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 CORPORATIONS
Taxpayers are legal entities that receive taxable income during the tax year. The taxable income is taxed at the rate of 30%, unless the primary means of production is land, in which case the rate of 10% applies.
Local Income Taxes
There are no local income taxes, although other local taxes do apply.
Capital Gains Taxes
No special treatment has been legislated and capital gains are therefore included in income subject to profit tax.
Branch Profits Taxes
Branches are currently taxed in the same manner and at the same rates as resident corporations, but are subject to an additional 15% tax levied on profits after income tax.
Foreign Tax Reliefs
To prevent double taxation, credit is given for foreign income taxes against income tax payable in Kazakstan. Credit is limited to the amount of tax that would have been assessed by Kazakstan on the income.
If a resident directly or indirectly owns more than 10% of the authorised capital or voting shares of a foreign legal person (or other form of business entity) that derives income from a "country with priveleged taxation", the income attributable to the Kazak entity is included in its taxable income whether or not it is actually received. A country with privileged taxation is one in which:
- The rate of tax is less than 2/3 of the rate in Kazakstan; or
- There are laws concerning confidentiality that allow the ownership of income or property to be kept secret.
Classification of Corporations
Corporations are classified for Kazak tax purposes as either resident or non resident. A resident corporation is one established in accordance with Kazak legislation or having its place of actual management in Kazakstan.
Payments of Taxes
Current tax payments should be paid to the Budget not later than the 20th day of each month on the basis of the relevant tax rate and the financial results for the previous month. Income taxes paid outside Kazakstan should be taken into account when paying Kazakstan income tax.
Declarations of aggregate annual income and deduction made by legal entities should be presented to the tax authorities before the 31st March of the year following the reporting year.
Non-resident legal entities carrying out activities through a permanent establishment are required to present to the tax authorities a tax return and an auditors' confiramtion of the reliablility of the information in the declaration. This confirmation should be submitted during the year following a reporting year, but no later than ten days after the date of completion of the auditor's review. Taxes should be paid within ten days of submission of the tax return but not later than April 10 of the year following the reporting year.
Kazak source income of a non-resident foreign legal entity that carries out activities in Kazakstan, other than through a registered permanent establishment and arising from the provision of services, is subject to withholding tax at source at a rate of 20%.
Dividends are subject to a final withholding tax at the rate of 15%.
Interest payable to legal entities is subject to a final withholding tax at the rate of 15%. Interest payable to resident banks is not subject to withholding tax.
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'.