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.
OTHER SIGNIFICANT TAXES
Sales (Value Added) Taxes
Legal entities and individuals who act as entrepreneurs are liable for value-added tax, which is applied to taxable turnover and taxable imports. The rate of VAT for taxable turnover is 20%. VAT at 20% also applies to taxable imports, the tax base comprising the customs values plus any customs duties, tariffs, and excises payable on import. The import of goods by individuals within limits set by the Board of Ministers of the Republic of Kazakstan is exempt from VAT.
Turnover may, on election by the taxpayer, be calculated on either the cash method or the accruals method. The election will apply to all taxes payable by the enterprise for an entire fiscal year.
The Tax Code provides exemption for several types of sales turnover and imports including:
- Rents and sale of possession, and rights to use land;
- Financial services, postal services;
- Privatisation transactions;
- Works and services rendered by noncommercial organisations;
- Geological prospecting and exploration works
The export of goods is taxable at 0%. Goods or services imported for the official or personal use of foreign diplomatic representative offices and representative offices with diplomatic status are taxable at 0%.
The frequency with which VAT returns and payments must be made to the Budget is determined by the volume of trade and varies between once per quarter and three times per month. Tax on imported goods is payable on the day specified by the Customs Code of the Republic of Kazakstan.
If international agreements to which Kazakstan is a party specify different rates of VAT, those agreements prevail.
Inheritance and Gift Taxes
Property and monetary means received by legal entities as a gift are included in the aggregate annual income. The value of property received as a donation (gift) or inheritance from one individual to another individual, or as a charitable contribution, is not subject to taxation.
Taxes on Payrolls (Social Security)
The tax on payroll is 32%, of which 30% goes to the Pension Fund and the Social Security Fund, and 2% goes to the Employment Fund.
Taxes on Natural Resources
Special payments and taxes an natural resources include:
- Bonuses - Bonus payers are subsurface users in accordance with contracts concluded with Government of the Republic of Kazakstan. Bonuses are negotiated and agreed on a case-by-case basis with reference to published guidelines.
- A special flat (contractual) bonus is a onetime fixed payment for the right of geological exploration and/or subsequent mining; - A commercial discovery bonus is a onetime fixed payment payable at the moment of discovering economic reserves or deposits; - An exploration bonus is a fixed payment payable periodically by users at the moment of reaching certain conditions or stages of mining or production
- Royalties - Royalty are subsurface users carrying out the mining of mineral resources. The royalty is payable on the basis and in the amount stipulated by the relevant contract concluded between the user and the government. Such royalties are negotiated on a case-by-case basis.
- Excess profits taxes - Excess profits tax payers are all subsurface users carrying out mining of mineral resources that receive additional profits due to better conditions or that sell their output at better than expected prices. The tax is paid if it its amount and payment terms are stipulated in the exploration and /or production agreement.
The terms of payments for bonuses and royalties are stipulated in the contract with the Kazak Government. Tax on excess profit is payable by 15 April in the year following the reporting year. A draft Mineral Resources Law is currently under consideration which it is intended will replace the current legislation concerning bonuses, royalties and excess profits taxes.
Securities Transactions Taxes.
Legal entities and individuals who make securities transactions connected with transfer of ownership of the securities and those who issue the securities are liable for this tax. The following are taxable:
- the value of original and additional issues of securities other than Government Securities issued within the territory of the Republic of Kazakstan.
- The market value of securities for transactions connected with transferring ownership of the securities within the territory of Kazakstan and outside its boundaries for securities issued in Kazakstan is 0,5% of the nominal (face) value of issue at the moment of registration of issue, and 3 tenge per 1000 tenge (1 tenge per 1000 tenge for Government Securities) of their selling price for securities transactions.
Legal entities and individuals, as well as lessors at the rates specified for certain categories of land under lease, are subject to land tax on a plot of land or area of land granted to them for ownership and use.
Tax rates are defined by the quality and location of the land and any water supply on the land; the business results or activities of land owner or user do not affect the rates. The land tax is an annual fixed payment per land unit.
The procedure and terms of tax payment for using the land plots granted to other states are defined by agreements concluded between Kazakstan and other states. The tax rates for different types of land are as follows:
(1) Land designated for Zone 1: 0.25 - 105.00 agriculture (tenge/hectare) Zone 2: 0.25 - 26.00 (2) Land in populated areas 0.25 - 15.00 (tenge/square metre) (3) Land of industrial, defence, transport, or other designated importance (tenge/hectare) 0.25 - 3,000.00 (4) Land of ecological, historic, or cultural importance same as in (1) and (2), above (5) Land for forestry reserves same as in (1) and (2), above (6) Land for water reserve same as in (3), above
Legal entities and individuals who either own or are entrusted with management of motor vehicles, or have operational management of motor vehicles that are registered by the state are liable for this tax. The tax is payable annually and is calculated as a percentage of the minimum monthly wage for each kilowatt of power of the transport vehicle. The tax rates range from 1.0% to 8.0%, depending on the type of vehicle, e.g., tracked vehicles, etc.
The tax is payable by Kazak citizens, foreign citizens, and stateless persons, and is due before 1 September of the year of use. The tax is payable regardless of whether the transport vehicle is in use or is operational until the vehicle is removed from the state register.
Legal entities, including those with participation of foreign capital participation, and individuals who either own or are entrusted with management of property, or have operational management of property, are liable for the tax. Property tax does not apply to non-profit making organisations, budgetary organisations, and the National Bank of Kazakstan.
Property Tax All fixed production and nonproduction 0.5% of depreciated assets valued at more than 40 minimum value, payable calculation ratios, having a useful annually life of more than one year, and owned by legal entities or individual entrepreneurs Residential premises, buildings, 0.1% of estimated and other premises owned by value, payable individuals that are not used for annually business activities
* If a non commercial, budget organisation, or an individual uses part of the property for business activities, the tax rate is 0.5% of the value of such part.
Property tax is deductible from taxable income. The tax is due 10 April of the year following the reporting year. Current paymants are made in equal instalments four times a year. Individuals should pay tax on property not used for business activities no later than October 1 of the current year.
Excise duties are levied on goods produced in the territory of Kazakstan, on imported goods and on gambling activities. Goods subject to duties include vodka and vodka products, ethyl alcohol, champagne, tobacco products, sturgeon and salmon fish and roe, jewellery, items made of natural fur, crystal items, petrol and diesel fuel, passenger cars.
Excise duty rates range from 0.05 to 3.5 ECU for tobacco products and alcohol products and from 5% to 100% for others.
Local Taxes and Tariffs.
Tariffs are imposed for the right to perform certain activities and for auction sales.
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'.