September 17, 2020
Taxation system in the Republic of Kazakhstan
1.1. Regulatory and legal framework (laws and regulations – the list)
1.2. Competent authorities in the field of tax regulation
1.7. Avoiding double taxation (countries, regulation features)
1.1. Regulatory and legal framework (laws and regulations – the list)
Taxation in Kazakhstan is governed by the Code of the Republic of Kazakhstan dated December 25, 2017 “On Taxes and Other Obligatory Payments to the Budget” (hereinafter referred to as the Tax Code), other regulatory legal acts of the Republic of Kazakhstan (hereinafter referred to as the NLA), as well as international treaties ratified by the Republic of Kazakhstan.
Below is the list of some of the main legal acts related to this area:
-Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan dated June 29, 2017 No. 4 “On Judicial Practice in the Application of Tax Legislation”).
-Code of the Republic of Kazakhstan dated December 25, 2017 No. 120-VI “On Taxes And Other Mandatory Payments To The Budget” (Tax Code) (with amendments and additions as of 02.07.2020).
-Code of the Republic of Kazakhstan dated October 29, 2015 No. 375-V “Entrepreneurial Code of the Republic of Kazakhstan” (with changes and additions as of 07.07.2020).
-Budget Code of the Republic of Kazakhstan dated December 4, 2008 No. 95-IV (with amendments and additions as of July 19, 2020).
-Code of the Republic of Kazakhstan dated December 27, 2017 No. 125-VI “On Subsoil and Subsoil Use” (with amendments and additions as of June 25, 2020).
-The Constitutional Law of the Republic of Kazakhstan dated December 7, 2015 No. 438-V “On the Astana International Financial Center” (with amendments and additions as of December 30, 2019).
-Resolution of the Government of the Republic of Kazakhstan dated October 31, 2011 No. 1238 “On Approval of the Forms of Documents Provided for by the Code of the Republic of Kazakhstan dated December 10, 2008 “On taxes and other obligatory payments to the budget” (as amended on February 24, 2016).
1.2. Competent authorities in the field of tax regulation
In accordance with paragraph 1 of Article 18 of the Tax Code, “tax authorities are the bodies of state revenue”.
On the whole, the system of tax authorities consists of an authorized body and its territorial subdivisions in regions.
The main body of state revenues is the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan.
The functions of the above body include ensuring tax receipts and payments to the budget.
Another functions are compliance with the tax legislation of the Republic of Kazakhstan, ensuring the completeness and timeliness of tax receipts and payments to the budget, participation in the implementation of the tax policy of the Republic of Kazakhstan, the formation and development of information and communication infrastructure and accessibility. electronic services for taxpayers.
1.3.Types of taxes
In accordance with article 189 of the Tax Code, the following taxes apply in the Republic of Kazakhstan:
- corporate income tax (CIT);
- individual income tax (IIT);
- value added tax (VAT);
- excise taxes;
- rental tax on export;
- special payments and taxes of subsoil users;
- social tax;
- vehicle tax;
- land tax;
- property tax;
- gambling tax;
- flat land.
1.4. Objects of taxation
CIT
The objects of taxation of CIT are:
- taxable income;
- income taxable at the source of payment;
- net income of a non-resident legal entity operating in the Republic of Kazakhstan through a permanent establishment.
IIT
The objects of taxation of IIT are:
Taxable income of an individual at the source of payment
- employee income;
- income in the form of property (works, services) received free of charge;
- pension income;
- income in the form of dividends, remuneration, winnings;
- scholarship income;
- income from endowment insurance contracts;
- income of an individual from a tax agent.
