to the refinancing rate
7	judicial rehabilitation or external administration introduced in an insolvency case	not specifically stated in parts five and six of Article 100

The rate means the Central Bank refinancing rate in force during the deferral period. Take it from the Central Bank's official announcement at the time of payment, because the rate changes.

Item 3³ is not for everyone: it applies to VAT and corporate profit tax payers. Legal entities in which at least 50 percent of the charter capital belongs to the state, subsoil users and producers of excisable goods are excluded.

There are two more limits. Under items 1 and 3–6, a legal entity is granted the option for an amount not exceeding the value of its net assets (part three of Article 100). Under item 3¹, the amount paid in instalments must not exceed fifty percent of taxes paid over the last three years (Article 101).

Can a debt from an audit be split over six months?

It can, and this is the "Ko'kcha Plast" case. Under part four of Article 100, a legal entity or individual entrepreneur that sends the tax authority a written notice, including via the personal account, is entitled to pay taxes additionally assessed on the results of a tax audit and a desk tax audit in equal instalments within six months from the day the decision takes effect. The same procedure applies to financial sanctions resulting from a field audit. Under this ground, interest equal to the refinancing rate is charged (part six).

84 000 000 ÷ 6 = 14 000 000 soum. Payment schedule and the balance on which interest is charged:

Month	Debt at start of month, soum	Payment, soum	Debt at end of month, soum
1	84 000 000	14 000 000	70 000 000
2	70 000 000	14 000 000	56 000 000
3	56 000 000	14 000 000	42 000 000
4	42 000 000	14 000 000	28 000 000
5	28 000 000	14 000 000	14 000 000
6	14 000 000	14 000 000	0
Total		84 000 000

Interest is charged on the amount of the debt (part six of Article 100), and in the schedule the debt falls by 14 000 000 soum every month: the earlier you pay, the less interest accumulates. If the same debt were not paid in one go and the deadline passed, late payment interest would arise (a link to a separate article on late payment interest is below).

When is it refused and which documents are needed?

If any of the following circumstances exists, the deadline is not changed (Article 98, part one):

a criminal case has been opened on signs of a crime relating to breach of tax legislation (with the exception in part two);
there are sufficient grounds to assume that the person will use this option to hide money or property or will leave abroad for permanent residence;
within three years before the application, a previous deferral was terminated for breach of its conditions;
the person has been declared bankrupt;
the person has been placed in the high-risk category under item 3² of part two of Article 100.

Documents attached to the application (Article 101, part two):

a certificate from the tax authority on the status of settlements for taxes, late payment interest and fines;
a certificate from the tax authority listing all bank accounts;
certificates from banks on monthly cash turnover for the last six months and on the file of unpaid settlement documents;
certificates from banks on balances on all accounts;
an undertaking to comply with the conditions of the decision and an indicative debt repayment schedule;
documents confirming the chosen ground (parts three to eight of Article 101).

The authorised body takes the decision within thirty days of receiving the application. The decision states the amount of the debt, the type of tax, and the procedure and deadlines for paying the debt and interest. Late payment interest accrued from the tax payment deadline until the decision takes effect is added to the debt (Article 101). A refusal must be reasoned and can be appealed.

What happens if the conditions are breached?

If the whole tax and interest are paid ahead of time, the option ends early (Article 102). If the conditions are breached, the authorised body may terminate it early. The company must then pay the unpaid debt within one month after receiving the decision and pay late payment interest for each calendar day from the day after the termination decision is taken until the day of payment (part four of Article 102). If the deferral was under item 3² and the land, building or structure is sold or leased during that period, the deferred amount is collected in full within one month (part three of Article 102).

Practical tips

Send the notice under part four as soon as the audit decision takes effect: this right is tied to six months from the day the decision takes effect.
The deadline for a notice under item 3³ is one month from the day the debt arises; if you are late, you cannot use this ground.
Enter every payment in the schedule into your bank calendar. A single delay may lead to losing the whole option and to late payment interest.