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Tax Code of the Republic of Taxastan
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A Hypothetical Tax Law
Prepared by the IMF Legal Department
September 29, 2000


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Part I. General Part

Division I. General Provisions

Chapter 1. The Tax System of the Republic of Taxastan
  Article 1. Relations Regulated by this Code
  Article 2. The tax system of the Republic of Taxastan
  Article 3. Legal basis for taxation
  Article 4. Tax legislation of the Republic of Taxastan and
       its operation in time
  Article 5. Tax
  Article 6. Taxes of the Republic of Taxastan
  Article 7. Procedure for Establishment, Amendment, and
       Elimination of Taxes

Chapter 2. Definitions of Terms Used in this Code
  Article 8. Economic activity
  Article 9. Entrepreneurial (active) and Nonentrepreneurial
      (passive) Economic Activity
  Article 10. Employment
  Article 11. Charitable Activity
  Article 12. Religious Activity
  Article 13. Enterprises
  Article 14. Resident enterprise and foreign enterprise
  Article 15. Place of establishment of an enterprise
  Article 16. Place of management of an enterprise
  Article 17. Permanent Establishment of a Nonresident
  Article 18. Noncommercial Organizations
  Article 19. Budgetary Organization
  Article 20. Charitable organization
  Article 21. Religious organization
  Article 22. Tax agent
  Article 23. Related persons
  Article 24. Resident physical persons
  Article 25. Individual Entrepreneur
  Article 26. Market prices
  Article 27. Definitions of other terms used in the Code

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Division II. General Administrative Provisions

Chapter 3. General Provisions
  Article 28. Procedure for application of administrative
  Article 29. Tax control of full and timely receipt of
       payments to the budget
  Article 30. Illegal taxable income or transaction
  Article 31. Taxpayer identification number
  Article 32. Rights of the taxpayer
  Article 33. Right to representation in relations regulated by
       tax legislation
  Article 34. Legal representative of the taxpayer
  Article 35. Actions (inaction) of legal representative of a
       legal person
  Article 36. Authorized representative of the taxpayer
  Article 37. Conversion of foreign currency
  Article 38. Measures against tax avoidance and alternative
       methods of taxation

Chapter 4. Contacts with Taxpayers
  Article 39. Procedure for establishing obligations
  Article 40. Written communications with taxpayers
  Article 41. Sufficiency of notices and other documents
  Article 42. Rulings for the application of tax legislation

Chapter 5. Presentation and Collection of Information
  Article 43. Formation and retention of records
  Article 44. Filing of tax returns
  Article 45. Provision of information on payments
  Article 46. Extension of deadline for filing tax returns
  Article 47. Bank accounts
  Article 48. Provision of information to the tax authorities

Chapter 6. Tax Obligations
  Article 49. Tax obligation
  Article 50. Satisfaction of tax obligations
  Article 51. Satisfaction of tax obligations in the event of
       the liquidation of an enterprise (organization)
  Article 52. Satisfaction of tax obligations in the event of
       the reorganization of a legal person
  Article 53. Satisfaction of Tax Obligations of Physical
       Persons Who Are Deceased, Incompetent, or Missing
  Article 54. Procedures for Satisfaction of Tax Obligations

Chapter 7. Assessments
  Article 55. Assessments
  Article 56. Notice of Assessment and Demand for
      Payment of Tax
  Article 57. Statute of limitations

Chapter 8. Payment, Collection and Refund of Tax
  Article 58. Payment of tax
  Article 59. Place of payment of tax
  Article 60. Refund of excess tax paid
  Article 61. Extension of deadline for payment
  Article 62. Order of payment of tax debts
  Article 63. Effect of objection or appeal

Chapter 9. Enforced Collection of Tax
  Article 64. Attachment of property
  Article 65. Procedure for Collection of Tax From Property
       of the Taxpayer
  Article 66. Enforcement of seizure
  Article 67. Sale of seized property
  Article 68. Recovery of amounts due to the taxpayer
  Article 69. Secondary liability for unpaid tax
  Article 70. Liability for failure to withhold income tax at
       the source
  Article 71. Writing off bad tax debts
  Article 72. Interest on overpayments and tax arrears

