Kazakhstan Highlights 2012 Currency: Tenge (KZT) Foreign exchange control: Payments between residents and nonresidents may be made in any currency. Certain transactions may be subject to the National Bank’s notification or registration regime. Accounting principles/financial statements: Large entities and public companies in Kazakhstan must use IFRS, while small and medium-size enterprises and branches and representative offices of foreign entities may use IFRS or a national financial reporting standard. Principal business entities: These are the joint stock company, limited liability company, partnership, branch of a foreign corporation and representative office. Corporate taxation: Residence – A company is resident if it is established under the laws of Kazakhstan or if it has its governing bodies or place of actual management there. Basis – Resident companies are taxed on worldwide income. Nonresidents are generally taxed only on Kazakhstan-source income. Taxable income – Businesses are subject to corporate income tax on trading profits and other taxable income. In general, expenses that are wholly and exclusively incurred for the purpose of the business and that can be documented may be deducted.
International Tax, 2012
Taxation of dividends – Dividends received (other than from risk investment funds) are effectively exempt from income taxation. Capital gains – Capital gains derived by a resident legal entity are treated as normal income and taxed at the standard tax rate. Certain categories of capital gains are exempt if conditions are met including gains derived from the sale of shares that principally do not derive their value from subsurface use property. Losses – Operating losses generally may be carried forward for up to 10 years following the year when the loss arises. The carryback of losses is not available. Rate – The main corporate income tax rate of 20% applies to both domestic and foreign companies (also see ‘Branch remittance tax’). Income payable to a nonresident from sources in Kazakhstan unrelated to a permanent establishment (PE) is taxed at rates varying between 5% and 20%, depending on the type of income (see ‘Withholding tax’). Surtax – A surtax exists in the form of an excess profit tax levied on subsurface users. Alternative minimum tax – No Foreign tax credit – A credit is generally available for foreign taxes paid on foreign-source income based on the document confirming the foreign income tax payment.
Participation exemption – No Holding company regime – No Incentives – Incentives are available in the form of an accelerated tax deduction for capital expenditure provided certain requirements are met. There are also incentives for investments in priority economic sectors relating to business in special economic zones. Withholding tax: Dividends – A withholding tax of 15% is levied on dividends paid to a nonresident without a PE in Kazakhstan. A 20% tax rate applies to dividends paid to a nonresident registered in a tax haven. Certain exemptions are available. Interest – A 15% withholding tax is levied on interest paid to a nonresident without a PE in Kazakhstan. Interest paid to a nonresident registered in a tax haven is subject to a 20% rate. Certain exemptions are available. Royalties – Royalties paid to a nonresident without a PE in Kazakhstan are subject to a 15% withholding tax. A 20% rate applies to royalties paid to a nonresident registered in a tax haven. Other – Other Kazakhstan source income (including capital gains, services fees etc.) is subject to wittholding tax at rates varying between 5% and 20%, depending on the type of income. Certain exemptions are available.
Branch remittance tax – A branch office of a foreign company pays a branch profits tax of 15% of net after-tax income, in addition to corporate income tax (unless reduced under a tax treaty). Other taxes on corporations: Capital duty – No Payroll tax – An employer is required to remit social tax at a flat rate of 11% on top of an employee’s salary (both local and foreign) at its own expense. In addition, an employer must pay social security contributions to the State Social Security Fund at an effective rate of 5% for 2012 (with an income cap of KZT 174,390) on top of local employees’ salaries. Social contributions paid reduce the social tax due. As a tax agent, an employer is required to withhold and remit 10% individual income tax and obligatory pension fund contributions on behalf of its employees to the appropriate authorities. Contributions to private pension accounts are equal to 10% of the monthly salary up to a maximum of KZT 130,793 per month. Real property tax – Property tax is paid at a rate of 1.5% of the average annual net book value of immovable property (i.e. buildings and constructions classified as such under the state classifier approved by authorized state body and accounted as part of fixed assets or real estate investments under the IFRS and Kazakh financial accounting and reporting law). Certain exemptions are available. Social security – See above under “Payroll tax”. Transfer tax – No. Other – Business entities engaged in subsurface use operations are subject to other specific taxes.
Taxes are levied on land and transport at various rates. Anti-avoidance rules:
Rulings – The tax authorities generally issue nonbinding rulings of an explanatory nature.
Transfer pricing – The transfer pricing rules adopt the arm’s length standard, introduce reporting requirements and allow for advance pricing agreements.
