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Tax kazakhstan

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tax aspects for doing business in kazakhstan

tax aspects for doing business in kazakhstan

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  • 1. Tax Aspects for Doing Business in  p g Kazakhstan August 2010 Oxford Business Information Services www.taxman‐cis.com 1
  • 2. Table of Contents S# Topic Page 1 Business Entities 3 2 Taxes 5 3 Corporate Tax 6 4 Value Added Tax l dd d 8 5 Withholding Tax 10 6 p y Employee Taxes 11 7 Currency Control 13 8 Labor Code 14 9 Other Taxes 15 10 Summary 16 Oxford Business Information Services 2 www.taxman‐cis.com
  • 3. Business Entities  Currently, Kazakhstan legislation allows for several forms of business entities, which include a Joint Stock Company, various types of partnerships, Branch etc etc.  The choice of vehicle is important due to the different financial, legal, commercial and tax implications. For example, representative offices cannot conduct commercial income‐generating activities. Foreign companies that i i h intend to engage i commercial i d in i l income‐generating b i i business activities in Kazakhstan typically structure their presence through a branch or a limited liability partnership.  Branches and Representative Offices  A branch and a representative office are not a separate legal entity, but rather an extension of its head office. A branch is permitted to carry out full commercial activities whereas a representative office is allowed only to undertake representative functions and protection of the interests of its head office. Neither a branch nor a representative office has charter capital and it is the head office that is legally responsible for liabilities of its representative office or branch to third parties. Oxford Business Information Services 3 www.taxman‐cis.com
  • 4. Business Entities…cont…  Branches and Representative Offices…cont…  A branch may not open another branch or a representative office and may be liquidated upon the decision of its head office. Parent loans or funding is not subject to licensing/registration/notification with the National Bank, and may not be deductible for the Kazakhstan tax purposes unless it is a third party. Funds can be freely transferred back to the head office.  Registration Process  Generally, the registration of a new company in Kazakhstan is done through registration with three different authorities: • Legal registration with the Ministry of Justice (State Registration Department); • Statistics registration with the State Statistic Agency; • Tax Registration with the Tax authorities at the place of location (and/or place of activity location of a taxable object) activity, object). Oxford Business Information Services 4 www.taxman‐cis.com
  • 5. Taxes  Principal Taxes  Corporate Income Tax (CIT) including branch profits tax capital gains tax Corporate Income Tax (CIT) including branch profits tax, capital gains tax  and withholding taxes  Individual Income Tax (IIT)  Value‐Added Tax (VAT) ( )  Social tax  Excise Tax  Land tax  Tax on transport vehicles  Property tax  Rent tax on exported crude oil, natural gas liquids p , g q  Taxes and special payments of subsurface users Oxford Business Information Services 5 www.taxman‐cis.com
  • 6. Corporate Tax Corporate Tax  The tax year in Kazakhstan is a calendar year.  The Tax Code of the Republic of Kazakhstan, effective from 1 January 2009 stipulates accrual b i f computation of t ti l t l basis for t ti f taxes.  Corporate income tax rate is 20% of the profits from 1st Jan 2009 until 1st Jan 2013 and 17.5% from 1st Jan 2013 until 1st Jan 2014.  In addition to corporate income tax non residents operating in Kazakhstan tax, non‐residents through a PE are also subject to a branch profits tax at the statutory rate of 15% (reducible to 10% or 5% under an applicable double tax treaty).  CIT returns / payment  Following tax payers have the right not to pay advance CIT • Taxpayers whose aggregate annual income in the preceding tax period does not exceed 325000 times MCI (MCI for 2010 is 1413 Kazakhstan Tenge) • Newly registered taxpayer – in the tax period in which state registration was done and also in the next tax period. Oxford Business Information Services 6 www.taxman‐cis.com
  • 7. Corporate Tax…cont… Corporate Tax cont  CIT returns / payment…cont…  Assessments of advance corporate income tax p • Not later than 20th January for the first quarter ‐ 1/4th of the advance tax assessed for the previous period multiplied by the ratio of the tax rate for the period. • Not later than 20th April ‐ 3/4th of the corporate tax plus branch tax multiplied by the ratio of the tax rate for the period. • Additional assessments may be submitted not later than 20th December.  Advance payments of CIT shall be made not later than 25th day of the current month.  Payers of corporate tax shall submit CIT declaration not later than 31st March of the year following the reporting tax period period.  Taxpayers shall make payment of CIT upon the results of the tax period not later than 10 calendar days after the date established for submission of declaration. Oxford Business Information Services 7 www.taxman‐cis.com
  • 8. Value Added Tax Value Added Tax  All taxpayers registered for VAT purposes are required to charge VAT on their taxable supply, and calculate and report their VAT obligations. The general VAT rate is 12% for 2010.  Taxpayers are required to register for Kazakhstan VAT purposes if their taxable supply in the preceding 12 months exceeded 30 000 MCI Even if an 30,000 MCI. entity is not required to register for VAT purposes, it may still voluntarily do so by submitting an application to the appropriate tax committee.  Turnovers taxable at the zero rate include: Turnovers taxable at the zero rate include:  export sales of goods;  international transportation services;  sales of goods in the territory of special economic zones under certain sales of goods in the territory of special economic zones under certain  conditions. Oxford Business Information Services 8 www.taxman‐cis.com
  • 9. Value Added Tax…cont… Value Added Tax cont  VAT Offset.  VAT paid on services and goods purchased by a VAT payer (i.e., input VAT) including reverse‐charge VAT and VAT paid at customs should generally be available for offset (credit) when determining a taxpayer’s VAT liability to the budget. However, offset is not available for VAT incurred for the purpose of supplies which are either exempted or which are deemed to be supplied outside of Kazakhstan.  VAT declarations / payment  The tax period for VAT is a quarter.  Submission of the VAT Declaration is due by the 15th and VAT payment is y p y due by 25th day of the second month following the reporting quarter. Oxford Business Information Services 9 www.taxman‐cis.com