Chapter 10. Liability
  Article 73. Definition of Tax Violation
  Article 74. Persons Subject to Liability for Tax Violations
  Article 75. Procedure in Tax Violation Cases
  Article 76. Circumstances Excluding Liability for Tax
  Article 77. Forms of Guilt for Tax Violations
  Article 78. Circumstances Excluding Guilt of a Person for
       a Tax Violation
  Article 79. Period of Limitations for Liability for Tax
  Article 80. Fines for late filing of returns
  Article 81. Fines for understatement of taxes
  Article 82. Fines for VAT violations
  Article 83. Liability of banks and other financial-Credit
  Article 84. Liability for the Impediment of Tax
  Article 85. Liability Imposed on Responsible Parties
  Article 86. Unlawful denial of access to authorized
       officials of the tax authorities onto territory or premises
  Article 87. Failure to respect the procedure for possession,
       use and (or) disposal of attached property
  Article 88. Failure to Furnish Information Concerning the
       Taxpayer to a Tax Authority
  Article 89. Exoneration of taxpayer from liability

Chapter 11. Settlement of Disputes
  Article 90. Review of tax authority decisions
  Article 91. Burden of proof

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Division III. Status and Structure of the Tax Authorities of the Republic of Taxastan

Chapter 12. The Tax Authorities
  Article 92. Basic functions of the tax authorities
  Article 93. Legal basis for operation of the Tax Authorities
  Article 94. Principles of Activity of the Tax Authorities
  Article 95. Status and Structure of the Tax Authorities
  Article 96. Authority of the Chairman of the Tax
  Article 97. The Financing and Material-Technical Support
       of Tax Authorities
  Article 98. An Employee of the Tax Authorities
  Article 99. The Progression of Service
  Article 100. Relations between Tax Authorities and
       Government Bodies
  Article 101. Delegation of Authority
  Article 102. Annual reports

Chapter 13. Powers and Responsibilities of Tax Authorities
  Article 103. Responsibilities of Tax Authorities
  Article 104. Rights of Tax Authorities
  Article 105. Procedures for the Employment of Rights
       Given to the Tax Authorities
  Article 106. Liability of Officials of the Tax Authorities
  Article 107. Conflict of interest
  Article 108. Confidentiality of information

Chapter 14. The Legal and Social Protection of Employees of the Tax Authorities of the Republic of Taxastan
  Article 109. The Legal Protection of Employees of the
       Tax Authorities
  Article 110. The Material and Social Support of
      Employees of the Tax Authorities and Members of
      Their Families

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Part II. Special Provisions

Division IV. Income Tax on Physical Persons

Chapter 15. General Provisions
  Article 111. Taxpayers
  Article 112. Object of taxation
  Article 113. Gross income
  Article 114. Income received in the form of wages
  Article 115. Income from nonemployment economic
  Article 116. Adjustment of gross income and deductions
  Article 118. Income tax rates
  Article 119. Exemptions

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Division V. Tax on Profits of Legal Persons

Chapter 16. General Provisions
  Article 120. Taxpayers
  Article 121. Object of taxation
  Article 122. Tax rates
  Article 123. Exemptions

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Division VI. General Provisions of the Profits Tax and Income Tax

Chapter 17. General rules and definitions
  Article 124. Scope of Application

Chapter 18. Deductions from Gross Income
  Article 125. Outlays connected with the receipt of income
  Article 126. Nondeductible expenses
  Article 127. Limitation on Interest Deduction
  Article 128. Doubtful debt deduction
  Article 129. Deduction for allocations to insurance
       reserve funds
  Article 130. Deductions for expenditures on scientific-
      research, project-design, and experimental-design work
  Article 131. Amortization charges and deductions for
       fixed assets
  Article 132. Repair expenses deduction
  Article 133. Deduction of insurance premium payments
  Article 134. Expenditures on geological surveying and
      work to prepare for the extraction of
      natural resources
  Article 135. Expenditures on intangible assets
  Article 136. Limitation on deduction of taxes and fines
  Article 137. Losses upon the sale or transfer of property
  Article 138. Carrying losses forward

Chapter 19. Withholding of Tax at the Source of Payment
  Article 139. Procedures for Withholding Tax at the Source
       of Payment
  Article 140. Withholding of tax on dividends at the source
       of payment
  Article 141. Withholding of tax on interest at the source
       of payment
  Article 142. Withholding of tax on income of nonresidents
      at the source of payment

Chapter 20. International Taxation
  Article 143. Taxation of net profit of the permanent
       establishment of a foreign legal person
  Article 144. Foreign tax credit
  Article 145. Income received in countries with
       concessional taxation