Personal taxation:
Thin capitalisation – The deductibility of interest paid to nonresidents registered in tax havens, related parties and independent parties under certain conditions may be limited for resident payers.
Residence – tax residency criteria are based on whether an individual is permanently residing or has a center of vital interests located in Kazakhstan. The permanent residence test is based on the number of days of stay in Kazakhstan, i.e. a foreign individual deemed to be a resident if his/her presence in Kazakhstan exceeds 183 days in any consecutive 12month period ending in the reporting tax year. The center of vital interests test is based on whether an individual is a citizen or a holder of a Kazakh residency permit and has family and a place of abode in Kazakhstan.
Controlled foreign companies – CFC rules apply to residents with a 10% or more shareholding in a tax haven entity. A “tax haven state” is one that has certain confidentiality laws or a tax rate below 10%. The list of tax haven states is adopted by government. Other – No. Disclosure requirements – No. Administration and compliance: Tax year – Calendar year. Consolidated returns – Consolidated returns are not permitted; each company must file a separate return. However, a nonresident with multiple PEs in Kazakhstan may opt to file a consolidated tax return. Filing requirements – The corporate income tax return is due by 31 March of the year following the reporting tax year. A one month extension can be obtained for tax returns filed electronically. Penalties – Penalties are assessed at 2.5 times the official refinancing rate established by the National Bank for each day of delay in paying tax due.
Basis – Resident individuals are taxed on worldwide income while non-residents are taxed on their Kazakh-source income only.
Filing status – Joint filing is not permitted; each individual must file his/her own return, if required. Taxable income – Kazakh-source income includes income from employment and other activities in Kazakhstan and any other benefits received in this respect, regardless the place of payment. Taxable income is comprised of employment income (including benefits in-kind), income from a business and passive income. Capital gains – Income derived from the sale of property is treated as capital gain subject to taxation unless the individual has held the property for more than 1 year. Subject to certain exceptions, income derived from the sale of shares of participation and securities is treated as a capital gain subject to taxation.
Deductions and allowances – Standard monthly deductions are allowed for tax residents, such as minimum monthly salary deduction (KZT 17,439 per month), obligatory pension fund contributions, medical costs, etc., with certain limitations. Rates – Employment income is taxed at a flat rate of 10% for both residents and non-residents. Dividends are taxed at 5% for residents. Dividends and capital gains are taxed at 15% for nonresidents. Other income is taxed at 10% for residents and 20% for nonresidents. Other taxes on individuals: Capital duty – No. Stamp duty – No, but the authorities may impose a levy on various legal actions, such as for the issuance of documents by state bodies. Capital acquisitions tax – No. Real property tax – Property tax is levied on immovable property located in Kazakhstan at progressive rates ranging from 1% to 1.5%, depending on the value of the property. Taxes on land and transport vary depending on specified factors. Inheritance/estate tax – No. Net wealth/net worth tax – No.
Social security – See under “Other taxes on corporations”. Administration and compliance: Tax year – Calendar year. Filing and payment – Individual income tax on employment income is subject to withholding, payment and reporting by the employer. Payment is due by 25th of the month following the month the income was paid. Income and tax should be reported on a quarterly basis by the 15th of the second month following the reporting quarter. In case if an individual receives income not subject to taxation at the source of payment, a tax return must be filed by 31 March of the year following the reporting year, with the payment of final tax due by 10 April. Penalties – Penalties apply for late payment of taxes and administrative fines are imposed for noncompliance.
Registration – Registration for VAT is compulsory for companies whose turnover exceeds KZT 48,540,000 in a calendar year period. Otherwise, registration is optional. Filing and payment – Payment is due by the 25th of the second month following the reporting quarter. VAT and related turnover should be reported on a quarterly basis by the 15th of the second month following the reporting quarter. Source of tax law: Code of the Republic of Kazakhstan on taxes and other mandatory payments to the budget. Tax treaties: Kazakhstan has concluded more than 40 tax treaties. Tax authorities: Tax Committee of the Ministry of Finance; Territorial tax committees at the district, region, town and city levels. International organisations: UN, CIS, IMF.
Value added tax: Taxable transactions – VAT is levied on the supply of goods and services and imports. A reverse charge applies in certain cases. Rates – The standard rate is 12%. Certain exemptions exist for financial and other transactions. Export of goods are zero rated.
Deloitte contact: Vladimir Kononenko vkononenko@deloitte.kz Tel +7 (727) 258 13 40
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