  • 10. Withholding Tax g  Payments to Overseas Vendors for services  Non‐residents which do not have a permanent establishment in Kazakhstan are subject to Kazakhstan withholding tax on Kazakhstan source income. Non‐residents’ income in the form of interest, royalties and dividends is subject to 15% withholding tax, potentially reducible to between 10% and 5% under most tax treaties provided that beneficial ownership criteria and other administrative requirements (tax residence certificate etc.) are met Other Kazakhstan‐sourced income (including income from services and management fees) is taxed at 20% unless a relevant DTT 20%, provides otherwise.  WHT applies even if payment for such services are effected from the head office.  Taxpayer shall transfer the amount of WHT withheld at source not later than 25 calendar days after the end of the month in which the payment was made. Oxford Business Information Services 10 www.taxman‐cis.com
  • 11. Employee Taxes Employee Taxes  Individual Income Tax  Tax rate of 10% on gross income of employees (both monetary and in g p y ( y kind) is applicable.  Expatriates residing in Kazakhstan for more than 183 days in a year are generally taxed on their worldwide income.  A general deduction based on the minimum monthly wage of KZT 14 95214,952 or KZT 179,424 per annum is allowed while calculating the taxable income.  It is the responsibility of the employer to withhold taxes from the employee payroll for both resident and non resident employees employees.  Tax withheld should be transferred to the budget before the 25th days of the month following a month of payment.  Quarterly tax declarations of income tax shall be submitted not later than y 15th day of the second month following the reporting quarter. Oxford Business Information Services 11 www.taxman‐cis.com
  • 12. Employee Taxes…cont… Employee Taxes…cont…  Social Tax  Social tax is payable by employers at the rate of 11% of the total remuneration (both monetary and in kind) provided to all employees.  Quarterly tax declarations of social tax shall be submitted not later than 15th day of the second month following the reporting quarter.  S i li Social insurance contributions rate i 5% of an i di id l ’ gross i t ib ti t is f individuals’ income, capped at 10 times the minimum monthly wage.  Obligatory pension contributions are payable by Kazakhstan citizens and foreign citizens with legal permanent residence at the rate of 10% of their citi ens 0% gross income (to be withheld by their employer) and capped at 75 times the minimum monthly wage. Oxford Business Information Services 12 www.taxman‐cis.com
  • 13. Currency Control Currency Control  The Tenge, the official currency of Kazakhstan, has full convertibility.  Settlements between Kazakhstan residents have to be carried out in the Kazakhstan Tenge only.  Settlements between residents and non‐residents are permitted in foreign currency. g y  Foreign entities are allowed to make and receive payments in foreign currency including to their offshore accounts.  Foreign legal entities may transfer abroad any foreign exchange in excess of local requirement.  Payment of expat salaries in foreign currency from offshore is permitted. Oxford Business Information Services 13 www.taxman‐cis.com
  • 14. Labor Code  Working Conditions  According to the Labor Code, employment contracts define the terms of employment. employment Normal duration of business day should not exceed eight hours and standard working hours a week are 40 hours, with special provisions for shift work. The amount of work remuneration is established by the employer independently and may not be lower than the minimum amount of work remuneration as established by Kazakhstan's legislation.  Overtime work should not exceed two hours during one day, twelve hours in a month and one hundred twenty hours during one year.  Payments for each overtime hour must be not less than the rate for 1,5 hours of employee's base payment Payments for each hour of overtime employee s payment. during the official holidays must not be less than 2 hourly rate of employee’s base payment rate.  Work permit  KLE’s and FLE’s are required to obtain work permits for employment of expatriates in Kazakhstan except for head of branch or representative offices or persons on business trip for less than 60 days in a calendar year. 14
  • 15. Other Taxes  Excise Tax.  Excise duties apply to the sale and importation of all types of spirit, pp y p yp p alcohol products, tobacco, petrol/gasoline (excluding aviation fuel), diesel fuel, cars, crude oil and natural gas condensate. Excise duty rates vary and are subject to frequent changes.  Property Tax. p y  Property tax is calculated at a rate of 1.5% of the average book value of taxable items as determined in accounting. Property tax is paid in four installments during the reporting year with the final payment of the actual tax to be made by the 10th April.  Vehicle Tax.  The tax rate depends on the type of the vehicle, and the engine size. Vehicle tax payable by legal entities is paid annually not later than 5 July of the year following the tax period. Oxford Business Information Services 15 www.taxman‐cis.com
  • 16. Summary y  Corporate income tax rate – 20%  Branch tax – 15% of net income  Withholding tax rate – 20%  VAT rate – 12%  Individual Income Tax – 10%  Social tax – 11%  Abbreviations used  VAT – Value Added Tax  CIT – Corporate Income Tax  WHT – Withholding Tax WHT – Withholding Tax  DTT – Double Tax Treaty  PE – Permanent Establishment  MCI – Monthly Calculation Index  KLE – Kazakhstan Legal Entity  FLE – Foreign Legal Entity Oxford Business Information Services 16 www.taxman‐cis.com
  • 17. Disclaimer The information contained in this publication is for general purpose only and is not intended, and should not be construed, as legal, accounting, or tax advice or opinion provided by Oxford Business Information Services to the reader. This material may not be applicable or suitable for, the reader’s specific circumstances or needs. Therefore, needs Therefore the information should not be used as a substitute for consultation with professional accounting, tax, or other competent advisors. The publishers and the authors expressly disclaim all and any liability and responsibility to any person, entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this publication publication. Oxford Business Information Services 17 www.taxman‐cis.com

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