Chapter 21. Rules for Tax Accounting
  Article 146. The tax year
  Article 147. Principles for recording income and
  Article 148. Principles for recording income and
       expenditures using the cash basis method
  Article 149. Moment of receipt of income in certain cases
      under the cash basis method
  Article 150. Moment of carrying out of expenditures in
      certain cases under the cash basis method
  Article 151. Principles for recording income and
       expenditures under the accrual basis method
  Article 152. Moment of receipt of income under the
      accrual basis method
  Article 153. Moment of carrying out of expenditures under
      the accrual basis method
  Article 154. Joint ownership
  Article 155. Income and deductions under long-term
  Article 156. Procedures for recording inventories
  Article 157. Finance leases
  Article 158. Recovered deductions and decrease in
  Article 159. Income and losses upon the sale or transfer
       of assets
  Article 160. Cost of assets
  Article 161. Nonrecognition of gain or loss
  Article 162. Liquidations
  Article 163. Formation of a legal person
  Article 164. Reorganization of legal persons
  Article 165. Significant change in ownership of legal       persons

Chapter 22. Administrative Provisions
  Article 166. Filing of returns
  Article 167. Current tax payments
  Article 168. Payment of tax on results for the year

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Division VII. Value-Added Tax

Chapter 23. General Provisions
  Article 169. Concept of value added tax

Chapter 24. Taxpayers
  Article 170. Taxpayers
  Article 171. Requirement for submission of application to
       be registered
  Article 172. Voluntary registration
  Article 173. Registration
  Article 174. Cancellation of registration

Chapter 25. Objects of Taxation
  Article 175. Objects of taxation
  Article 176. Sale or Transfer of Enterprise

Chapter 26. Determination of Taxable Turnover and of Taxable Import
  Article 177. Value of a taxable transaction
  Article 178. Adjustment of taxable turnover
  Article 179. Amount of a taxable import

Chapter 27. Tax Preferences
  Article 180. Exemptions from payment of tax
  Article 181. Regime of Taxation Goods Crossing the
       Customs Border of the Republic of Taxastan

Chapter 28. Transactions Taxed at a Zero Rate
  Article 182. Taxation of the export of goods (works,
  Article 183. Taxation of international and transit
  Article 184. Gold transferred to the National Bank of the
       Republic of Taxastan

Chapter 29. Time and Place of Taxable Transaction and Special Rules
  Article 185. Time of taxable transaction
  Article 186. Place of supply of goods
  Article 187. Place where works are fulfilled or services
       are rendered
  Article 188. Reverse taxation
  Article 189. Time of import
  Article 190. Mixed transactions
  Article 191. Transactions by agent

Chapter 30. Procedure for the Calculation and Payment
of Tax

  Article 192. Rates of value added tax
  Article 193. Value added tax on taxable turnover payable
      to the budget
  Article 194. Value added tax creditable in the
      determination of payments to the budget
  Article 195. VAT invoices
  Article 196. Special Rules

Chapter 31. Administrative and Concluding Provisions
  Article 197. Filing of returns and payment of value added
  Article 198. Value added tax accounting period
  Article 199. Operations with the budget in cases
       where the amount of tax to be credited exceeds the
      amount of tax charged for the accounting period
  Article 200. Responsibility of taxpayers and control by the
       tax organs

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Division VIII. Excises

Chapter 32. Excise
  Article 201. The concept of excise
  Article 202. Taxpayers
  Article 203. Object of taxation
  Article 204. Amount of taxable transaction
  Article 205. Time of taxable transaction
  Article 206. Taxation of exports
  Article 207. Exemptions
  Article 208. Excise credit for inputs
  Article 209. Tax rates and list of excisable products
  Article 210. Payment of excise
  Article 211. Filing of returns
  Article 212. Refund of excise on re-exports
  Article 213. Excise stamps
  Article 214. Excise tax invoices

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Division IX. Social Fees

Chapter 33. Social Fees
  Article 215. Definition and Role of Social Fees
  Article 216. Taxpayers
  Article 217. Object of Taxation
  Article 218. Exemptions
  Article 219. Tax Rate
  Article 220. Procedures for the Determination and
      Payment of Taxes

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Division X. Land Tax

Chapter 34. Land Tax
  Article 221. Taxpayers
  Article 222. Object of Taxation
  Article 223. Tax Rates on City Land and Suburban Areas
  Article 224. Land Tax Rates on Rural Areas
  Article 225. Procedures for Filing Tax Accounts
  Article 226. Deadlines for Payment of Land Tax
  Article 227. Land Tax Concessions

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Division XI. Tax on Subsurface Users

Chapter 35. General Provisions
  Article 228. Identification of the Tax Regime under Contract on
       Subsurface Users
  Article 229. Models of a Tax Regime for Subsurface
       User Contracts
  Article 230. A Tax Regime for Operations not Pertaining
      to Subsurface Use
  Article 231. Stability of the Tax Regime
  Article 232. Taxation of Rights Assignment
  Article 233. Special Payments and Subsurface User Taxes
  Article 234. Tax Audit

