TAXATION
Kazakhstan taxation is regulated by the Kazakhstan Code On Taxes and Other Obligatory Payments to the Budget (Tax Code) of 25 December 2017 which entered into force on 1 January 2018 (the “Tax Code”) and other Kazakhstan regulatory legal acts, as well as all applicable international treaties ratified by the Republic of Kazakhstan. The Tax Code determines rates of taxes and other obligatory payments, the procedure for their assessment and payment, the scope of powers of tax authorities with respect to ensuring fulfilment and enforcement of outstanding tax liabilities, the rules for maintaining tax accounting records and filing tax returns, the forms and procedures for tax control to be exercised by tax authorities, and the methods of appealing against decisions and actions (non-feasance) of tax authorities and officers thereof.
The Kazakhstan Government levies the following taxes:
1. corporate income tax;
2. individual income tax;
3. value added tax;
4. excise taxes;
5. rent export tax;
6. special charges and taxes levied on subsoil users;
7. social tax;
8. tax on transport vehicles;
9. land tax;
10. property tax;
11. gambling business tax; and
12. single land tax.
There are also obligatory payments to the budget:
1. state duty;
2. fees;
3. dues for:
· the use of licenses for certain activities;
· the use of land plots;
· the use of surface water resources;
· adverse impact on the environment;
· the use of wildlife;
· the use of forests;
· the use of specially protected natural areas;
· the use of frequencies;
· the provision of long-distance and/or international telephone services and mobile services; and
· outdoor/visual advertisement installations.
Corporate Income Tax (CIT)
Corporate income tax is levied on:
1) taxable income;
2) income taxable at the source of payment;
3) net income of a nonresident legal entity operating in the Republic of Kazakhstan via a permanent establishment;
4) taxable income of controlled foreign companies and permanent establishments thereof, except for those which are incorporated/registered in tax haven countries; and
5) taxable income of controlled foreign companies and permanent establishments thereof incorporated/registered in tax haven countries.
CIT is payable by Kazakhstan resident legal entities (except for public institutions and public secondary educational institutions) and nonresident legal entities operating in Kazakhstan via a permanent establishment or receiving income from Kazakhstan sources.
Taxable income (which is determined as difference between comprehensive annual income adjusted for amount required by the Tax Code and applicable deductions) less revenues and expenses provided for by the Tax Code, minus loss carryforwards, as well as taxable income of controlled foreign companies and permanent establishments thereof, is applied a 20% CIT.
Income taxable at source, save for nonresidents’ income from Kazakhstan sources, is applied a 15% CIT to be deducted at source.
Besides, net income (income after CIT) of a nonresident legal entity operating in Kazakhstan via a permanent establishment is also applied an additional 15% CIT.
It is worth noting that comprehensive annual income of a resident taxpayer accounted for assessment of taxable income shall be reduced by (or adjusted for) the amount of dividend income.
Besides, resident taxpayers are also entitled to decrease of their taxable income by the capital gain on disposal of shares or interests in a legal entity which is not a subsoil user, provided that fifty or more percent of the legal entity’s asset value comprises the assets of persons not being subsoil users and the taxpayer has been holding the shares or interests for over three years.
Taxation of income of a nonresident legal entity depends on whether or not it operates through a permanent establishment in the Republic of Kazakhstan. The most common form of a nonresident’s permanent establishment is a branch or representative office. However, the performance of nonresident’s activities in the Republic of Kazakhstan via a branch or representative office does not necessarily entail the formation of a permanent establishment of such nonresident in Kazakhstan under an international double-tax treaty. Besides, any preparatory or auxiliary activities (complying with the Tax Code) different from the nonresident’s core activities also do not necessarily entail the formation of the nonresident’s permanent establishment in Kazakhstan.
When nonresident’s business activities run in Kazakhstan without incorporation of a branch or representative office entail the formation of a permanent establishment, such nonresident must get registered with Kazakhstan tax authorities as a taxpayer.
CIT on income of a nonresident legal entity operating in Kazakhstan through a permanent establishment is assessed and paid in accordance with the standard procedure, i.e. similar to the procedure applicable to Kazakhstan legal entities. Taxable income includes all types of income related to the operations of the permanent establishment as of the time of commencement of its operations in the Republic of Kazakhstan. Deductions include expenses directly related to earning of income from operations in Kazakhstan through the nonresident’s permanent establishment regardless of whether or not such expenses are incurred within or outside Kazakhstan, other than non-deductible expenses provided for by the Tax Code.
Tax (Withholding Tax or WHT) on Kazakhstan sourced income of nonresident legal entities operating without a permanent establishment in the Republic of Kazakhstan is withheld at the source of payment by the tax agent, i.e. the person paying the income, at the following rates:
|
1) |
income from international transportation services, insurance premiums under risk reinsurance policies; capital gain arising from the sale of shares/interests in the legal entities participating in the Astana Hub International Technological Park, and dividends received from such legal entities |
5% |
|
2) |
capital gain, interest, compensations, royalty and insurance premiums under risk insurance policies |
15% |
|
3) |
income of a person incorporated/ registered in a tax haven country recognized by the Tax Code as Kazakhstan sourced income of a nonresident |
20% |
|
4) |
other income recognized by the Tax Code as Kazakhstan sourced income of a nonresident |
20% |
The payment procedure and rates of the WHT subject to withholding at the source of payment largely depend on whether the Republic of Kazakhstan and the home state of the foreign legal entity receiving income from Kazakhstan sources have signed an international treaty on avoidance of double taxation and prevention of evasion of taxes on income or property (capital). In this regard, subject to certain conditions, a tax agent (a resident of the Republic of Kazakhstan) may pay income to a foreign company operating in Kazakhstan without a permanent establishment free from WHT. Besides, international treaties may provide for lower income tax rates compared to the national laws of the contracting states. Pursuant to the Tax Code, if an international treaty ratified by the Republic of Kazakhstan provides for rules different from those contained in its tax legislation, the rules of such international treaty shall apply. It should be noted that Kazakhstan tax legislation determines the procedure for administration and application of international treaties. A failure to comply with such procedure entails invalidation of certain international treaty applications.
