Kazakhstan: Tax And Customs Laws Update

Last Updated: 24 April 2017
Article by Liza Zhumakhmetova, Gaukhar Kudaibergenova and Ulan Stybayev

On 1 January 20171, the Law of the Republic of Kazakhstan ('the RK') No. 26-VI ЗРК 'On Amending Certain Legislative Acts of the Republic of Kazakhstan on Taxation and Tax Administration' ('the Law') came into force.

The Law introduced significant changes to Kazakhstan tax and customs laws, which we would like to draw your attention to.

Audit

  • The total annual income threshold has been increased from 60,000 MCI2 to 120,000 MCI for the Kazakhstan resident companies' pre-liquidation audit;
  • Preliminary tax audit report has been introduced. The Law entitles the taxpayer to present a legitimate objection in writing to the preliminary results of tax audit report.

Individual Income Tax (IIT)

  • Insurance benefits as compensation of harm, inflicted upon life and health of an employee during his employment duties, under annuity insurance contracts3 are not recognized as personal income
  • The IIT and social tax declarations for the Kazakhstan citizens and foreigners have been consolidated;
  • An individual's property income, received in a foreign currency, is recalculated in tenge at the market exchange rate established on the last business day preceding the date of the transaction.

Individual Income Declaration

Due to the launch by Kazakhstan of a general income declaration (starting from 2017 – for civil servants, from 2020 – for the other persons), the Law provides for the following changes:

  • Cash, debit and credit indebtedness and other property threshold has been increased under general declaration from 160 Minimum Wages4 to 500 Minimum Wages;
  • Administrative charges for untimely/incomplete/false declaration have been significantly reduced from 30 MCI to 3 MCI;
  • Individuals in possession of immovable property, which is subject to the state or other registration in a competent body of another state; securities, the emitters of which are registered outside Kazakhstan; or a share in the charter capital of a foreign company, must file an IIT declaration with the tax authorities.

Value Added Tax (VAT)

  • by all VAT payers – from 2019.
  • by major taxpayers – from 2018;
  • The e-Vat invoice must be issued:
  • In order to adjust taxable turnover, apart from supplementary VAT invoice, a cash register machine receipt may be mandatorily required in the cases, stipulated by Kazakhstan Tax Code.
  • The timescales for issuance of VAT invoices in case of customs export procedure have been increased from 2017:
  • for hard copy – not later than 7 calendar days following the date of the sale turnover;
  • in e-form – not later than 20 calendar days following the date of the sale turnover.
  • The cash borrowings on terms of payment, urgency and repayment are VAT exempt regardless of lender's property form5.
  • The VAT offsetting procedure has been amended so that VAT is offset in the tax period corresponding with the latest date of receiving goods, works and services or issuing VAT invoice.
  • The receiver is entitled to state disconformity in a reissued e-VAT invoice within 10 calendar days after its receipt.
  • No VAT invoice in case of payment for goods, works and services having been made via device that accepts payment cards.

Excise Duty

  • Excise duty has been increased for:
  • alcoholic beverages (save for cognac, brandy, wines, beer): per 1 liter of 100% pure alcohol in 2017 – KZT 2,000, 2018 – KZT 2,250, 2019 – KZT 2,550;
  • beer and beer drinks: per 1 liter in 2017 – KZT 39, 2018 – KZT 48, 2019 – KZT 57;
  • tobacco products: per 1000 items in 2017 – KZT 6,200, 2018 – KZT 7,500, 2019 – KZT 8,700.
  • The obligation has been introduced for the targeted use of account and control marks by third country importers when importing alcoholic beverages to Kazakhstan. Such obligation may now be secured by the importer by a bank guarantee, suretyship or property pledge6.
  • The Law on Tobacco Products7 has been amended as follows:
  • PIN for tobacco products has been introduced, which is an identification number assigned to produced and imported tobacco products;
  • Application must be filed prior to production and import of tobacco products in accordance with PIN assignment rules.

Subsoil Use

  • The subsoil user's expenses are actual expenses for the purpose of fulfilling the obligation to finance Kazakhstan citizens' training and retraining by means of acquisition of goods, works and services as prescribed under the statutory list. Such goods, works and services are required in order to improve the material and technical base of educational organizations carrying out advanced training in Kazakhstan, directly related to the subsoil use sphere.
  • Kazakhstan Tax Code clarified the definition of commercial discovery, which means approval by an authorized government body of the mineral reserves in the relevant contract territory.
  • The commercial discovery bonus, apart from the deposit's additional exploration, is also paid by the subsoil user when recalculating mineral reserves.
  • Income from debt cancellation by strategic partners of national companies and their subsidiaries on remuneration for investment in the absence of commercial discovery is exempt from CIT.
  • The procedure has been established for fulfillment of the tax liability in kind in royalties and the Kazakhstan's participation interest in the production share.

Tax and Customs Administration

  • Penalties for changing the tax liability due date is eliminated in cases of insolvency resolving procedure, court resolution on initiation of bankruptcy proceedings or court decision on rehabilitation procedure coming into legal force.
  • An appellate commission under Kazakhstan Ministry of Finance will be operating from 1 July 2017 for consideration of complaints on notifications of the results of tax and customs audits.
  • The period has been increased from 3 to 10 working days, during which the customs authorities, based on the results of the audit, impose limitations on taxpayer's disposal of the property in case of charges for customs payments and taxes.

Other Changes

  • The new fee for issuance and extension of the work permit to foreign manpower has been introduced into Kazakhstan Tax Code.
  • The definition of a foreign economic transaction has been introduced into Kazakhstan Customs Code. It is a transaction between a person from a Member State of the Customs Union and a foreigner, as well as a transaction between the persons of the different Member States of the Customs Union, on the basis of which goods are transported across the customs border of the Customs Union.
  • Customs transit does not apply to foreign goods transported from the place of arrival to the place of temporary storage located within the administrative territorial boundary of one urban area.
  • No need to provide security for the payment of customs duties and taxes at customs transit in the case when goods are transported by air from places of arrival to delivery points in Kazakhstan.

Footnotes

[1] Save for certain provisions of the Law.

[2] MCI (Monthly Calculation Index) – KZT 2,269.

[3] An annuity insurance contract is a contract, under which the insurer makes recurrent insurance payments to beneficiary for a set period, as the result of insurable event.

[4] Minimum Wages – KZT 24,459.

[5] Previously, this rule applied only to the national management holdings and their wholly owned subsidiaries, approved by the Kazakhstan government.

[6] Previously, it was possible only to put money on temporary money accommodation account of the competent body's local department.

[7]The Law of the RK No. 439-II 'On State Regulation of Production and Turnover of Tobacco Products' dated 12 June 2003 (amended as of 30 November 2016).

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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