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Kazakhstan Highlights New Tax Code Provisions

Posted on Aug. 4, 2021

In a July 28 release, the State Revenue Committee of the Kazakh Ministry of Finance outlined new tax code provisions introduced by Law 53-VII (dated June 24), including tax breaks and special regimes.

Corporate Deductible Expenses

From July 1, legal entities are permitted to deduct for corporate tax purposes expenses related to the introduction and implementation of sanitary, anti-epidemic, and preventive measures to safeguard employees against COVID-19. These expenses are not to be considered taxable income of individuals.

The modifications to the tax code also allow the deduction of interest expenses and other compensation paid on intragroup loans granted to subsidiaries by their parent company.

Legal entities whose activities are aimed at solving social problems (and meet the relevant eligibility criteria) may reduce their taxable income by double the amount of expenses incurred to pay for training of socially vulnerable categories of the population.

Corporate Tax Exemption of Reinvested Income

Small manufacturing businesses will not be taxed on income reinvested in the acquisition or construction of buildings and structures for industrial purposes.

Digital Mining Tax

A tax on digital mining (mining of cryptocurrencies) will be introduced January 1, 2022. The payers of the tax will be digital miners. The tax will be determined based on the volume of electrical energy consumed during digital mining at the rate of KZT 1 per kilowatt-hour. The tax must be paid quarterly no later than the 20th day of the month following the end of the reporting quarter.

Retail Turnover Tax for Catering Industry

From January 1, 2023, until January 1, 2025, legal entities and individual entrepreneurs working in the public catering sector will be allowed to switch to a special tax regime in the form of a retail turnover tax collectible at the rate of 6 percent.

Special Tax Regime With Use of Mobile App

From January 1, 2022, a special tax regime will be available for users of the mobile application е-SalyqBusiness. The new regime provides for simplified tax registration of individual entrepreneurs, calculation and payment of taxes and social charges, and filing of tax reporting documentation via smartphone. The tax regime can be applied by individuals who do not use hired employees, carry out one or more eligible activities as individual entrepreneurs, and are not registered as VAT payers. These activities include: minor construction-related and renovation work, such as plastering, carpentry, flooring, wall cladding, and painting; taxi driving; freight transportation by road; property management on a fee or contract basis; photography; translation services; rent services; sports training; education; activities in the field of art; repair services; hairdressing; manicure and pedicure services; veterinary services; cultivation of land; cleaning services; housekeeping; production and repair of musical instruments; and grazing of domestic animals.

Under the special tax regime, personal income tax will apply at a rate of 1 percent. Personal income tax and social charges will be payable monthly no later than the 25th of the month following the reporting month.

Extended Deadline to Submit Tax Residency Certificates

Due to the difficulties in obtaining tax residency certificates in foreign countries because of COVID-19 restrictions, the deadline to submit these certificates for tax treaty purposes for 2019 and 2020 is extended until December 31, 2021.

VAT

Beginning July 1, legal entities, within two years from the date of their state registration, have the right to offset against their VAT liabilities the VAT paid in connection with operations involving the sale of goods resulting from their production activities in the manufacturing industry (except for the metallurgical industry). The manufactured goods must meet the criteria for sufficient processing and be confirmed by a certificate of origin of goods in accordance with the Kazakh legislation. Also, their production must be nonexistent in Kazakhstan or insufficient to cover the country’s needs.

The tax code modifications also exempt from VAT imports in the special economic zone Qyzyljar designated for the production of agricultural machinery and equipment.

Deferral of Personal Income Tax and Social Tax

The modifications granted a deferral until July 1 of payment and remittance of the personal income tax and social tax due from individuals during the period of April 1 through July 1. The deferral applies to entities/individuals (tax agents) using the special tax regime of a retail tax and to individuals involved in private practice.

Iurie Lungu, lawyer, Montreal

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