As at 1 April 2022, the Republic of Kazakhstan has signed double tax treaties with Austria, Azerbaijan, Armenia, Belarus, Belgium, Bulgaria, Canada, China, Czech Republic, Cyprus, Estonia, Finland, France, Germany, Great Britain, Georgia, Hungary, India, Iran, Italy, Japan, Korea, Kyrgyzstan, Latvia, Lithuania, Luxemburg, Macedonia, Malaysia, Moldova, Mongolia, Netherlands, Norway, Pakistan, Poland, Qatar, Russia, Romania, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, Spain, Sweden, Switzerland, Tajikistan, Turkmenistan, Turkey, UAE, United States, Uzbekistan, Ukraine and Vietnam. The double tax treaties with Kuwait, Indonesia, Egypt and Israel are still pending execution and subsequent ratification.
Individual Income Tax (IIT)
IIT is levied on:
1) individual income taxable at source:
(1) employees' income;
(2) income in the form of donated assets (works, services);
(3) income in the form of pension payments;
(4) income in the form of dividends, interest and prizes;
(5) income in the form of scholarships/bursaries;
(6) income under insurance savings plans;
(7) individual income from tax agency;
2) individual taxable income of a self-assessment taxpayer:
(1) property income, including:
· capital gain on the sale of an individual’s assets in the Republic of Kazakhstan (e.g. real estate, motor vehicles, shares/interests in Kazakhstan companies, etc.);
· individual income from the sale of assets received from non-Kazakhstan sources;
· capital gain on the transfer of an individual’s assets (other than cash) as a contribution to the authorised capital of an entity;
· income received by an individual (other than a sole trader or a payer of single aggregate payment) from letting their property to persons other than tax agents;
· capital gain on the sale of other assets by a sole trader who is subject to special tax treatment applicable to small businesses, peasant households and farms;
· income from assignment of accounts receivable, including a share in a residential building acquired under a share construction participation agreement;
(2) income of a sole trader;
(3) income of a private practitioner (attorney, private notary, private law enforcement officer (bailiff) or professional mediator);
(4) other income from non-Kazakhstan sources; and
(5) consolidated income of controlled foreign companies or permanent establishments thereof.
The aforesaid income is subject to IIT at the rate of 10%, save for the income in the form of dividends received from Kazakhstan sources which is taxable at the rate of 5%.
IIT is payable by natural persons who have taxable objects. The assessment, withholding and payment of tax from income taxable at the source of payment are the responsibility of the tax agent, while the assessment, withholding and payment of IIT from income not taxable at the source of payment are the responsibility of the taxpayer.
The Tax Code contains a wide list of individual income which is not recognized as income or is adjustable/deductible from individual income, for example: (i) value of property acquired by individuals through donation or inheritance from other individuals, (ii) capital gain on the sale of shares or participation interests in a legal entity that is not a subsoil user, provided that fifty or more percent of the asset value of such legal entity is made up of property of persons or entities who are not subsoil users and the taxpayer has been holding shares or participation interests for over 3 years, as well as the dividends received from such persons (provided that the dividend payer is a resident of the Republic of Kazakhstan); (iii) capital gain on the sale of motor vehicles subject to state registration in Kazakhstan, provided that such vehicles have been beneficially owned by such individual for over one year; (iv) capital gain on the sale of residential houses, country houses, garages or private farming facilities located in Kazakhstan, provided that they have been beneficially owned by such individuals for over one year from the date of the title registration with government authorities.
Certain categories of Kazakhstan resident individuals must file IIT returns directly with tax authorities before 31 Mach of the year following an accounting tax period:
1) sole traders;
2) private practitioners (private notaries, private law enforcement officers (bailiffs), attorneys and professional mediators);
3) individuals who have received property income;
4) individuals who have received income from non-Kazakhstan sources;
5) immigrant workers (residents of the Republic of Kazakhstan) who receive (or are expected to receive) income under employment agreements executed in accordance with Kazakhstan labour law subject to a work permit;
6) Kazakhstan citizens, qandases (returnees) and individuals holding a Kazakhstan residence permit who, as at 31 December of a reporting tax period, beneficially own any of the following properties:
· real estate (rights and/or deals in relation thereto) subject to the state or any other form of registration (accounting) with competent authorities of a foreign state in compliance with the legislation of such foreign state;
· securities the issuers of which are incorporated outside Kazakhstan;
· interest in the authorised capital of a legal entity incorporated outside Kazakhstan; and
7) individuals who receive income subject to a direct IIT payable by such individuals themselves.
Income of nonresident individuals received from Kazakhstan sources is also subject to IIT, usually, at the same rates which are applied to income of nonresident entities running business without formation of a permanent establishment in Kazakhstan (please see the section Corporate Income Tax above).
However, income received by a resident individual from activity in Kazakhstan (e.g. salary, allowance for staying in Kazakhstan, etc.) paid by the employer, pension paid by Kazakhstan pension funds, and compensation paid by a resident company to its management board members are subject to IIT at the rate applicable to resident individuals (10%).
The IIT assessable and payable on such income of nonresident individuals must be withheld at the source of payment by a tax agent, i.e. the payer of income.
The Tax Code exempts certain types of income of nonresident individuals received from Kazakhstan sources from taxation in Kazakhstan. For example, income of nonresident individuals (except for the persons registered in tax havens) in the form of capital gain on the sale of shares/interests in a resident entity that is not a subsoil user, provided that fifty or more percent of the asset value of such entity belongs to a person other than a subsoil user, and the person has been owning such shares/interests for a period over 3 years, as well as income received from such persons in the form of dividends, is exempt from taxation in Kazakhstan (provided that the dividends payer is a resident of the Republic of Kazakhstan).