Individual taxable income for self-taxation:
(i) property income, including:
– income from value gains when an individual sells property in the Republic of Kazakhstan;
-income of an individual from the sale of property received from sources outside the Republic of Kazakhstan;
– income from value gains when an individual transfers property (other than money) as a contribution to the authorized capital;
-income received by an individual who is not an individual entrepreneur from the lease (lease) of property to persons who are not tax agents;
-income from value gains from the sale of other assets by an individual entrepreneur applying a special tax regime for small businesses or for peasant or farm enterprises;
– income from the assignment of the right to claim, including a share in a residential building (building) under an agreement on shared participation in housing construction;
(ii) individual entrepreneur income;
- income of a person in private practice (private notary, private bailiff, lawyer, professional mediator);
- other income from sources outside the Republic of Kazakhstan;
- total profits of controlled foreign companies or their permanent establishments.
VAT
The objects of value added tax are:
- taxable turnover;
- taxable
Taxable turnover is the turnover made by the VAT payer:
- for the sale of goods (work, services), with the exception of turnover exempted from VAT in accordance with the Tax Code (for example, operations with securities, borrowing operations in cash, etc.), and (or) the place of sale of which is not is the Republic of Kazakhstan;
- for the purchase of works, services from a non-resident, which are not the turnover of his structural unit (branch, representative office);
- in the form of balances of goods (in case of removal of the payer from the VAT registration);
- the turnover of the transferred goods reflected in the deed of transfer upon reorganization by spin-off, provided that the newly formed legal entity after such reorganization has not registered as a VAT payer.
Taxable imports are goods imported or imported into the territory of the EEU member states and subject to declaration in accordance with the customs legislation of the EEU and (or) the customs legislation of the Republic of Kazakhstan.
Excise taxes
Objects of taxation:
- all types of spirits;
- alcoholic beverages;
- tobacco products;
- heated tobacco products, nicotine-containing liquids for use in electronic cigarettes;
- gasoline (excluding aviation), diesel;
- motor vehicles designed to carry 10 or more people with an engine capacity of more than 3,000 cubic centimeters, excluding minibuses, buses and trolleybuses;
passenger cars and other motor vehicles intended for the transport of people with an engine capacity of more than 3,000 cubic centimeters (except for vehicles with manual control or a manual control adapter specially designed for disabled people)
motor vehicles on the chassis of a passenger car with a platform for cargo and a driver’s cab separated from the cargo compartment by a rigid stationary partition with an engine capacity of more than 3,000 cubic centimeters (except for vehicles with manual control or a manual control adapter specially designed for disabled people);
- crude oil, gas condensate;
- alcohol-containing medical products registered in accordance with the legislation of the Republic of Kazakhstan as a medicine.
It should also be noted that the authorized body in the field of regulation of trade activities has the right to determine, at its discretion, an additional list of imported goods that are subject to excise taxes in the country of origin.
Export rental tax
The object of taxation with the export rental tax is the volume of crude oil and crude oil products and coal sold for export.
Special payments and taxes of subsoil users
- a subscription bonus – a one-time fixed payment of a subsoil user for the acquisition of the right to subsoil use in the contract territory (subsoil plot), and when expanding the contract territory (subsoil plot);
- payment to reimburse historical costs – a fixed payment of the subsoil user to reimburse all costs incurred by the state for geological exploration;
- alternative subsoil use tax – an object is defined as the difference between the total annual income (adjusted for adjustments) and deductions, with a separate procedure;
- royalty;
- share of the Republic of Kazakhstan by production sharing.
Social tax
The object of taxation by social tax, except for payers – individual entrepreneurs and persons engaged in private practice (private notaries, private bailiffs, lawyers, professional mediators, are the following expenses of the employer:
1) money to be transferred by the employer to the employee in cash and (or) non-cash forms arising from labor relations, the employee’s income in kind and (or) in the form of material benefit;
2) on the payment of income to non-resident individuals:
- from activities in the Republic of Kazakhstan under an employment agreement (contract) concluded with a resident or non-resident who is an employer;
- allowances in connection with residence in the Republic of Kazakhstan, paid by a resident or non-resident who is an employer;
- from activities in the Republic of Kazakhstan in the form of material benefits received from the employer;
3) for the payment of income to foreign personnel provided for work in the Republic of Kazakhstan by a non-resident to a resident of the Republic of Kazakhstan or to a non-resident operating in the Republic of Kazakhstan through a permanent establishment.
