The tax legislation of the Republic of Kazakhstan consists of the Code On Taxes and Other Mandatory Payments to the Budget (The Tax Code) of June 12, 2001, N 209-II, and other regulatory legal acts, the adoption of which is provided for by the Tax Code.
TYPES OF TAXES
Withdrawals in the Republic of Kazakhstan are as follows: taxes and other mandatory payment to budget (fees, charges, stamp duty and customs payments):
Taxes:
Corporate income tax -
Payers: Resident legal entities of the Republic of Kazakhstan, with the exception of the National Bank of the Republic of Kazakhstan and government institutions, as well as nonresident legal entities doing business in the Republic of Kazakhstan through a permanent establishment or earning income from sources in the Republic of Kazakhstan.
Objects of taxation:
Taxable income;
Income taxed at the source of payment;
Net income of a nonresident legal entity doing business in the Republic of Kazakhstan through a permanent establishment.
Tax rates: General - 30 per cent; income taxed at the source of payment - 15 per cent; in addition to the corporate income tax, the net income of a nonresident legal entity doing business in the Republic of Kazakhstan through a permanent establishment shall be subject to taxation at the rate of 15 percent.
Individual income tax -
Payers: Individuals who have objects of taxation; there are some special provisions for nonresident individuals.
Objects of taxation:
Income taxed at the source of payment;
Income not taxed at the source of payment.
Tax rates: from 5 to 20 per cent depending on gross annual income.
Value-added tax -
Payers:
Following persons who have registered for the value-added tax in the Republic of Kazakhstan: individual entrepreneurs, legal entities, with the exception of government institutions, nonresident doing business in the Republic of Kazakhstan through a permanent establishment;
Structural subdivisions of the legal entity recognized as independent payers of the value-added tax;
Payers of the value-added tax on imported goods are persons who import these goods onto the territory of the Republic of Kazakhstan in accordance with the customs legislation of the Republic of Kazakhstan.
Objects of taxation:
Taxable turnover
Taxable imports
Tax rates: 15 per cent.
Excise taxes -
Payers: Individuals and legal entities including nonresident legal entities and their structural subdivisions who:
Produce excisable goods on the territory of the Republic of Kazakhstan;
Import excisable goods onto the customs territory of the Republic of Kazakhstan;
Are engaged in wholesale or retail trade in gasoline (with the exception of aviation fuel) and diesel fuel on the territory of the Republic of Kazakhstan;
Are engaged in the realization of confiscated, unclaimed excisable goods, as well as excisable goods inherited by the state and transferred to the state as a gift, on the territory of the Republic of Kazakhstan, if excise taxes were not previously paid on said goods on the territory of the Republic of Kazakhstan in accordance with the legislation of the Republic of Kazakhstan;
Are engaged in excisable activities on the territory of the Republic of Kazakhstan.
Objects of taxation:
Excisable goods: All types of spirits; alcohol products; tobacco products; other articles containing tobacco; gasoline (with the exception of aviation fuel), diesel fuel; passenger cars (other than cars with hand-operated controls specially designed for disabled persons); crude oil, gas condensate;
Excisable activities: Gambling business; the organization and holding of lotteries.
Tax rates: Are set by the Republic of Kazakhstan government and shall be established as a percentage of the value of the goods (ad valorem) and/or as an absolute amount per unit of measure in physical terms (fixed). Excise tax rates on alcohol products are set on the basis of their absolute (100-percent) alcohol content by volume. Excise tax rates for all types of spirits are differentiated depending on the purposes for which the spirits will subsequently be used. The Republic of Kazakhstan government establishes maximum and minimum levels of the basic excise tax rate calculated on an annual basis for objects involved in the gambling business.
Rent tax on exported crude oil, gas condensate -
Payers: Individuals and legal entities who sell crude oil or gas condensate for export, with the exception of subsurface users concluded subsurface use contracts.
Object of taxation: Volume of crude oil or gas condensate that is sold for export.
Tax rates: Depending on market price of a barrel - from 0 per cent (when a barrel's price is less than USD 19) to 33 per cent (when a barrel's price is more than USD 40).
