Kazakhstan: Legislation Alert - March 2016

Last Updated: 1 August 2016
Article by Grant Thornton

Main amendments to the legislation

1. Regarding record of registration for value added tax (further – the "VAT")

From April 1, 2016 the following changes to the tax legislation of the Republic of Kazakhstan (further – the "RoK") regarding the order of record of registration for VAT will be introduced:

  • tax application shall be presented by resident legal entities, non-residents operating in the RoK through a branch or representative office, individual entrepreneurs (further – "IE") to tax bodies at their location in person.

Also, it shall be noted that while submitting such application chief executive officers of legal entity-resident of the RoK and IE will be photographed.

  • VAT registration certificate is presented in the form of electronic document certified by digital stamp of the official of registering body. Also, it shall be noted that according to the changes such certificate is termless.

Further, according to the Law of the RoK №432-V dated December 3, 2015 "On the Introduction of Amendments and Additions to Certain Legislative Acts regarding Taxation and Customs Administration" paragraph 3 article 568 is excluded from the Tax Code of the RoK (further – the "Tax Code"), according to which for the purposes of making record of registration for VAT, a taxpayer making budget settlements according to the special tax regime for farms or farm holdings, shall not include realisation turnover from activities subject to the special tax regime in turnover.

The following norms become effective in a retrospective order – from January 1, 2015.

Additionally, the article 569 is excluded from the Tax Code, which stipulates voluntary record of registration for VAT. From January 1, 2017 record of registration for VAT will be common shall the taxpayers exceed the minimum turnover in the amount of 3 234 times the monthly calculation index (further – "MCI") set by the Law on the State Budget and valid on 1 January of the relevant financial year. So, the limit set previously in the amount of 30 000 times MCI will be valid until January 1, 2017.

2. Regarding cancellation of social tax in the RoK

Currently, the tax legislation of the RoK sets fixed rate for social tax – 11% from salary fund, out of which 5% are social contributions.

Also, employers besides social tax and social contributions pay obligatory professional pension contributions (further – "OPPC") in the amount of 5% from salary fund, and as it was already mentioned in the previous legislation alerts, obligatory medical insurance contributions introduced to them in the future:

  • from January 1, 2017 - 2%;
  • from January 1, 2018 - 3%;
  • from January 1, 2019 - 4%;
  • from January 1, 2020 - 5%.

So, overall employer's burden on social tax, contributions to the funds of social security, pension contributions would be equal to in 2017 – 13%, in 2018 – 19%, in 2019 – 20% and in 2020 – 21% (without OPPC – 5%).

Therefore, Ministry of the National Economy of the RoK suggests two options of simplifying the process of social tax and social contributions payment in a new Draft of Tax and Custom Code:

  • Option №1:

It is proposed to set social tax rate at 7%. Tax base would be determined as employers' expenses paid in the form of income to employees, and also as payments made to individuals under civil law contracts, who are not IE. Additionally it is proposed to exempt from social tax for its own benefit IE, private notaries, private legal executives, advocates and professional mediators.

  • Option №2:

Cancellation of social tax in several stages, particularly:

Stage №1:

From January 1, 2017 to set a social tax rate as 7% with gradual reduction of rate depending on increase of rate on obligatory medical insurance contributions.

Further, the tax base would be determined as employers' expenses paid in the form of income to employees, and also payments made to individuals under civil law contracts, who are not IE. Also, to exempt from social tax payments for its own benefit IE, private notaries, private legal executives, advocates and professional mediators, but to set a personal income tax rate (further – "PIT") at 2%, under special tax

regime on the basis of patent and 3% under simplified declaration.

Stage №2:

To cancel social tax from January 1, 2020, as the overall amount of contributions to Social Fund and obligatory medical insurance contributions Fund will reach 10% from salary fund, meanwhile to implement progressive scale of PIT rates.

As it was already mentioned, this issue is under consideration at the Ministry of National Economy of the RoK, and the exact date of the introduction of such changes is unknown.

3. Regarding the list of imported goods on which VAT can be paid via offset method

The Ministry of National Economy of the RoK by the Order №93 dated February 13, 2015 approved "The list of imported goods on which VAT can be paid via offset method" (further – the "List").

So, according to the changes, codes of goods in the List are presented in accordance with the code of goods on the Common Customs Tariff of the Eurasian Economic Union (further – the "EAEU").

Additionally, the List has been supplemented with a serial number 235-1 – "research vessel, oil spill cleanup vessels".

The changes become effective in 10 calendar days after its first official publication - from 28 February 2016.

4. Regarding establishment of penalties for violation of terms for completion of customs procedures

By the Law №432-V dated December 3, 2015 "On the Introduction of Amendments and Additions to Certain Legislative Acts regarding Taxation and Customs Administration" the changes to the article 543 of the Code of the RoK on Administrative Violations (further – the "CoAV") are introduced.

Such changes introduce additional penalties, besides already established administrative charges, from 15 to 50 MCIs (in 2016 MCI is equal to 2 121 tenge), in the form of goods confiscation for violation of terms for completion of customs procedures.

The previous version of the article 543 of the CoAV stipulated confiscation of vehicles only.

The changes become effective from January 1, 2016.

5. Regarding import of goods without declaration for Kazakhstani Entrepreneurs

At a meeting of the department of the methodology of customs procedures of the State Revenue Committee of the RoK (further – "SRC RoK") it became known that Kazakhstan is planning to introduce "after the event" regime of customs clearance for a certain categories of foreign economic activity participants.

In other words, certain categories of entrepreneurs in the RoK will be able to import and export goods without the declaration and payment of duties and taxes when moving abroad. For these services entrepreneurs will be granted an extension to 40 days. It shall be noted, that such changes will be available only for:

  • products that pass inspection in the field of free warehouse or free customs zone;
  • products with the provided investment preferences;
  • authorized economic operators, the list of which will be expanded.

According to deputy head of the methodology of customs procedures of the SRC RoK the amendments are agreed with the countries-participants of the EAEU and will be included in the Customs Code of the EAEU.

"After the event" customs cleaning mechanism will start operating after the Customs Code enters into its force.

6. Regarding changes in legislation on production of oil products

On March 16, 2016 at a meeting the Committee on Economic Policy, Innovative Development and Entrepreneurship has reviewed the Draft Law "On amendments and additions to certain legislative acts of Kazakhstan on state regulation of production and turnover of certain types of petroleum products"(further – the "Draft Law").

By this Draft Law it is proposed to amend paragraph 5 article 574 of the Tax Code with the norm, according to which large resource owners can sell petroleum products at gas stations of small and medium-sized business.

Additionally, it has been proposed to give the Ministry of Energy of the RoK the right to approve the basic indicators of the production capacity of large oil refineries and their characteristics governing the use of existing equipment to meet the technological process.

The Draft Law will be considered at the plenary session of the Senate.

7. Regarding ratification of the Agreement with Slovakia on mutual protection on investments

On March 15, 2016 the Head of the RoK has signed the Law "On ratification of the agreement between Republic of Kazakhstan and Slovak Republic on encouragement and mutual protection of investment" (further – the "Agreement").

So, the Agreement stipulates payments of compensations to investors for exportation or nationalization of their investments. Additionally, the Agreement sets the procedures for formation of the international arbitration court which will be organized in order to settle disputes between the parties of the Agreement.

The Agreement is concluded for 10 years with the possibility of further extension.

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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