Vehicle tax
The objects of taxation are vehicles, except for trailers, registered and (or) registered in the Republic of Kazakhstan.
Mining dump trucks with a carrying capacity of 40 tons and more, specialized medical vehicles, special vehicles subject to property tax, and sea vessels registered in the international ship register of the Republic of Kazakhstan are not taxable.
Land tax
All lands are subject to taxation. Rates vary depending on purpose and category. The above categories are established by the Land Code of the Republic of Kazakhstan.
Property tax
The object of taxation of property tax for legal entities and individual entrepreneurs are located on the territory of the Republic of Kazakhstan:
1) buildings, structures, in accordance with the classification established by the authorized state body in the field of technical regulation, part of such buildings for which accounting is kept as part of fixed assets or real estate investments in accordance with international financial reporting standards and the requirements of the legislation of the Republic of Kazakhstan on accounting and financial reporting;
2) buildings, in accordance with the classification established by the authorized state body in the field of technical regulation, parts of such buildings provided to individuals under long-term lease agreements for dwellings with the right to purchase, accounted for in accordance with international financial reporting standards and the requirements of the legislation of the Republic of Kazakhstan on accounting and financial reporting as long-term receivables;
3) buildings, structures that are objects of concession, the rights of ownership, use of which are transferred under a concession agreement;
4) depreciable assets, for the acquisition and (or) creation of which the subsoil user incurred costs (expenses) in the preparation of production blocks (landfills) for uranium mining by in situ leaching in the period after the start of production after commercial discovery;
5) buildings, structures related to such in accordance with the classification established by the authorized state body in the field of technical regulation, parts of such buildings accounted for in accordance with international financial reporting standards and the requirements of the legislation of the Republic of Kazakhstan on accounting and financial reporting as part of assets of second-tier banks that have passed into ownership as a result of foreclosure on property acting as a pledge, other security, with the exception of buildings (parts of buildings) and structures specified in subparagraph 1) above;
6) buildings, structures that are actually owned and used (operated) by persons in the absence of state registration of rights to them.
The objects of taxation for individuals who are not individual entrepreneurs are dwellings, buildings, summer cottages, garages and other structures, structures, premises that belong to them on the basis of the right of ownership.
1.5. Rates
(i) corporate income tax (CIT) – varies from 10% (taxable income of legal entities producing agricultural products, aquaculture (fish farming) products), 15% (at the source of payment, except for non-residents’ income from sources in the Republic of Kazakhstan), 20% (taxable income) and up to an additional 15% (after payment of CIT in respect of net income for a non-resident legal entity operating through a permanent establishment).In addition, for non-resident legal entities operating in the Republic of Kazakhstan without forming a permanent establishment, they are withheld at the source of payment by a tax agent, that is, by a person paying income at rates from 5 to 20% in accordance with Article 646 of the Tax Code of the Republic of Kazakhstan;
(ii) individual income tax (IIT) – 10% (except for income in the form of dividends received from sources in the Republic of Kazakhstan, taxed at a rate of 5%);
(iii) value added tax (VAT) – 12%;
(iv) excise taxes are firm and are set in an absolute amount per unit of measure in kind;
(v) rental tax on export – from 0 to 32%;
(vi) special payments and taxes of subsoil users а) for a signature bonus, the starting amount is set separately for each concluded subsoil use contract in the amount determined by the Tax Code, and can be increased by the decision of the tender committee of the competent authority) payment for the reimbursement of historical costs is calculated by the authorized body as the reimbursement fee established by the confidentiality agreement minus the purchase fee from the state) MET – in accordance with Articles 743, 746, 748, of the Tax Code of the Republic of Kazakhstan) d) for excess profits – from 10 to 60% on a sliding scale in accordance with Article 762 of the Tax Code of the Republic of Kazakhstan) e) alternative subsoil use tax – from 0 to 30% in accordance with Article 768 of the Tax Code of the Republic of Kazakhstan;
(vii) social tax – 9.5%;
(viii) vehicle tax – in accordance with article 492 of the Tax Code of the Republic of Kazakhstan in the MCI and depending on the type of vehicle, purpose, volume of its engine, year of manufacture;
(ix) land tax – in accordance with Chapter 61 of the Tax Code of the Republic of Kazakhstan, depending on the various parameters of the site;
(x) property tax – 0.5% to the tax base for persons carrying out activities on a simplified declaration and 1.5% to the tax base for legal entities.