Taxes and special payments of subsurface users -
Payers: Subsurface users. Object of taxation: There are two models of taxation:
The first model provides for payment by the user of mineral resources of all types of taxes and other mandatory payments established by the Tax Code, with the exception of the Republic of Kazakhstan's share under the production sharing arrangement;
The second model provides for payment (transfer) by the subsurface user the Republic of Kazakhstan's share under a production sharing arrangement, as well as payment of all types of taxes and other mandatory payments established by the Tax Code, with the exception of: the rent tax on exported crude oil, gas condensate; the royalty; the excise tax on crude oil and gas condensate; the excess profits tax; the land tax; the property tax.
Tax rates: The system of subsurface users' withdrawals is as follows:
The tax on excess profit (called the 'special tax of subsurface users') - from 0 to 60 per cent;
Special payments applied to subsurface users:
The Republic of Kazakhstan share under production sharing - is set in the contract;
A royalty - for crude oil and gas condensate is from 2 to 6 per cent; for solid minerals, including gold, silver, platinum, and other precious metals and precious stones - is set by the Republic of Kazakhstan government.
A bonus:
A signing bonus - the final amount of a signing bonus is established by the commission as a result of a competition of investment programs for obtaining subsurface usage right and is set in a contract taking into account the economic value of the deposits (territories) being turned over for mining operations, but it must not be less than the initial amounts.
A commercial discovery bonus - the amount of a commercial discovery bonus shall be determined in accordance with the object of taxation, the calculation base, and the rate;
An additional payment of a subsurface user doing business under a production sharing arrangement - in case that state returns in a tax period are less than 10 per cent before the reimbursement of invested funds, and less than 40 per cent in following periods of the cost of gross value of extracted production received by the subsurface user in the tax period, the respective difference is paid by the subsurface user.
Social tax -
Payers:
Individual entrepreneurs, with the exception of those who carry out payments to budget basing on a single-use coupon; private notaries and attorneys;
Private notaries and attorneys.
Resident legal entities of the Republic of Kazakhstan
Structural subdivisions of legal entities can be recognized as payers of the social tax basing on the decision of the legal entity;
Nonresidents doing business in the Republic of Kazakhstan through a permanent establishment.
Object of taxation: The number of employees, including the payers themselves (for (1) and (2)); employers expenditures paid to employees in the form of income (for (3), (4) and (5)).
Tax rates: An amount that is equal to three times the monthly index factor for themselves and two times the monthly index factor for each employee (for (1) and (2)); a regressive scale from 20 per cent from the taxable income to 7 per cent (for (3), (4) and (5)). There are some exceptions with respect to foreign specialists serving as administrative and management personnel and engineering and technical personnel (from 11 to 5 per cent) and specialized organizations that employ disabled persons who have musculo-skeletal system disabilities, or who have lost their hearing, speech, or vision (6.5 per cent).
Land tax -
Payers: Individuals and legal entities that hold objects of taxation on the basis of: the right of ownership; the right of permanent land use; the right of primary temporary land use at no charge. Object of taxation: A parcel of land (in the case of common share ownership of a parcel of land, the object of taxation shall be the land share). Tax rates: Are differentiated basing on a type of land, its location and other characteristics.
Vehicle tax -
Payers: Individuals who own objects of taxation and legal entities and their structural subdivisions that own objects of taxation or have objects of taxation under their economic control or operational management. Object of taxation: A means of transport. Tax rates: From 0,04 to 55 monthly index factors basing on a type of a means of transport.
Property tax -
Payers:
Legal entities that own an object of taxation or have an object of taxation under their economic control or operational management on the territory of the Republic of Kazakhstan; individual entrepreneurs who own an object of taxation on the territory of the Republic of Kazakhstan;
Individuals who own an object of taxation.
Legal entities that are not residents of the Republic of Kazakhstan are subject to the property tax with respect to objects on the territory the Republic of Kazakhstan. Object of taxation: For (1) - fixed assets (including objects that are classified as residential buildings) and intangible assets; for (2) - objects, which are owned by them and not used for entrepreneurial activity: residential premises, summer cottages, garages, and other structures, structural installations, and premises located on the territory of the Republic of Kazakhstan; unfinished construction projects located on the territory of the Republic of Kazakhstan - from the moment they are occupied (put into use). Tax rates: For (1) - 1 per cent of the average annual value of the objects of taxation; for (2) - a progressive rate from 0.1 to 1 per cent from the value of objects of taxation established as of January 1 of each year by an authorized agency identified by the Republic of Kazakhstan government.
