1. Ratification of the Convention for the avoidance of double
taxation between the Republic of Kazakhstan (further – the
"RoK") and Saudi Arabia
On June 16, 2016 Senate of the Parliament of the RoK at the
plenary session approved the Law "On the Ratification of the
Convention between the Government of the RoK and the Government of
the Kingdom of Saudi Arabia for the Avoidance of Double Taxation
and Prevention of Fiscal Evasion and the Protocol to the
Convention" (further – the "Convention").
As it was mentioned in previous tax alerts, the Convention and
Protocol to Convention was signed in Astana on June 7, 2011.
The Convention provides, among others, the reduced withholding
taxes on interest, dividends, royalty.
2. Deduction of export customs duty
On March 28, 2016 the Revenue Committee of the Ministry of
Finance published letter № NK-24/2470-I, with an outline of
frequent tax violations made by oil and gas companies (further
– the "Letter").
In paragraph 4 and 5 of the Letter the Revenue Committee
discusses the deduction of export customs duty amount (further
– the "ECD") charged during the inspection and
export of crude oil when the temporary customs declaring procedure
In Letter №525-04/16, dated April 29, 2016, the
Association of Taxpayers of RoK (further – the
"ATK") requested from the Revenue Committee a
clarification in respect of paragraph 4 and 5 of the Letter.
The Revenue Committee responded to the above letter as
paragraph 4 of the Letter refers to a
case where ECD was not paid (for any reasons), and, consequently,
was not reflected in the customs declaration, but later was charged
as a result of a customs inspection (audit).
In this case, the ECD is deductible in the period when goods
have been transferred rather than in the period when the results of
the customs inspection (audit) were approved.
paragraph 5 of the Letter refers to
the case where the taxpayer paid applicable ECD and reported the
ECD amount on the customs declarations.
In this case, the ECD is deductible in the period when the
customs declaration was arranged. Further, the Revenue Committee
asserts that the ECD amount does not form part of the cost of
sales, so it is deductible as a period expense in accordance with
the accruals principle of accounting.
3. Draft rules for an indirect calculation of taxable income of
The Ministry of the Finance of the RoK approved a draft of Rules
for an indirect calculation of taxable income of individuals
(further – the "Draft Rules").
The Draft Rules were developed in accordance with paragraph 6 of
article 643-1 of the Tax Code of the RoK.
The methods described in
the Draft Rules are as follows:
Capital gain method would be used if
the acquisition cost of property is known and transaction with that
property is subject to registration.
Cost accounting method would be used
if an individual has expenses other than those mentioned in the
This method is applied by comparing these expenses of an
individual (for example, an expensive vacation, repayment of
credits) with the individual's income reported on income tax
Movement of cash on bank accounts
would be analyzed if cash is transferred into/from these
The revenue authorities of the RoK can apply these methods in
The Draft Rules become effective from January 1, 2017
and is subject to official publication.
4. Barrelization ratio to calculate rent tax
In its letter №708-06/16, dated June 19, 2016, ATK asked
the Ministry of Finance to clarify which of the quality
certificates can be considered as a document confirming the
barrelization ratio to calculate the rent tax on exports.
Revenue Committee in its letter № SRC-09-YLE-133 SRC-15481
explains that in accordance with paragraph 2 of Article 302 of the
Tax Code, the basis for the calculation of the rent tax on exports
is the cost of oil. The cost of oil is calculated on the basis of
the actual volume of exported oil and the world price determined in
accordance with paragraph 3 of article 334 of the Tax Code.
Further, under paragraph 3 of article 334 of the Tax Code, the
conversion from barrels to tones should be made in accordance with
the national standard.
Thus, in order to calculate the rent tax on
exported oil, taxpayers must refer to oil quality passport used to
determine the gross exported volume of oil indicated in line 35 of
the customs declaration.
It is worth noting that the Tax Code in the version effective
until 2016 does not provide a procedure for the application of the
weighted average barrelization ratio.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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