1.6. Payers
(i) CIT – resident legal entities (with the exception of state institutions and state educational institutions of secondary education), non-resident legal entities operating in the Republic of Kazakhstan through a permanent establishment or deriving income from sources in the Republic of Kazakhstan;
(ii) individual income tax (IIT) – individuals with taxable objects;
(iii) value added tax (VAT) – persons registered for value added tax in the Republic of Kazakhstan (individual entrepreneurs, persons engaged in private practice (private notaries, private bailiffs, lawyers and professional mediators), resident legal entities, with the exception of state institutions and state educational institutions of secondary education, and non-residents operating in the Republic of Kazakhstan through a branch, representative office)and persons importing goods into the territory of the Republic of Kazakhstan in accordance with the customs legislation of the EEU and (or) the customs legislation of the Republic of Kazakhstan;
(iv) excise taxes – individuals and legal entities producing and collecting, importing and selling confiscated, ownerless, transferred by inheritance to the state and transferred free of charge to the ownership of the state on the territory of the Republic of Kazakhstan (if the excise tax was not paid before) excisable products, wholesale, retail sale of gasoline (with the exception of aviation) and diesel fuel on the territory of the Republic of Kazakhstan, releasing the property mass of excisable goods;
(v) rental tax on exports – individuals and legal entities exporting crude oil and crude oil products, classified in subheading 2709 00 of the EEU unified commodity nomenclature for foreign economic activity (except for certain categories of subsoil users), and coal;
(vi) special payments and taxes of subsoil users – subsoil users;
(vii) social tax – all employers;
(viii) vehicle tax – individuals who have taxable objects on the right of ownership, and legal entities that have taxable objects on the right of ownership, economic management or operational management;
(ix) land tax – individuals and legal entities with land plots (on the basis of ownership, permanent land use or primary free temporary land use;
(x) property tax – legal entities that have an object of taxation on the basis of the right of ownership, economic management or operational management; individual entrepreneurs who have an object of taxation on the basis of ownership; a concessionaire who has on the right of ownership, use an object of taxation, which is an object of concession in accordance with the concession agreement; individuals who have objects of taxation on the basis of ownership; other persons determined by the Tax Code as taxpayers of property tax.
1.7. Avoiding double taxation (countries, regulation features)
The procedure for payment of CIT, withheld at the source of payment associated with the activities of a non-resident in the Republic of Kazakhstan, should be considered taking into account international treaties for the avoidance of double taxation.
In some statutory cases, a tax agent (resident of the Republic of Kazakhstan) has the right to pay income to a foreign company operating without establishing a permanent establishment in the Republic of Kazakhstan, without deducting CIT.
So, for example, according to the website doingbusiness.kz “as of April 1, 2020, in the Republic of Kazakhstan, international conventions on avoidance of double taxation on income and capital are in force with Austria, Azerbaijan, Armenia, Belarus, Belgium, Bulgaria, Great Britain, Hungary, Vietnam , Germany, Georgia, India, Iran, Ireland, Spain, Italy, Canada, Qatar, Cyprus (tax exemption applies to income from January 1, 2021),China, Korea, Kyrgyzstan, Latvia, Lithuania, Luxembourg, Malaysia, Macedonia, Moldova, Mongolia, the Netherlands, Norway, UAE, Pakistan, Poland, Russia, Romania, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, USA, Tajikistan, Turkmenistan , Turkey, Uzbekistan, Ukraine, Finland, France, Croatia, Czech Republic, Switzerland, Sweden, Estonia, Japan ”.