Taxation of Income Received by Controlled Foreign Companies
Any nonresident legal entity or another foreign type of business organisation with no separate legal identity (except for an entity registered/incorporated/established in a foreign state with which the Republic of Kazakhstan has a valid double-tax treaty that provides for a statutory corporate tax rate above 75% of the Kazakhstan standard WHT (20%)) falls under the category of “controlled foreign company” (“CFC”) if it cumulatively meets the following criteria:
1) as at 31 December of the reporting period, (i) ≥25% of interests/voting shares in the CFC are owned, either directly or indirectly, by a Kazakhstan resident individual or entity, and/or (ii) a Kazakhstan resident individual or entity exercises direct, indirect or meaningful control over the CFC; and
2) effective profit tax rate applied to the CFC is less than 10% and/or the CFC or its constituent document (incorporation document) is registered in a tax haven country, or a member responsible for accounting of income and expenses or asset management of the CFC having a different corporate status is registered in a tax haven country.
Residents of the Republic of Kazakhstan must notify tax authorities of their interest in/control over a CFC.
Consolidated income of CFC or permanent establishments thereof is included into the taxable income of a resident entity or annual income of a resident individual and is subject to CIT or IIT, respectively, in the Republic of Kazakhstan.
When a resident entity does not have taxable income, consolidated income of CFC or permanent establishments thereof is reduced by the amount of loss from the business activity of such resident. The positive difference between the consolidated income of CFC or permanent establishments thereof and a loss from the resident’s business activity is recognised as taxable.
Subject to the Tax Code, income of a CFC or its permanent establishment may, under certain circumstances, be exempt from taxation in the Republic of Kazakhstan.
Social Tax
In Kazakhstan, social tax is levied on employers, including foreign legal entities operating in the Republic of Kazakhstan through permanent establishments and nonresident legal entities operating in Kazakhstan through branches or representative offices not leading to the formation of permanent establishments of such nonresident legal entities in the Republic of Kazakhstan.
The following employer's expenses are subject to social tax (except for sole traders and private practitioners, such as private notaries, private enforcement agents, professional mediators and attorneys):
1) money in cash and/or non-cash forms payable by an employer in favour of an employee by operation of the respective employment agreement, and employee’s benefits in kind and/or in the form of material gain;
2) payment of income to nonresident individuals:
- from activities in the Republic of Kazakhstan under an employment agreement (contract) signed with a resident or nonresident employer;
- compensations for nonresident executive officers and/or other benefits for nonresident members of a management body (e.g. board of directors or another body) payable thereto for the performance of their management duties in relation to a resident entity;
- allowances paid by resident or nonresident employers in connection with the stay in the Republic of Kazakhstan (expatriate allowances);
- from their activities in the Republic of Kazakhstan as material gain received from the employer; and
3) payment of income to expatriate personnel provided for work in the Republic of Kazakhstan by nonresidents to residents of the Republic of Kazakhstan or to nonresidents operating in the Republic of Kazakhstan through a permanent establishment.
Social tax is paid at the rate of 9.5%. Sole traders (other than those operating under special tax regimes), private practitioners (private notaries, private law enforcement officers (bailiffs), professional mediators and attorneys) assess social tax in the amount equal to the 2-fold monthly calculation index established and effective on the date of payment (as at 1 January 2022, KZT6,126) for themselves, and equal to 1 monthly calculation index (as at 1 January 2022, KZT3,063) for each employee.
Social tax is assessed by applying tax rates to the tax base for a calendar month tax period.
Value Added Tax (VAT)
VAT payers in the Republic of Kazakhstan include:
1) persons registered as VAT payers in the Republic of Kazakhstan:
- sole traders and individual practitioners (i.e. private notaries, private bailiffs, attorneys and professional mediators);
- resident legal entities other than public institutions and public secondary educational institutions;
- nonresidents operating in the Republic of Kazakhstan through branches or representative offices;
2) persons importing goods to the Republic of Kazakhstan in accordance with the customs legislation of the Eurasian Economic Union and/or the customs legislation of the Republic of Kazakhstan; and
3) foreign companies letting e-commerce platforms to individuals or providing e-services to individuals.
Subdivisions of resident legal entities may not be VAT payers.
Registration as a VAT payer is either mandatory or voluntary.
Kazakhstan legal entities, nonresidents operating in the Republic of Kazakhstan through a branch or representative office, sole traders and individual practitioners the turnover of which for a calendar year exceeds 20,000-fold monthly calculation index established and effective on 1 January of the respective financial year (as at 1 January 2022, KZT61,260,000) are subject to mandatory VAT registration.
The tax bases for VAT purposes are:
1) taxable turnover; and
2) taxable import.
Taxable turnover is the turnover of a VAT-payer:
1) related to sale of goods (works and/or services) in the Republic of Kazakhstan, other than the turnover exempt from VAT in accordance with the Tax Code (e.g., transactions with securities, money lending transactions, etc.) and/or turnover occurring outside the Republic of Kazakhstan; and
2) related to acquisition of works and/or services from nonresidents, other than the turnover of their structural subdivisions (branches/representative offices); and
3) in the form of stock-in-trade (if the taxpayer has been deregistered as a VAT payer).
The Tax Code also determines turnovers that are taxable at the zero rate (export of goods, international transportation, etc.).
If works and/or services are performed or provided by nonresidents who are not VAT-payers in the Republic of Kazakhstan and if they are sold in Kazakhstan, such works and/or services constitute turnover of their receiving taxpayer of the Republic of Kazakhstan who is required to pay VAT for the nonresident in accordance with the Tax Code. The amount of paid VAT may be subsequently offset.
Taxable import is comprised of goods imported or to be imported to the territory of the EAEU Member States that are subject to declaration in accordance with the customs legislation of the EAEU and/or the customs legislation of the Republic of Kazakhstan.
Subject to certain exemptions and conditions provided for by the Tax Code, in determining the amount of VAT payable to the budget, the recipient of goods (works and/or services) may offset the amounts of VAT payable for received goods, works and services, if they are used or will be used for the purpose of taxable sales.
The VAT rate is 12%.
Commercial invoice is a compulsory document to be issued by a VAT payer on sales of goods/works/services (unless otherwise provided for by the Tax Code). With limited exceptions, invoices must be issued in electronic format.