There is also a reduced tax rate (0.1 per cent) with respect to noncommercial legal entities, organizations operating in the social sphere, organizations whose principal activity involves the performance of work (delivery of services) related to library services, government enterprises performing functions in the area of state certification of scientific personnel, legal entities with respect to hydro land reclaiming structures.
Fees:
Fee for state registration of legal entities -
Is collected at the time of state registration (recording) of the creation and termination of operation of legal entities and their branch offices and representative offices, their re-registration, and also when they receive a duplicate certificate of state registration (recording).
Fee for state registration of individual entrepreneurs -
Is collected at the time of state registration of unincorporated individuals engaged in entrepreneurial activity on the territory of the Republic of Kazakhstan as individual entrepreneurs, and also when they receive a duplicate of the document certifying their state registration.
Fee for state registration of rights to real property and real estate transactions -
Is collected at the time of state registration of rights to real property and real estate transactions, and also upon receipt of a duplicate of the document certifying state registration.
Fee for state registration of pledge of movable property -
Is collected at the time of state registration of pledge of movable property, and also upon receive of a duplicate of the document certifying state registration.
Fee for state registration of radio-electronic equipment and high-frequency devices -
Is collected at the time of registration of radio-electronic equipment and high-frequency devices, and also upon receipt of a duplicate of the document certifying state registration.
Fee for state registration of mechanical means of transport and trailers -
Is collected at the time of registration (re-registration) of mechanical means of transport and trailers, and also upon receipt of a duplicate of the document certifying state registration.
Fee for state registration of marine and river vessels and small craft -
Is collected at the time of state registration (re-registration) of marine and river vessels and small craft, and also upon receipt of a duplicate of the document certifying state registration.
Fee for state registration of mortgage of vessels or vessels under construction -
Is collected at the time of state registration of mortgage of vessels or vessels under construction, and also upon receipt of a duplicate of the document certifying state registration.
Fee for state registration of civilian aircraft -
Is collected at the time of state registration (re-registration) of civilian aircraft, and also upon receipt of a duplicate of the document certifying state registration.
Fee for state registration of medicines -
Is collected at the time of state registration (re-registration) of medicines permitted for use in the Republic of Kazakhstan in accordance with the legislation of the Republic of Kazakhstan, and also upon receipt of a duplicate of the document certifying state registration.
Fee for travel by motor vehicles on the territory of the Republic of Kazakhstan -
Is collected for: (1) departure from the territory of the Republic of Kazakhstan of domestic motor vehicles that are transporting passengers and freight on international routes; (2) entry onto (or exit from) the territory of the Republic of Kazakhstan, and transit across the territory of the Republic of Kazakhstan, of foreign motor vehicles that are transporting passengers and freight on international routes; (3) travel by domestic and foreign oversize and/or heavy-duty motor vehicles on the territory of the Republic of Kazakhstan; (4) travel by domestic and foreign motor vehicles on government-operated toll roads of the Republic of Kazakhstan.
Auction fee -
Is collected when property (including property rights) is sold at auctions.
Licensing fee for the right to engage in certain types of activity -
Is collected when licenses (duplicate licenses) are issued to engage in certain types of activity that are subject to licensing in accordance with the legislation of the Republic of Kazakhstan.
Fee for issuing permits to television and radio broadcasting organizations to use the radio frequency spectrum -
Is collected when the authorized communications agency issues permits (duplicate permits) to television and radio broadcasting organizations of the Republic of Kazakhstan to use the radio frequency spectrum.
Charges:
Charge for the use of parcels of land -
Is collected for the allocation of parcels of land by the state for temporary paid land use (leasing).
Charge for the use of surface water resources -
Is collected for all types of special water use from surface sources, in which water is or is not removed from the surface sources.
Charge for environmental pollution -
Is collected for the performance of activity on the territory of the Republic of Kazakhstan that is classified as a special use of natural resources, as defined by legislative acts of the Republic of Kazakhstan.
Charge for the use of wildlife resources -
Is collected for the removal of animals living in the wild from their natural habitat.
