October 25, 2019

Review of the proposed amendments to tax legislation set out in the Concept of the draft Law of the Republic of Kazakhstan “On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on taxation and Improvement of the Investment Climate” (hereinafter – the “Draft”).

The main goal of the Project is to improve tax policy and tax administration in order to create a favorable business environment and investment climate, as well as to expand the tax base due to the need to increase tax revenues against the background of increased social spending by the state. In order to stimulate investment activity, the Project proposes the introduction of investment tax credits provided for 3 years on corporate income tax and property tax.

The project provides for a number of changes in value added tax, namely:

—VAT on the cost of services in electronic form provided by foreign Internet companies to individuals in Kazakhstan;

—The application of a zero VAT rate to the turnover for the sale of aircraft refueling services and cargo transshipment from rail to water transport;

—VAT exemption for sales by dealers of vehicles and agricultural machinery of domestic manufacturers;

— VAT exemption for sales of vehicle components, agricultural machinery components and new types of machinery, the place of sale of which is Kazakhstan, as well as VAT exemption for imports of raw materials and (or) materials used for the production of vehicle components, agricultural machinery components and new types of machinery;

—VAT exemption for sales of services for regular automobile transportation of passengers and luggage;—Preferential taxation of production for the preparation of cotton fiber, sugar beet processing, confectionery production, yeast production.

In order to improve the taxation of the financial sector, it is proposed:

—Exempt from taxation the income of borrowers arising from debt forgiveness by mortgage organizations (similar to banks);

—Exempt from taxation the income of individuals from the increase in value when selling units of mutual investment funds;

—Exempt from taxation the investment income of the Insurance Benefit Guarantee Fund;

— Extend temporary benefits for clearing bad loans of Kazkommertsbank for a year.

 

For other taxes

The project suggests:

— Increase excise tax rates on beer, heated tobacco products, nicotine-containing liquids, expensive alcoholic and tobacco products;

—Combine property tax and land tax from individuals (payment in one amount);

—Abolish the land tax for owners of apartment buildings.

 

In the field of taxation of individuals, the Draft provides:

—Deduction of mandatory pension contributions under civil contracts;

— Exclusion of the cost of uniforms from the income of an individual;

—Recognition of the fees of members of the board of directors or other management body of the taxpayer, subject to social tax;

—Equating the income of members of the board of directors or other management body of the taxpayer with the income of employees, with the application of tax benefits similar to benefits for employees;

—Replacing the adjustment of the income of a low-paid employee in the amount of 90% with a reduction in the taxable income of the employee.

 

In order to improve tax administration:

—the list of information that does not constitute a tax secret is expanding;

—the list of organizations and third parties with which information will be exchanged for tax administration purposes is being clarified;

—the limitation period of five years applies to large business entities;

— obligations are established to provide an individual with a declaration on individual income tax with independent taxation;

—the tax period covered by the tax audit is included in the audited period for a comprehensive or thematic tax audit.