Besides, all the goods (officially listed by the competent authority) moved, distributed and/or shipped throughout Kazakhstan, or imported to Kazakhstan, or exported from Kazakhstan must be accompanied by dispatch notes.
Specifics of VAT on Exports and Imports of Goods, Performance of Works and Provision of Services in the EAEU
Apart from the persons registered as VAT-payers in the Republic of Kazakhstan, VAT in the EAEU must also be paid by the following persons importing goods to the territory of the Republic of Kazakhstan from the territories of the EAEU Member States:
- resident legal entities;
- structural subdivisions of resident legal entities, if they are a party to an agreement (contract);
- structural subdivisions of resident legal entities upon a respective decision of such legal entities if, pursuant to the terms and conditions of an agreement (contract) between the resident legal entity and the taxpayer of a Member State of the Eurasian Economic Union, the recipient of goods is the structural subdivision of the resident legal entity;
- nonresident legal entities carrying out business through a permanent establishment without opening a branch or representative office and registered as taxpayers with Kazakhstan tax authorities;
- nonresident legal entities carrying out business in the Republic of Kazakhstan through their structural subdivisions;
- nonresident legal entities conducting business without setting up a permanent establishment;
- trust managers importing goods as part of business carried out under trust management agreements with trustors or beneficiaries in other events of creation of trust management;
- diplomatic missions of foreign states and their missions with equal status accredited in the Republic of Kazakhstan, persons who are members of diplomatic and administrative and support staff of such missions, including their cohabiting family members; consular services of foreign states accredited in the Republic of Kazakhstan and consular services officers and personnel, including their cohabiting family members;
- private practitioners (private notaries, private law enforcement officers (bailiffs), professional mediators and attorneys) importing goods in order to practise as notaries, to enforce writs of execution and to practise as attorneys, respectively;
- mediators importing goods for the purpose of their mediation activities; and
- individuals importing goods for the purpose of carrying out business activities.
In the event of export of goods from the Republic of Kazakhstan to another Member State of the EAEU, a zero-rate VAT applies. The VAT-payer must submit to tax authorities together with the VAT return an application for import of goods and payment of indirect taxes received from the taxpayer of a EAEU Member State importing the goods to its home state that should bear lettering from tax authorities that the indirect taxes have been paid and/or the applicant is exempt from such taxes.
In the event of import of goods, including goods derived from processing of customer-supplied and -owned raw materials (on a give-and-take basis) to the territory of the Republic of Kazakhstan from the territory of the EAEU Member States, the taxpayer must submit to the respective customs authority having jurisdiction over its registered office the indirect tax return on the imported goods.
It is worth noting that the Treaty on the EAEU exempts, with effect from 1 January 2015, the following goods imported to any Member State of the EAEU from indirect taxes (VAT and excises):
1) any goods the import of which is exempt from taxation in a Member State under the national laws of such Member State;
2) any goods which are imported to a Member State by individuals for non-business purposes; and
3) any goods which are imported to a Member State from another Member State for transfer thereof within one legal entity (national laws of a Member State may provide for an obligation to notify tax authorities of the import/export of such goods).
Specifics of taxation of foreign companies conducting e-commerce or providing e-services to individuals
With effect from 1 January 2022, all foreign companies conducting e-commerce via Internet platforms or providing e-services to individuals are treated as VAT-payers and subject to deemed registration with Kazakhstan tax authorities accordingly.
Such foreign companies must assess their VAT at the rate of 12% of the value of goods/services sold/provided to individuals through means of electronic transmission, provided that they meet any of the following criteria:
• the individual buyer permanently resides in the Republic of Kazakhstan;
• the bank serving the bank account of the individual buyer through which the latter pays for goods/services, or the e-money operator through which the latter pays for goods/services, is located in the Republic of Kazakhstan;
• the web address used by the individual buyer for the purchase of goods/services is registered in the Republic of Kazakhstan; or
• the international code of the telephone (including mobile) used by the individual buyer for the purchase of and payment for goods/services was assigned by the Republic of Kazakhstan.
Please note that the aforementioned companies do not need to issue invoices for the goods/services sold/provided through means of electronic transmission.
Excise Duties
Excise duties are applied to the following goods produced in the Republic of Kazakhstan and imported to the Republic of Kazakhstan (excise goods):
1) all kinds of spirits;
2) alcohol products;
3) tobacco products;
4) tobacco heating products and e-cigarette nicotine-containing liquids;
5) gasoline (other than aviation gasoline), diesel fuel, gasohol, benzanol, nefras, ethane-propane mix and ecological fuel;
6) motor transport vehicles designed for transportation of 10 or more passengers with engine capacity of over 3,000 cubic centimetres, other than minivans, buses and trolleys;
light-duty motor vehicles and other motor transport vehicles designed for transportation of passengers with engine capacity of over 3,000 cubic centimetres (other than manually-operated motor vehicles or those with manual operation adaptors specifically designed for disabled persons); and
chassis-box trucks with engine volumes of over 3,000 cubic centimetres (except for the cars with manual steering or manual steering adapter for handicapped people);
7) crude oil and gas condensate; and
8) alcohol-containing medical products registered in accordance with the laws of the Republic of Kazakhstan as drugs.
Besides, the trade regulator may extend the list of imported goods subject to excise taxes depending on the country of their origin.
Excise taxes are paid by those individuals and entities who/which:
· produce excise goods in the Republic of Kazakhstan;
· import excise goods to the Republic of Kazakhstan;
· undertake wholesale and retail trade in gasoline (other than aviation gasoline) and diesel fuel in the Republic of Kazakhstan;
· sell seized or ownerless excise goods and excise goods passed to the State by succession and transferred to the State on a gratuitous basis in the Republic of Kazakhstan that are set forth in paragraphs 5)-7) above, if no excise tax has been previously paid on such goods in the Republic of Kazakhstan in accordance with Kazakhstan law;
· sell the aforesaid excise goods included in bankruptcy assets if no excise tax has been earlier paid on such goods in the Republic of Kazakhstan in accordance with Kazakhstan law; or
· carry out picking (packing) of excise goods set forth in paragraph 6).