Charge for the use of forest resources -
Is collected for the following types of forest uses:
Logging;
Procurement of turpentine and tree sap;
Procurement of secondary timber materials (bark, branches, stumps, roots, leaves, buds of trees and bushes);
Ancillary use of forest resources (haying and grazing of livestock, maral breeding, animal breeding, placement of beehives and apiaries, vegeculture, melon-growing, and growing of other farming cultures, procurement and gathering of medicinal plants and industrial raw materials, wild fruits, nuts, mushrooms, berries, and other edible forest products, procurement and gathering of moss, forest bedding, leaf litter and cane);
Use of state forests parcels for cultural-recreational, recreation, tourist and sport purposes;
Use of state forests parcels for hunting;
Use of state forest parcels for scientific and research purposes.
Charge for the use of specially protected natural areas -
Is collected for the use of specially protected natural areas of the Republic of Kazakhstan for scientific, cultural, educational, training, tourist, recreational, and limited economic purposes.
Charge for the use of the radio frequency spectrum -
Is collected for bandwidths (bands, ranges) of the radio frequency spectrum (referred to hereinafter as radio frequency bandwidths) that are allocated by the authorized communications agency.
Charge for the use of the domestic long distance and (or) international telephone line -
Is collected for granting for the right to provide the domestic long distance and (or) international telephone line within the telecommunication net of common use.
Charge for the use of navigable waterways -
Is collected for the use of navigable waterways of the Republic of Kazakhstan.
Charge for the placement of outdoor (visual) advertising -
Is collected for the right to place outdoor (visual) advertising in the form of signs, display stands, illuminated display panels, billboards, transparencies, posters, and other permanent advertising installations in the right-of-way of public roadways and in population centers on the territory of the Republic of Kazakhstan.
Customs payments:
Customs duty.
Customs charges -
(1) For customs processing;
(2) For the storage of goods;
(3) For customs accompaniment;
Fees -
(1) For licenses issued by customs authorities of the Republic of Kazakhstan;
(2) For qualification certificate issued to a customs processing specialist.
Payment -
For a preliminary decision.
Stamp duty -
Is a mandatory payment collected for the performance of legally significant actions and/or for the issuance of documents by duly authorized government agencies or officials.
One of the types of a stamp duty is a consular fee which is a type of stamp duty collected by diplomatic missions and consular institutions of the Republic of Kazakhstan from citizens and legal entities of the Republic of Kazakhstan, as well as foreign citizens and stateless persons, and foreign legal entities, for the performance of consular actions and for issuing documents that have legal significance.
ADDITIONAL INFORMATION
There is an accrual method of taxation in the Republic of Kazakhstan. An accrual method is a tax accounting method according to which income and expenditures are recorded as of the moment the work is performed, services are provided, goods are shipped for the purpose of their realizationrealization, and property is received, regardless of the time of payment.
Statute of limitations for a tax obligation is extended to 5 year in comparison with a general term (3 years).
There are three tax regimes with respect to offshore business in Kazakhstan:
Usage of treaties for the avoidance of double taxation.
Taxation of an activity through a permanent establishment or caused as a result of receiving income from sources in the Republic of Kazakhstan.
Taxation of an activity without formation a permanent establishment.
By 2005 Kazakhstan ratified Conventions for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital with 35 states: Azerbaijan, Belarus, Belgium, Bulgaria, Canada, China, Czech, Estonia, France, Georgia, Germany, Great Britain, Hungary, India, Iran, Italy, Korea, Kyrgyzstan, Latvia, Lithuania, Moldova, Mongolia, Pakistan, Poland, Rumania, Russia, Sweden, Switzerland, Tajikistan, the Netherlands, Turkey, Turkmenistan, Ukraine, USA, Uzbekistan. Besides, Conventions with Austria and Norway were ratified by Kazakhstan. Conventions with Finland, Malaysia, and Slovakia had been initialed in the Republic of Kazakhstan. Negotiations with Indonesia, Singapore, Sultanate Oman and Vietnam had been commenced. The process of preparation to commence negotiations with Armenia, Egypt, Greece, Jordania, Macedonia, Morocco, Qatar, Spain, Thailand and Yugoslavia is in progress at the moment.
FUTURE
The Republic of Kazakhstan currently modifies its tax legislation. In particular, there have been introduced amendments with respect to exemption from income tax for those who produce goods with a high added value. In April 2005, two draft laws on securitization were introduced for consideration. in Mazhilis, the Lower House of the Parliament. These amendments shall exempt a securitization cover from the taxpayer's annual income. Some amendments are going to be introduced with regard to special economy zones etc.
