The document provides an overview of tax aspects for doing business in Kazakhstan. It discusses various business entities, principal taxes including corporate income tax of 20%, VAT of 12%, and withholding tax of 20%. It also outlines employee taxes such as a 10% individual income tax and 11% social tax. Currency controls, the labor code, and other taxes such as excise and property taxes are also summarized.
2. Table of Contents
S# Topic Page
1 Business Entities 3
2 Taxes 5
3 Corporate Tax 6
4 Value Added Tax
l dd d 8
5 Withholding Tax 10
6 p y
Employee Taxes 11
7 Currency Control 13
8 Labor Code 14
9 Other Taxes 15
10 Summary 16
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3. Business Entities
Currently, Kazakhstan legislation allows for several forms of business
entities, which include a Joint Stock Company, various types of partnerships,
Branch etc
etc.
The choice of vehicle is important due to the different financial, legal,
commercial and tax implications. For example, representative offices
cannot conduct commercial income‐generating activities. Foreign
companies that i
i h intend to engage i commercial i
d in i l income‐generating b i
i business
activities in Kazakhstan typically structure their presence through a branch
or a limited liability partnership.
Branches and Representative Offices
A branch and a representative office are not a separate legal entity, but
rather an extension of its head office. A branch is permitted to carry out
full commercial activities whereas a representative office is allowed only
to undertake representative functions and protection of the interests of
its head office. Neither a branch nor a representative office has charter
capital and it is the head office that is legally responsible for liabilities of
its representative office or branch to third parties.
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4. Business Entities…cont…
Branches and Representative Offices…cont…
A branch may not open another branch or a representative office and
may be liquidated upon the decision of its head office. Parent loans or
funding is not subject to licensing/registration/notification with the
National Bank, and may not be deductible for the Kazakhstan tax
purposes unless it is a third party. Funds can be freely transferred back to
the head office.
Registration Process
Generally, the registration of a new company in Kazakhstan is done
through registration with three different authorities:
• Legal registration with the Ministry of Justice (State Registration
Department);
• Statistics registration with the State Statistic Agency;
• Tax Registration with the Tax authorities at the place of location
(and/or place of activity location of a taxable object)
activity, object).
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5. Taxes
Principal Taxes
Corporate Income Tax (CIT) including branch profits tax capital gains tax
Corporate Income Tax (CIT) including branch profits tax, capital gains tax
and withholding taxes
Individual Income Tax (IIT)
Value‐Added Tax (VAT)
( )
Social tax
Excise Tax
Land tax
Tax on transport vehicles
Property tax
Rent tax on exported crude oil, natural gas liquids
p , g q
Taxes and special payments of subsurface users
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6. Corporate Tax
Corporate Tax
The tax year in Kazakhstan is a calendar year.
The Tax Code of the Republic of Kazakhstan, effective from 1 January 2009
stipulates accrual b i f computation of t
ti l t l basis for t ti f taxes.
Corporate income tax rate is 20% of the profits from 1st Jan 2009 until 1st
Jan 2013 and 17.5% from 1st Jan 2013 until 1st Jan 2014.
In addition to corporate income tax non residents operating in Kazakhstan
tax, non‐residents
through a PE are also subject to a branch profits tax at the statutory rate of
15% (reducible to 10% or 5% under an applicable double tax treaty).
CIT returns / payment
Following tax payers have the right not to pay advance CIT
• Taxpayers whose aggregate annual income in the preceding tax
period does not exceed 325000 times MCI (MCI for 2010 is 1413
Kazakhstan Tenge)
• Newly registered taxpayer – in the tax period in which state
registration was done and also in the next tax period.
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7. Corporate Tax…cont…
Corporate Tax cont
CIT returns / payment…cont…
Assessments of advance corporate income tax
p
• Not later than 20th January for the first quarter ‐ 1/4th of the
advance tax assessed for the previous period multiplied by the ratio
of the tax rate for the period.
• Not later than 20th April ‐ 3/4th of the corporate tax plus branch
tax multiplied by the ratio of the tax rate for the period.
• Additional assessments may be submitted not later than 20th
December.
Advance payments of CIT shall be made not later than 25th day of the
current month.
Payers of corporate tax shall submit CIT declaration not later than
31st March of the year following the reporting tax period
period.
Taxpayers shall make payment of CIT upon the results of the tax
period not later than 10 calendar days after the date established for
submission of declaration.
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8. Value Added Tax
Value Added Tax
All taxpayers registered for VAT purposes are required to charge VAT on their
taxable supply, and calculate and report their VAT obligations. The general
VAT rate is 12% for 2010.
Taxpayers are required to register for Kazakhstan VAT purposes if their
taxable supply in the preceding 12 months exceeded 30 000 MCI Even if an
30,000 MCI.
entity is not required to register for VAT purposes, it may still voluntarily do
so by submitting an application to the appropriate tax committee.
Turnovers taxable at the zero rate include:
Turnovers taxable at the zero rate include:
export sales of goods;
international transportation services;
sales of goods in the territory of special economic zones under certain
sales of goods in the territory of special economic zones under certain
conditions.
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9. Value Added Tax…cont…
Value Added Tax cont
VAT Offset.
VAT paid on services and goods purchased by a VAT payer (i.e., input VAT)
including reverse‐charge VAT and VAT paid at customs should generally be
available for offset (credit) when determining a taxpayer’s VAT liability to
the budget. However, offset is not available for VAT incurred for the
purpose of supplies which are either exempted or which are deemed to
be supplied outside of Kazakhstan.