Therefore, excise tax is levied on:
1) the following operations carried out by an excise taxpayer with goods manufactured, produced and/or extracted and/or bottled by such taxpayer:
· sale of excise goods;
· transfer of excise goods for processing on a give-and-take basis;
· transfer of excise goods derived from customer-supplied and -owned raw materials (on a give-and-take basis), including excise raw materials;
· making contributions to charter capital;
· use of excise goods in payments made in kind, unless they are used for the payment of mineral replacement tax and rent export tax;
· shipping of excise goods by the manufacturer to its structural subdivisions;
· use by the manufacturer/producer of the manufactured, produced and/or extracted and/or bottled excise goods for own production needs and for own production of excise goods;
· movement of excise goods by the manufacturer from the manufacturer’s address specified in the license;
2) wholesale trade in gasoline (other than aviation), diesel fuel, gasohol, benzanol, nefras, ethane-propane mix and ecological fuel;
3) retail trade in gasoline (other than aviation), diesel fuel, gasohol, benzanol, nefras, ethane-propane mix and ecological fuel;
4) disposal of bankruptcy assets and/or excise goods either seized and/or abandoned or inherited by the State or gratuitously assigned to the State;
5) damage and/or loss of excise goods; and
6) import of excise goods to the Republic of Kazakhstan.
Excise rates are determined as a percentage (ad valorem) of the value of goods and/or as an absolute value (specific) per unit of measurement in kind.
Alcohol products, other than wine stock, beer and malt beverages must bear control marks, and tobacco products must bear excise marks.
Any person who is engaged in production and wholesale and/or retail trade in gasoline (except for aviation gasoline), diesel fuel, gasohol, benzanol, nefras, ethane-propane mix and ecological fuel, production of ethanol and/or alcohol products, wholesale and/or retail trade in alcohol, production and/or wholesale of tobacco products, gambling business, or production and assembly/furnishing of excisable motor vehicles must get registered with tax authorities as a business taxpayer at the location of taxable and/or tax-related items.
Rent Tax on Export
Rent tax on export is payable by individuals and legal entities exporting crude oil and crude petroleum products falling under position 2709 00 in the Unified Foreign Trade Goods Classification of the EAEU produced by subsoil users (with the exception of certain categories of subsoil users).
With limited exceptions, the tax base for the purpose of rent tax on export is the volume of exported crude oil and crude petroleum products.
The rates of rent tax on export of crude oil and crude petroleum products are determined by the Tax Code and depend on the world prices of crude oil and crude petroleum products per barrel: the higher the price the higher is the rate. The minimum rate is 0% and the maximum rate is 32%.
Taxes and Special Charges Levied on Subsoil Users
Taxes levied on subsoil users are the tax on extraction of mineral resources and excess profit tax.
Special charges payable by subsoil users include:
1) subscription bonus;
2) historic cost recovery charge;
3) alternative subsoil use tax;
4) royalty; and
5) share of the Republic of Kazakhstan under production sharing agreements.
Subscription Bonus
Subscription bonus is a one-time charge payable by a subsoil user for the acquisition of a subsoil use right in a contract territory (subsoil block) or for the extension of a contract territory (subsoil block).
Subscription bonuses are payable by individuals or legal entities who win tenders for the acquisition of a subsoil use right through direct negotiations on granting the subsoil use right in accordance with the subsoil and subsoil use legislation of the Republic of Kazakhstan and who are parties to one of the following subsoil use contracts signed (awarded) in accordance with the procedure established by Kazakhstan law:
1) exploration contract; or
2) contract for production of mineral resources (save for subsoil users who have entered into a contract under the exclusive right to acquire a mineral production right following commercial discovery under an exploration contract within the relevant contract territory/subsoil block);
3) combined exploration and production contract;
4) license for geological study;
5) license for use of subsoil area; and
6) prospecting license.
The initial amount of subscription bonus is determined on a contract-by-contract basis in accordance with the Tax Code requirements and may be increased when a tender commission of competent authority decides to do so.
Subscription bonus payable under a license for geological study, prospecting, exploration or production of solid minerals (except for a license issued through an auction) is assessed at the rate expressed in the monthly calculation index as effective on the date of the subscription bonus payment.
Historic cost recovery charge
Historic cost recovery charge is a fixed charge paid by a subsoil user in connection with recovery of the total costs incurred by the government on geological survey of a contract area/subsoil block and exploration of mineral deposits prior to signing a subsoil use contract.
Historic cost recovery charge is paid by subsoil users operating under subsoil use contracts in the respective mineral deposits in relation to which the Government incurred costs on geological survey of the contract area/subsoil block and exploration of deposits prior to signing subsoil use contracts.
The amount of historic costs incurred by the Government in relation to geological survey of a contract area/subsoil block and exploration is determined by the government body authorized for these purposes in the manner prescribed by Kazakhstan law and is payable to the budget:
1) as historic cost recovery charge at a rate determined by the relevant confidentiality agreement less the fee for geological information acquired from the Kazakhstan Government; and
2) as fee for geological information acquired from the Kazakhstan Government at a rate determined by the relevant confidentiality agreement.
Mineral Extraction Tax
Mineral extraction tax is paid by subsoil users in monetary form (with limited exceptions) separately for each type of mineral resources, hydrocarbons, ground waters and therapeutic muds produced in Kazakhstan.
Mineral extraction tax for all types of produced minerals, hydrocarbons, ground waters and therapeutic muds, regardless of the method of extraction, is paid at the rates and in the manner determined by the Tax Code.
Mineral extraction tax is payable by subsoil users producing hydrocarbons, minerals, ground waters and therapeutic muds, including extraction of minerals from man-made deposits for which mineral extraction tax and/or royalty has not been paid, each under separate subsoil use contract (save for the subsoil users who operate solely under a prospecting license).
