Tax Alert: February 2019

SIGNUM regularly provides Legislative Alerts to keep Clients informed about important legislation or regulatory changes in Kazakhstan. This Alert includes recent developments related to the following finance and tax matters:

  1. Exemption of Chinese Companies’ Dividends from Taxation in Kazakhstan
  2. VAT Separate Bank Account
  3. “Astana Hub” IT Park Tax Privileges
  4. Thresholds for Special Taxation Regimes Are Changed (“Light” Taxation)
  5. Preliminary Tax Opinion on Planned Transactions
  6. Risk Management System
  7. Horizontal Monitoring
  8. Tax Amnesty for Businesses
  9. New Consular Fees of Kazakhstan

1. Exemption of Dividends Payable to Chinese Companies from Taxation in Kazakhstan

On 8 January 2019, the Agreement between the Government of the Republic of Kazakhstan and the Government of People’s Republic of China on Release from Taxation of Certain Types of Income of the Chinese-Kazakhstan Production Capacity Cooperation Fund Making Direct Investments into Kazakhstan, signed on 8 June 2017 in Astana, Kazakhstan (hereinafter – the “Agreement”) was ratified.

Within the framework of the Agreement, the Government of Kazakhstan provides the Chinese Kazakhstan Production Capacity Cooperation Fund with exemption from taxation of dividends.

Please follow the link for more detailed information.

2. VAT Separate Bank Account

On 1 January 2019, the Article of the Code of the RK dated 25 December 2017 No. 120-VI “On Taxes and Other Obligatory Payments to the Budget (Tax Code) (hereinafter – “Tax Code”) on the peculiarities of value-added tax (hereinafter – “VAT”) refund at using VAT Separate Bank Account by taxpayers came into force.

VAT Separate Bank Account means a bank account opened by VAT payer in Kazakhstan second-tier bank and used for the purposes of accounting the VAT settlements.

The purpose of introduction of the VAT Separate Bank Account is to ease the VAT refund process. When conducting tax audit at VAT refund the “Pyramid of Suppliers” Analytical Report must not be formed.

Please follow the link for more detailed information.

3. “Astana Hub” IT-Park Tax Privileges

Within the period from 1 January 2019 to 1 January 2029, the capital gain tax at sale of shares/participating interests in legal entities – participants of the International IT-Park “Astana Hub” as well as dividends from such companies will be taxed at the decreased rate of 5%.

Please follow the link for more detailed information.

4. Thresholds for Special Taxation Regimes Are Changed (“Light” Taxation)

Special taxation regimes (hereinafter – “STR”) set simplified procedures for calculation and payment of income and social taxes. STR are usually used by the self-employed individuals or small businesses as these regimes set the fixed rate (normally lower rate) for certain businesses/activity and require less administrative burden. Starting from 1 January 2019 the thresholds for application of STR are changed slightly, and will be calculated based on Monthly Calculated Index (hereinafter – “MCI”), while previously were based on Minimum Earnings (hereinafter – “ME”). Such changes are related to the significant increase of the ME amount from KZT 28,284 in 2018 to KZT 42,500 in 2019.

Thus, the new thresholds for STR application are:

- Patent Based – 3,528 MCI (KZT 8,908,200, approx. USD 23,567), instead of 300 ME (KZT 8,485,200, approx. USD 22,448);

- Simplified Tax Returns Based – 24,038 MCI (KZT 60,695,950, approx. USD 160,571), instead of 2,044 ME (KZT 57,812,496, approx. USD 152,943);

- Based on Fixed Deductions – 144,184 MCI (KZT 364,064,600, approx. USD 963,134), instead of 12,260 ME (KZT 346,761,840, approx. USD 917,359).

The amount of MCI for 2019 constitutes KZT 2,525.

5. Preliminary Tax Opinion on Planned Transactions

Effective from 1 January 2019, preliminary tax opinion on planned transactions may be requested from tax authorities. Such preliminary tax opinion on planned transactions may be provided on request of:

- Taxpayer on horizontal monitoring;

- Organization implementing investment project.

For more detailed information, please follow the link.

6. Risk Management System

On 1 January 2019, the new provisions of the Tax Code on Risk Management System (hereinafter – “RMS”) came into effect.

One of the purposes of the RMS with the new wording is to minimize tax control with respect to taxpayers, which risk level of activity is low.

Tax authorities will categorize taxpayers based on the analysis results by attributing their activities to categories of low, medium and high risk levels, and apply forms of tax control with differentiation.

For more detailed information, please follow the link.

7. Horizontal Monitoring

Starting from 1 January 2019, the provisions of the Tax Code on horizontal monitoring came into effect. Horizontal Monitoring means extended information and documentation exchange between competent body and taxpayer based on principles of cooperation, justified trust, rule of law, transparency and extended information cooperation.

For more detailed information, please follow the link.

8. Tax Amnesty for Businesses

On 1 January 2019, Article 57-1 of the Law of the RK dated 25 December 2017 No. 121-VI “On Implementation of the Tax Code” came into effect.

This novelty states that taxpayer may be released from payment of assessed penalties and fines, in case if the taxpayer pays the debt amount outstanding as of 1 October 2018. In order to have the outstanding amount written-off, the taxpayer must pay the debt amount till 31 December 2019.

The commissions on writing-off the penalties and fines have commenced their work in all state revenue departments starting from February 2019.

For more detailed information, please follow the link.

9. New Consular Fees of Kazakhstan

The Decree of the RK Government dated 20 February 2019 No. 74 approved:

- The consular fees payable in the territory of the RK;

- Basic minimum and maximum consular fees amounts payable abroad.

The Decree came into effect on 4 March 2019.

Please follow the link to find more about the fees amounts.

The external links in this Alert referred to the web-sources in Russian language. Should you have any questions or require any further information please email tax@signumlaw.com.

Information contained in this Client Update is of general nature and cannot be used as legal advice or recommendation. Please note that Kazakhstan is an emerging economy, and its legislation and legal system are in constant development. Should you have any questions or want to discuss matters addressed in this Client Update, please contact us.