Chapter 36. Bonuses
  Article 235. General Provisions on Bonuses
  Article 236. Signing Bonus
  Article 237. Procedures for the Liability, Amount and
      Deadline of Payment of a Subscription Bonus
  Article 238. Commercial Discovery Bonus
  Article 239. Procedures for the Calculation, Amount and
       Deadline of Payment of the Commercial Discovery
  Article 240. Extraction Bonus
  Article 241. Procedures for the Calculation, Amount and
       Deadline of Payment of the Extraction Bonus

Chapter 37. Royalties
  Article 242. General Provisions on Royalties
  Article 243. Forms of Payment of Royalties
  Article 244. General Royalty Principles
  Article 245. Royalties on Common Mineral Resources and
      Underground Water Resources
  Article 246. Royalties on Precious Metals and stones
  Article 247. Royalties on Hydrocarbons
  Article 248. Royalties on Solid Minterals, other than
      Common Minerals
  Article 249. Procedures for Payment of Royalties

Chapter 38. Excess Profits Tax
  Article 250. General Provisions for the Excess Profits
  Article 251. Object of Taxation and Procedures for
  Article 252. Rates and Deadlines for Payment of the
      Excess Profits Tax

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Division XII. Enterprise Property Tax

Chapter 39. Enterprise Property Tax
  Article 253. Taxpayers
  Article 254. Object of Taxation
  Article 255. The Determination
  Article 256. Tax Concessions
  Article 257. Tax Rates and their Calculations Procedure
  Article 258. Report on Property Tax
  Article 259. Profits Tax Records

  Division XIII. Tax on Owners of Vehicles

Chapter 40. Tax on Owners of Vehicles.
  Article 260. Taxpayers
  Article 261. Object of Taxation
  Article 262. Exemptions
  Article 263. Tax Rates
  Article 264. Procedures for Payment and Collection of the

  Division XIV. Simplified Version of the Tax on Small Business

  Article 265. Taxpayers.
  Article 266. Object of Taxation
  Article 267. Tax Rate
  Article 268. Procedure for Applying the Simplified
      Version of the Tax

  Division XV. Local Taxes

  Article 269. General Provisions
  Article 270. Retail Sales Tax
  Article 271. Tax on Immovable Property of Physical       Persons


Over the last five years or so most CIS countries have either adopted tax codes or prepared draft tax codes. These codes are similar in general structure, although different in their details. The process of compiling and revising tax codes in these countries continues. In some countries, the tax code has not been adopted, but the possibility of its adoption is being reviewed. In other countries, work is actively underway to prepare legislative acts. In countries that have already adopted codes, the codes are being applied and these countries are already dealing with issues connected with the interpretation and possible revision of their codes. With time, their further revision is probable as the tax systems of these countries continue to develop.

The International Monetary Fund's Legal Department has developed a sample tax code for a hypothetical country (the Transition Republic of Taxastan) for use as reference material to provide assistance in the preparation of legislative acts and the application of laws. Although there are many possible variants, only one text is proposed. The reason is not that it always represents the best variant for all countries, but rather that the code is based on the actual experience of working with legislation and that the proposed single text of the code is easier to read and understand. The text is based for the most part on the tax codes of Georgia (June 1997) and Tajikistan (November 1998), which in turn rely on the tax code of Kazakhstan (April 1995) and Part I of the tax code of Russia (August 1998). Other legislative tax documents of CIS states (for example, Kyrgyz Republic and Uzbekistan) and other states were also reviewed in the preparation of the text.

The tax code of Taxastan includes all the national taxes of Taxastan: Tax on the income of physical persons, tax on the income of legal persons, value-added tax, excise taxes, social insurance contributions, land tax, tax on the processors of commercial minerals, tax on the property of enterprises, tax on owners of vehicles, tax on small commercial enterprises, and local taxes. Of course, the set of included taxes should be modified for the individual country in order to bring it into correspondence with existing taxes. The text of the sample code does not deal with issues of the distribution of authority for the collection of taxes among state administrative authorities at the national (federal) and regional (local) level inasmuch as there exist important differences in this area among the constitutions of the individual CIS countries.

Naturally, it will be necessary to make substantial changes to the text to satisfy the needs of a specific country. In this connection, it is suggested that the text be used as a guideline, and as reference material, not as a standard. It is not a recommendation from the IMF that certain specific provisions be introduced in any specific country.