On 1 January 2021, a number of changes in the tax legislation came into force1, which are aimed at improving the investment climate. One of th? important changes is the introduction of provisions on an investment tax credit granted to taxpayers (hereinafter - the 'ITC').
The ITC represents a change in the due date for the payment of taxes for forthcoming periods, i.e. taxes that are payable in the future at a statutory time may be deferred in full (100 percent). Thus, the state provides a tax credit that can be paid in instalments after the due date established by the Tax Code. At the same time, while applying the ITC, the taxpayer retains the right to carry forward losses in accordance with the provisions of the Tax Code.
The Tax Code provides for the ITC for two taxes only: corporate income tax and(or) property tax. The ITC is provided for up to 3 years.
To obtain the ITC, a taxpayer shall file an application and enter into an agreement with the Ministry of Foreign Affairs of the Republic of Kazakhstan.
The Tax Code provides that the form of the agreement, as well as the procedure for signing thereof, shall be determined by the Ministry of Foreign Affairs of the Republic of Kazakhstan.
The agreement shall provide for: the procedure for reducing tax payments, the term of the agreement, restrictions related to the ITC granting, and the liability of the parties. For instance, if a taxpayer has purchased expensive production equipment, it can apply for an ITC. In this case, the ITC agreement may provide for a prohibition for the taxpayer to sell or transfer equipment to other persons. Violation of such restrictions stipulated by the agreement may result in the termination thereof, as well as payment of the taxes being the subject of the agreement and the corresponding amounts of interest in full2.
Please note that the Tax Code does not give the right to use ITC to the taxpayers, who:
- enjoy a special tax regime;
- produce and(or) sell all types of alcohol, alcoholic beverages, tobacco products;
- pay taxes in accordance with sections 21 (FEZ, etc.) and 23 (Subsoil Users) of the Tax Code.
As stated above, the principal conditions for the ITC provision will be determined by the agreement between the taxpayer and the Ministry of Foreign Affairs of the Republic of Kazakhstan. To date, the form of the agreement and the procedure for singing thereof has not yet been provided by the Ministry of Foreign Affairs of the Republic of Kazakhstan.
1 The Law of the Republic of Kazakhstan dated 10 December 2020 No. 382-VI 'On the Introduction of Amendments to the Code of the Republic of Kazakhstan 'On Taxes and Other Obligatory Payments to the Budget' (Tax Code)' and the Law of the Republic of Kazakhstan 'On the Enactment of the Code of the Republic of Kazakhstan 'On Taxes and Other Obligatory Payments to the Budget' (Tax Code)'.
2 Article 54.4 of the Tax Code.
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.