Excess Profit Tax
Excess profit tax is levied on subsoil users operating under individual subsoil use contracts, except for subsoil users operating under:
· production sharing agreements (contracts) signed between the Kazakhstan Government (or its competent authority) and subsoil users prior to 1 January 2009, and subsoil use contracts approved by the Kazakhstan President;
· contracts for exploration and/or production of solid minerals, including commonly occurring minerals, ground waters and/or therapeutic muds (if these contracts do not provide for production of other mineral groups); and
· contracts for construction and operation of underground facilities not related to exploration or production.
The tax base for excess profit tax is the portion of the subsoil user’s net income for each separate subsoil use contract for a tax period exceeding the amount of 25% of the subsoil user’s deductions for the purpose of assessment of excess profit tax in the manner prescribed by the Tax Code.
Excess profit tax is payable by subsoil users at the rates set out in a sliding scale (the excess tax rate increases as the percentage ratio of net profit distributions to deductions grows). The excess profit tax rate ranges between 10% and 60%.
Alternative Subsoil Use Tax
With effect from 1 January 2018, the following corporate subsoil users may apply an alternative subsoil use tax instead of the aforementioned historic cost recovery charge, mineral extraction tax and excess profit tax:
1) the holders of contracts for production and/or combined exploration and production of hydrocarbons in the field(s) entirely falling within the Kazakhstan sector of the Caspian Sea; and
2) the holders of contracts for production and/or exploration and production of hydrocarbons in the fields where the depth of the upper point of hydrocarbon deposit specified in a mining allotment or contract for production or exploration/production of hydrocarbons (in the absence of mining allotment) is maximum 4,500 metres and the depth of the lower point of hydrocarbon deposit specified in a mining allotment or contract for production or exploration/production of hydrocarbons (in the absence of mining allotment) is at least 5,000 metres.
The object of alternative subsoil use tax is determined as the difference between total annual income (as adjusted) and deductions applied in the manner prescribed by the Tax Code for the purpose of alternative subsoil use tax.
The rate of alternative subsoil use tax depends on the global oil price per barrel, i.e. the higher the price, the higher the rate. The minimum tax rate is 0% and the maximum tax rate is 30%.
Tax on Transport Vehicles
Tax on transport vehicles is payable by individuals and legal entities who own taxable items under the right of ownership, the right of operating control or operational management. The transport vehicles tax on taxable items transferred (received) under financial lease contracts is payable by the lessee.
The taxable base is a transport vehicle (including aircraft, motor boat, ship, tug boat, barge, yaught and railway rolling stock), other than trailer, subject to state registration and/or registered in Kazakhstan. Open-pit dump trucks with loading capacity of minimum 40 tons, special-purpose transport vehicles subject to property tax, and sea ships registered with the Kazakhstan international ship register are not subject to transport vehicles tax.
The rates of transport vehicles tax are set out by the Tax Code in the monthly calculation index and depend on the type of a transport vehicle, its designation, engine volume and year of manufacture.
Land Tax
Individuals and legal entities holding land plots (or shares in land in the event of shared ownership) under the land ownership right, permanent land use right and primary temporary free land use right are required to pay land tax.
For tax purposes, all lands are classified into different categories depending on their designation. Land categories are determined by the Land Code of the Republic of Kazakhstan.
The tax base for assessing land tax is the size of a land plot and/or farmland allotment. Base rates of land tax are determined by the Tax Code and vary depending on the quality of soil, location, water supply and other characteristics of a land plot.
Property tax
Property tax is levied on:
1) legal entities holding a taxable item under the right of ownership, operating control or operational management in the Republic of Kazakhstan;
2) sole traders holding a taxable item under the right of ownership in the Republic of Kazakhstan;
3) concessionaires holding a taxable item under the right of possession or use when such taxable item is a concession facility under a concession agreement;
4) individuals holding taxable items under the right of ownership; and
5) other persons determined by the Tax Code as property tax payers.
In Kazakhstan the following assets of legal entities and individuals are subject to property tax:
1) buildings and structures classified as such by the appropriate technical regulator, as well as parts thereof, accounted for as fixed assets or investment in real property in accordance with the International Financial Reporting Standards and Kazakhstan accounting and financial reporting regulations;
2) buildings and structures classified as such by the appropriate technical regulator, as well as parts thereof, granted to individuals under long-term housing lease agreements with a purchase option and accounted for as long-term accounts receivable in accordance with the International Financial Reporting Standards and Kazakhstan accounting and financial reporting regulations;
3) buildings and structures under concession the title and use rights to which have been assigned under concession agreements;
4) depreciable assets (for acquisition and/or creation of which a subsoil user has incurred costs/expenses associated with the preparation of operation blocks/sites to the production of uranium by the method of drillhole in situ leaching since the commencement of production upon a commercial discovery);
5) buildings and structures classified as such by the appropriate technical regulator, as well as parts thereof, accounted for, subject to the International Financial Reporting Standards and Kazakhstan accounting and financial reporting legislation, to the extent of the assets of second-tier banks which acquired the ownership thereto after the foreclosure on pledged assets or other collateral, except for the buildings (or parts thereof) and structures specified in paragraph 1) above; and
6) buildings and structures actually owned and used/operated without the state registration of titles thereto.
Legal entities (subject to certain exceptions, e.g. non-profit organizations, etc.) assess property tax at the rate of 1.5% applied to the tax base (i.e. the average annual balance-sheet value of the taxable items as shown by accounting records).
Sole traders and legal entities applying the special legal regime on the basis of a simplified tax return assess property tax at the rate of 0.5% applied to the tax base.
Taxable items of individuals (except for sole traders) include housing and residential buildings, country houses (dachas), garages and other structures, constructions and premises, as well as land plots, beneficially owned by such individuals.
The tax on property of private individuals is assessed based on the value of taxable items at the rates set out in a progressive tax scale: ranging between 0.05% for taxable items the value of which is up to 2,000,000 tenge and 2,946,600 tenge + 2% of the amount exceeding 450,000,000 tenge for items the value of which is over 450,000,000 tenge.
Special Tax Regimes
Taxpayers are entitled to choose between a general tax regime and a special tax regime.
