Major developments

Tax legislation in the Republic of Kazakstan is constantly evolving as part of the development of a young sovereign State.

The key changes in the tax legislation are provided in the Edict of the President of the Republic of Kazakstan "Concerning Taxes and Other Obligatory Payments to the Budget" which became effective July 1, 1995, as amended with effect from 1 January , 1996.

The following information on taxes operating in the territory of the Republic of Kazakstan is based on the legislation as at 1 August, 1996.

INCOME TAXES ON NONRESIDENTS

Liability to Tax

Nonresident taxpayers are foreign legal entities that carry out business activities through a permanent establishment or receive income from Kazak sources without establishing a permanent establishment.

A nonresident taxpayer carrying out business activities through a permanent establishment pays income tax on income from Kazak sources connected with the permanent establishment in the same manner as stipulated for residents of the Republic of Kazakstan. A nonresident legal entity's income from Kazak sources not connected with a permanent establishment, is taxable at source on the basis of gross income without offset of expenses at the rates prescribed in item 16.

Rates

Types of Income                              Tax Rate

Dividend and interests                       15%
Insurance payments                           5%
Telecommunications and transport
services for international
communication and transportation
between Kazakstan and other countries        5%
Royalties, income from services
(including management services
consulting, rents and other
(except wages)                               20%

Tax Treaties

Kazakstan renounced all the former USSR double tax treaties effective January 1, 1995, with the exception of those with Canada, France, Germany and Japan which remain in force until December 31, 1995. Kazakstan currently has treaties with two countries - with Poland and the United Kingdom. Treaties with Hungary, Italy, the Netherlands and the United States of America await ratification.

                       Dividends      Interest       Royalties

Poland                 15,10          10             0
United Kingdom         5,15           10             10

Treaty definition are as follows:

                       Period of Time         Employment
                       Construction Site      Less Than
                       Less Than (Months)     (Days)

Poland                 12                     183
United Kingdom         12                     183

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.

For further information contact Jonathan Wale or Zaid Sethi on tel: +7 3272 622 101 or enter a text search 'Coopers & Lybrand' and 'Business Monitor'.