VAT declarations / payment
The tax period for VAT is a quarter.
Submission of the VAT Declaration is due by the 15th and VAT payment is
y p y
due by 25th day of the second month following the reporting quarter.
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10. Withholding Tax
g
Payments to Overseas Vendors for services
Non‐residents which do not have a permanent establishment in
Kazakhstan are subject to Kazakhstan withholding tax on
Kazakhstan source income. Non‐residents’ income in the form of
interest, royalties and dividends is subject to 15% withholding tax,
potentially reducible to between 10% and 5% under most tax
treaties provided that beneficial ownership criteria and other
administrative requirements (tax residence certificate etc.) are met
Other Kazakhstan‐sourced income (including income from services
and management fees) is taxed at 20% unless a relevant DTT
20%,
provides otherwise.
WHT applies even if payment for such services are effected from
the head office.
Taxpayer shall transfer the amount of WHT withheld at source not
later than 25 calendar days after the end of the month in which
the payment was made.
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11. Employee Taxes
Employee Taxes
Individual Income Tax
Tax rate of 10% on gross income of employees (both monetary and in
g p y ( y
kind) is applicable.
Expatriates residing in Kazakhstan for more than 183 days in a year are
generally taxed on their worldwide income.
A general deduction based on the minimum monthly wage of KZT 14 95214,952
or KZT 179,424 per annum is allowed while calculating the taxable
income.
It is the responsibility of the employer to withhold taxes from the
employee payroll for both resident and non resident employees
employees.
Tax withheld should be transferred to the budget before the 25th days of
the month following a month of payment.
Quarterly tax declarations of income tax shall be submitted not later than
y
15th day of the second month following the reporting quarter.
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12. Employee Taxes…cont…
Employee Taxes…cont…
Social Tax
Social tax is payable by employers at the rate of 11% of the total
remuneration (both monetary and in kind) provided to all employees.
Quarterly tax declarations of social tax shall be submitted not later than
15th day of the second month following the reporting quarter.
S i li
Social insurance contributions rate i 5% of an i di id l ’ gross i
t ib ti t is f individuals’ income,
capped at 10 times the minimum monthly wage.
Obligatory pension contributions are payable by Kazakhstan citizens and
foreign citizens with legal permanent residence at the rate of 10% of their
citi ens 0%
gross income (to be withheld by their employer) and capped at 75 times
the minimum monthly wage.
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13. Currency Control
Currency Control
The Tenge, the official currency of Kazakhstan, has full convertibility.
Settlements between Kazakhstan residents have to be carried out in the
Kazakhstan Tenge only.
Settlements between residents and non‐residents are permitted in
foreign currency.
g y
Foreign entities are allowed to make and receive payments in foreign
currency including to their offshore accounts.
Foreign legal entities may transfer abroad any foreign exchange in excess
of local requirement.
Payment of expat salaries in foreign currency from offshore is permitted.
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14. Labor Code
Working Conditions
According to the Labor Code, employment contracts define the terms of
employment.
employment Normal duration of business day should not exceed eight
hours and standard working hours a week are 40 hours, with special
provisions for shift work. The amount of work remuneration is established
by the employer independently and may not be lower than the minimum
amount of work remuneration as established by Kazakhstan's legislation.
Overtime work should not exceed two hours during one day, twelve hours
in a month and one hundred twenty hours during one year.
Payments for each overtime hour must be not less than the rate for 1,5
hours of employee's base payment Payments for each hour of overtime
employee s payment.
during the official holidays must not be less than 2 hourly rate of
employee’s base payment rate.
Work permit
KLE’s and FLE’s are required to obtain work permits for employment of
expatriates in Kazakhstan except for head of branch or representative
offices or persons on business trip for less than 60 days in a calendar year.
14
15. Other Taxes
Excise Tax.
Excise duties apply to the sale and importation of all types of spirit,
pp y p yp p
alcohol products, tobacco, petrol/gasoline (excluding aviation fuel), diesel
fuel, cars, crude oil and natural gas condensate. Excise duty rates vary and
are subject to frequent changes.
Property Tax.
p y
Property tax is calculated at a rate of 1.5% of the average book value of
taxable items as determined in accounting. Property tax is paid in four
installments during the reporting year with the final payment of the
actual tax to be made by the 10th April.
Vehicle Tax.
The tax rate depends on the type of the vehicle, and the engine size.
Vehicle tax payable by legal entities is paid annually not later than 5 July
of the year following the tax period.
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16. Summary
y
Corporate income tax rate – 20%
Branch tax – 15% of net income
Withholding tax rate – 20%
VAT rate – 12%
Individual Income Tax – 10%
Social tax – 11%
Abbreviations used
VAT – Value Added Tax
CIT – Corporate Income Tax
WHT – Withholding Tax
WHT – Withholding Tax
DTT – Double Tax Treaty
PE – Permanent Establishment
MCI – Monthly Calculation Index
KLE – Kazakhstan Legal Entity
FLE – Foreign Legal Entity
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17. Disclaimer
The information contained in this publication is for general purpose
only and is not intended, and should not be construed, as legal,
accounting, or tax advice or opinion provided by Oxford Business
Information Services to the reader. This material may not be
applicable or suitable for, the reader’s specific circumstances or
needs. Therefore,
needs Therefore the information should not be used as a substitute
for consultation with professional accounting, tax, or other
competent advisors.
The publishers and the authors expressly disclaim all and any liability
and responsibility to any person, entity or corporation who acts or
fails to act as a consequence of any reliance upon the whole or any
part of the contents of this publication
publication.
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