The following special tax regimes are applied in Kazakhstan:
1) special tax regime for small businesses, including:
– special tax regime based on business licenses;
– special tax regime based on simplified tax returns;
– special tax regime using fixed deduction;
– special tax regime using a special mobile application;
2) special retail tax regime;
3) special tax regime for agricultural producers, including:
– special tax regime for farms and farm households; and
– special tax regime for agricultural producers and agricultural cooperatives.
A special tax regime applies to small businesses a simplified procedure for assessment and payment of the following taxes:
1) individual income tax, except for tax withheld at the source of income – when special tax regime is based on a business license;
2) individual income tax, except for tax withheld at the source of income – when special tax regime is based on a special mobile application;
3) social tax, corporate or individual income tax, except for taxes withheld at the source of income – when special tax regime is based on a simplified tax return; and
4) individual or corporate income tax, except for taxes withheld at the source of income – when special tax regime is using fixed deduction.
Special tax regime applied to small businesses
The special tax regime applied to small-size businesses provides for a simplified procedure to assess and pay social tax and corporate/individual income tax, save for the taxes withheld at the source of income. All other taxes and obligatory payments to the budget must be assessed, paid and reported in accordance with the generally applied procedure.
In spite of the fact that the Entrepreneurial Code provides for the qualification criteria of private enterprises as small and micro businesses, the Tax Code provides its own criteria for qualification of taxpayers as small and micro businesses. For application of a special tax regime the Tax Code provides certain criteria to qualify a taxpayer as a small business.
In pursuance of the Tax Code, the special tax regime meant for small businesses may be applied by the taxpayers meeting the following criteria:
1) average number of employees for a tax period shall not exceed:
· 30 people, if the special tax regime is based on a simplified tax return; and
· 50 people, if the special tax regime uses a fixed deduction;
2) income for a tax period does not exceed:
· 3,528-fold monthly calculation index established and effective on 1 January of the respective financial year (as at 1 January 2022, KZT10,806,264), if the special tax regime is based on a business license or a special mobile application;
· 24,038-fold monthly calculation index established and effective on 1 January of the respective financial year (as at 1 January 2022, KZT73,628,394), if the special tax regime is based on a simplified tax return [Please note that such income does not include the income of an individual entrepreneur received through non-cash settlements via a three-component integrated system but only up to 70,048-fold monthly calculation index established and effective on 1 January of the respective financial year (as at 1 January 2022, KZT214,557,024)]; and
· 144,184-fold monthly calculation index established and effective on 1 January of the respective financial year (as at 1 January 2022, KZT441,635,592), if the special tax regime uses a fixed deduction;
3) such businesses are not engaged in any of the following activities:
· production of excisable goods;
· storage and wholesale trade of excisable goods;
· sale of certain petroleum products (gasoline, diesel fuel and masout);
· conducting lotteries;
· subsoil use;
· collection and redemption of glassware;
· collection, storage, processing and sale of ferrous and non-ferrous scrap and waste;
· provision of consulting services;
· accounting and audit;
· financial, insurance, insurance brokerage and insurance agency;
· activities in the area of law, justice and judicial system; and
· financial leasing.
The special tax regime for small businesses may not be applied to:
1) legal entities that have branches and/or representative offices;
2) branches and representative offices of legal entities;
3) taxpayers having other separate structural subdivisions and/or tax entities in various populated locations (other than those carrying out activities related only to property lease/letting);
4) legal entities in which other legal entities hold an over 25% participation interest;
5) legal entities whose founder or participant is also a founder or participant of another legal entity applying a special tax regime or specific taxation;
6) nonprofit organisations; and
7) gambling tax payers.
Furthermore, the special tax regime based on a business license, simplified tax return or special mobile application may not be applied by those sole traders and legal entities who provide services under agency contracts/agreements.
The special tax regime based on licenses applies only to those sole traders who meet the following criteria (apart from those which are listed above in relation to the special tax regime for small businesses):
1) do not use hired labour;
2) carry out activities as sole traders; and
3) carry out one or several types of activity listed by the Tax Code (e.g. taxi services, letting property, hairdressing services, etc.).
The tax base for taxpayers applying the special tax regime on the basis of a license is the income received for a tax period (calendar year) comprising the adjusted revenues received (receivable) in the Republic of Kazakhstan as determined by the Tax Code.
The value of a license includes the payable individual income tax (excluding the tax withheld at the source of payment) and social benefits, obligatory pension contributions, social contributions and deductions to mandatory health insurance plan.
The individual income tax included into the value of a license is determined by applying the rate of 1% to the tax base.
The special tax regime based on a special mobile application may be applied only by the sole traders meeting the following criteria (apart from the aforementioned general criteria for the application of the special tax regime by small-size businesses):
1) do not use hired labour;
2) carry out activities as sole traders; and
3) carry out one or several types of activity listed by the Tax Code (e.g. taxi services, letting property, hairdressing services, etc.).
Special mobile application is a mobile application developed by the competent authority (i.e. the Kazakhstan Ministry of Finance) especially for the application of the simplified procedure for the performance of tax and social contribution obligations and liabilities, and for the registration as a sole trader by means of an electronic document validated by an electronic digital signature.
For the taxpayers applying the special tax regime based on a special mobile application, the tax base is comprised of income for the tax period (calendar year) that consists of those types of income which are determined by the Tax Code and received (receivable) in the Republic of Kazakhstan, subject to adjustments.
The individual income tax amount payable to the budget must be assessed at the rate of 1% of the tax base. Social contributions must be assessed in the manner prescribed by the applicable laws.
The tax base for the taxpayers applying the special tax regime based on simplified tax returns is the income received for a tax period (6 months) comprising income types set out in the Tax Code and received/receivable in the Republic of Kazakhstan, taking into account relevant adjustments.