The income of a non-resident from sources in the Republic of Kazakhstan is recognized as incomes listed in the clause 1 of Art. 644 of the Tax Code.
It should be noted that according to Art. 666 of the Tax Code, a tax agent (taxpayer of the Republic of Kazakhstan) has the right to independently apply tax exemption when paying income to a non-resident, if such a non-resident is the final (actual) recipient (owner) of the income and a resident of the country with which an international agreement is concluded
In practice, there are often cases when, for reasons of confidentiality and unwillingness to “lose” money, the counterparty does not disclose the residence of the non-resident – the ultimate recipient of the income, including by delaying the provision of the certificate. In addition, such reluctance is often due to residence in a country with a so-called preferential taxation, which, based on the meaning of subparagraph 4) of paragraph 1 of Article 644 of the Tax Code, is recognized as income from sources to the Republic of Kazakhstan, regardless of the place where such work is performed, and in any case is subject to CIT. In this regard, in order to minimize tax risks, we believe it is necessary to fix the obligation in contracts for the provision of residence certificates within a certain period from the date of the conclusion of the contract or before its conclusion and with reference to the provisions of tax legislation, in particular Article 675 of the Tax Code of the Republic of Kazakhstan regarding the content of such a certificate.
In particular, article 675 of the Tax Code establishes requirements for the provision of a document in one of the following types:
1) the original, certified by the competent authority of the foreign state, the resident of which is the non-resident. The signature of the official and the seal of the competent authority confirming the residence of a non-resident must be legalized in the manner determined by the legislation of the Republic of Kazakhstan;
2) a notarized copy of the original document that meets the requirements of subparagraph 1) of this paragraph. The signature and seal of a foreign notary must be legalized in the manner prescribed by the legislation of the Republic of Kazakhstan;
3) a paper copy of an electronic document confirming the residence of a non-resident posted on the Internet resource of the competent authority of a foreign state.
It is necessary to clarify that in the context of the above subparagraphs 1) and 2), the corresponding apostille and legalization at the consulate of the Republic of Kazakhstan is meant.
However, according to paragraph 2 of the same article, “legalization in the manner determined by the legislation of the Republic of Kazakhstan is not required if a document confirming the residence of a non-resident is posted on the Internet resource of the competent authority of a foreign state or a different procedure is established for verifying the authenticity of the signature and seal of a person ( persons) specified (specified) in paragraph 1 of this article by the international treaty of the Republic of Kazakhstan between the authorized body and the competent body of a foreign state within the framework of the mutual agreement procedure carried out in accordance with Article 221 of this Code, by the decision of the body of the Eurasian Economic Union.
1.8. Expected amendments
In accordance with the Political Message of the President of the Republic of Kazakhstan (September 2020), significant optimization and reduction of the number of taxes and payments is expected in Kazakhstan.
In particular, as reported on the news resource zakon.kz, “The President of Kazakhstan, Kassym-Zhomart Tokayev, in his Message to the people, instructed government agencies to radically simplify the fulfillment of tax obligations and reduce the number of taxes and payments”.
In particular, in connection with the crisis in the economy, the possibility of “applying the right to pay retail turnover tax on an alternative basis for the most affected sectors of the economy” will be considered and “the possibilities of differentiating tax rates will be studied and a set of key budget coefficients will be developed” (based on press materials -conference of R. Dalenov, Minister of National Economy).
Thus, “it is expected to consider the possibility of combining tax deductions from the payroll fund into one payment and consolidation into one payment of fees and charges for the provision of various permits. According to the proposals already prepared, the implementation period is expected from 2021, for the rest to be discussed, the introduction date is expected from 2022 “(based on the materials of the press conference of R. Dalenov, Minister of National Economy).
Please note that, we partially used an information from the available Doing Business in Kazakhstan catalogs. The purpose of this publication is a systematic presentation of the main provisions of the current legislation of the Republic of Kazakhstan in the field of taxation.