Taxpayers make their own tax assessments under simplified tax returns by applying the rate of 3% to the tax base for an accounting tax period (six months). The assessed amount of taxes is adjusted to the lower figure by 1.5% of the amount of tax per employee based on the average number of employees if the average monthly wages of employees as at the end of an accounting period amounted to at least 23-fold monthly calculation index for sole traders, and at least 29-fold monthly calculation index for legal entities established and effective on the first day of a tax period (6 months) (as at 1 January 2022, KZT70,449 and KZT88,827, respectively).
The tax base for the taxpayers applying the special tax regime using a fixed deduction is the taxable income determined as the difference between the adjusted income received for a tax period (a calendar year) and the deductions provided for by the Tax Code.
The taxpayers applying the special tax regime using a fixed deduction may, in determining their taxable income, also include in their deductible expenses a fixed deduction in the amount of maximum 30% of income determined in the manner prescribed by the Tax Code, taking into account relevant adjustments. The total amount of deductible expenses, including such fixed deduction, must not exceed 70% of the income adjusted in accordance with the Tax Code.
The special retail tax regime may be applied by those taxpayers who meet the following criteria:
1) the taxpayer qualifies as a small- or mid-size business under the Kazakhstan Entrepreneurial Code; and
2) the taxpayer conducts a certain activity or a number of certain activities which are determined by the Kazakhstan Government as the activities falling under such special retail tax regime (e.g. maintenance and repair of motor vehicles, retail trade through non-specialised stores, etc.).
The tax base for the taxpayers applying the special retail tax regime is the income received/receivable for a tax period (calendar quarter), either inside or outside the Republic of Kazakhstan, and recognized in accordance with the standard procedure.
Corporate Income Tax or Individual Income Tax, except Withholding Tax, are assessed for the purpose of the special retail tax regime by the taxpayer themselves at a 3% rate applied to the tax base for the reporting tax period (a calendar quarter).
Single aggregate payment is due from the non-registered sole traders who meet all of the following criteria at the same time:
1) they have paid the singe aggregate payment;
2) they do not employ workers; and
3) they provide services only to those individuals who are not tax agents and meet the requirements set out by Kazakhstan law, and/or they sell agricultural products of their own private farm (except excisable products) to those individuals who are not tax agents.
Besides, annual income of a payer of the single aggregate payment from the provision of the aforementioned services and sale of goods shall not exceed 1,175-fold monthly calculation index established and effective on 1 January of the respective financial year (as of 1 January 2022, KZT3,599,025).
The monthly rate of the single aggregate payment (including the payable IIT and social contributions) in the capital city, republican-status cities and oblast-status cities is 1 monthly calculation index established and effective on 1 January of the respective financial year (as of 1 January 2022, KZT3,063) and in other localities – half the monthly calculation index established and effective on 1 January of the respective financial year (as of 1 January 2022, KZT1,531.50).
Tax Audits (Inspections)
Tax inspections can be conducted in the form of comprehensive, targeted and cross-check audits, as well as in the form of chronometric observations, and are subdivided into the following categories:
1) special risk-based tax audits; and
2) unscheduled tax audits.
It should be specifically noted that Kazakhstan law does not prohibit repetitive unscheduled audits, i.e. audits with respect to the same taxes and other mandatory payments to the budget payable or paid by a taxpayer for the already audited tax period. However, unscheduled audits (with limited exceptions) for the earlier audited period may be performed only on the grounds of a resolution issued by the competent authority (Kazakhstan Ministry of Finance).
A tax audit may cover a period within the general statute of limitation, i.e. 3 years. However, tax liabilities of certain categories of taxpayers (e.g. taxpayers operating under subsoil use contracts, large businesses, and resident entities qualified as controlled foreign companies) are subject to a 5-year statute of limitation.
30 calendar days prior to a special risk-based tax audit, tax authorities are required to send or deliver to the taxpayer (tax agent) a relevant tax audit notice made in a proper form. Such notice is not required for unscheduled audits.
Tax audits are carried out on the basis of an order, and the date of service of such notice is deemed to be the date of commencement of such tax audit. A tax audit order must be registered with the competent authority on legal statistics and special accounts of the Kazakhstan General Prosecutor’s Office prior to the commencement of the tax audit. Tax audits should not interrupt the taxpayer’s ordinary course of business. The duration of tax audits set out in notices may not exceed 30 business days from the date of service of such notice. However, in certain events as determined by the Tax Code, tax authorities may extend such period.
A tax audit report is prepared upon completion of the tax audit and the date of service of such report to the taxpayer (tax agent) is deemed to be the date of its completion. Prior to the issuance of a tax audit report, the following taxpayer groups must be served an interim tax audit report to which such taxpayers may object in writing:
1) the taxpayers who are subject to tax monitoring (both who are on the list of major taxpayers subject to monitoring and who have entered into a horizontal monitoring agreement);
2) the taxpayers who have signed investment contracts;
3) the taxpayers whose taxes and obligatory payments to the budget, mandatory pension contributions, mandatory employer’s pension contributions, mandatory professional pension scheme contributions, social contributions and mandatory health insurance liabilities exceed, according to interim reports, 20,000-fold monthly calculation index established and effective on 1 January of the respective financial year (as of 1 January 2022, KZT61,260,000).
Upon completion of the tax audit, if the auditors find any violations resulting in the assessment of any taxes and other obligatory payments to the budget, the tax authority issues a notice of the findings of the tax audit which must be sent to the taxpayer (tax agent) within 5 business days after the date of service of the tax audit report to the taxpayer.
The taxpayer may dispute such notice with a competent authority (Appeals Board of the Kazakhstan Ministry of Finance) within 30 business days or with a court within 1 month after the date of such notice service.
Administrative actions against tax audit notices are subject to a state duty at the rate of 0.1% of the disputed amount of taxes and other obligatory payments to the budget (including tax default interests) specified in the notices, but in any case not more than 500-fold monthly calculation index established and effective on the date of the duty payment (as at 1 April 2022, KZT1,531,500) for sole traders, and at the rate of 1% of the disputed amount of taxes and payments to the budget (including tax default interests) specified in the notices, but in any case not more than 20,000-fold monthly calculation index established and effective on the date of the duty payment (as at 1 April 2022, KZT61,260,000) for legal entities.