(b) This withholding tax applies to dividends paid to nonresident legal entities. Dividends paid to resident legal entities are generally exempt from tax (with some exceptions).
(c) A 20% withholding tax rate applies to Kazakh-source income paid to entities registered in tax havens.
B. Taxes on corporate income and gains
Corporate income tax. Kazakhstan legal entities and foreign legal entities operating through a permanent establishment are subject to tax. The definition of “permanent establishment” is generally similar to the definition in the model treaty of the Organisation for Economic Co-operation and Development, without the standard exemptions but with certain peculiarities. Kazakhstan tax-resident legal entities are subject to tax on their worldwide income. Taxable income of controlled foreign companies (CFCs) and permanent establishments of CFCs (including those registered in tax-haven countries) is subject to tax in accordance with special rules. Nonresident legal entities are subject to tax on income from Kazakh sources that are earned through a permanent establishment.
Rates of corporate tax. The regular corporate income tax rate is 20%. This rate applies to Kazakhstan companies, including enterprises with foreign participation (joint ventures) and companies with 100% foreign participation, and permanent establishments of foreign companies.
Permanent establishments are also subject to a 15% branch profits tax on their profits after deduction of corporate income tax. The 15% branch profits tax is imposed regardless of whether the profits are remitted to the home country of the permanent establishment. The branch profits tax rate may be reduced by an applicable double tax treaty.
Payments to foreign or nonresident legal entities without a permanent establishment are subject to withholding tax. The rate is 15% for dividends, interest, royalties, capital gains and insurance premiums. For reinsurance premiums and international transportation services, the rate is 5%. For all other payments, the rate is 20%. The rate is 20% for payments of any type of Kazakh-source income to tax-haven entities. The withholding tax rates may be reduced by an applicable tax treaty.
Taxation of subsurface users. Businesses engaging in the exploration and extraction of mineral resources in Kazakhstan (usually referred to as subsurface users under Kazakhstan law) operate under subsurface use contracts. The taxation under such contracts differs from the standard regime.
Tax incentives. Expenditure on certain qualifying fixed assets can be deducted in the first three years after commissioning, with each deduction equaling one-third of the initial value of the asset. Alternatively, it can be deducted in full in the tax year in which the expenditure is incurred.
Special-Economic Zones. The Kazakhstan Tax Code provides certain tax benefits for entities carrying out their activities in a special-economic zone in Kazakhstan. These tax benefits generally include a reduction of the corporate income tax payable by 100% and exemptions from land and property taxes and payments for the use of land plots. In addition, an exemption from social tax
may be applied by entities carrying out their activities in the Innovation Technology Park special-economic zone. Also, sales of goods to entities in special-economic zones may be subject to value-added tax at a 0% rate if certain conditions are met. The tax benefits may be claimed by entities that meet certain requirements established by the Tax Code, while the duration of the tax benefits depends on the category of the investment project.
Other incentives. Tax benefits that are similar to the specialeconomic-zone benefits are provided to entities outside specialeconomic zones that carry out priority investment projects based on investment agreements concluded with the government. Certain requirements and conditions must be met.
Capital gains. Capital gains are included in taxable profit and subject to tax at the regular corporate income tax rates. For nonresidents, certain capital gains are taxed by withholding tax.
Administration. The tax year is the calendar year.
Legal entities must make advance payments of tax on or before the 25th day of each month. These payments are generally based on the estimated income and corporate income tax due for the current year. Annual tax returns must be filed by 31 March of the year following the tax year. Corporate income tax due generally must be paid within 10 calendar days after the deadline for filing annual tax returns. The following legal entities are not required to make advance payments of tax:
• Taxpayers that had adjusted aggregate annual income not exceeding 325,000 monthly calculation indices (this index is established annually) in their antepenultimate tax year
• Taxpayers in their year of registration and in the following year
Dividends. Dividends paid to nonresident legal entities are subject to withholding tax at a rate of 15% (for legal entities from taxhaven countries, a 20% rate applies). Dividends paid to nonresident legal entities might be subject to a reduced withholding tax rate of 10% (as opposed to the regular 15% rate) if a minimum three-year holding period condition and certain other conditions are met.
Dividends paid to resident legal entities are generally exempt from withholding tax. Dividends received by resident legal entities are generally exempt from corporate income tax.
For purposes of the Tax Code, resident legal entities are legal entities created in accordance with Kazakhstan legislation and legal entities with their place of effective management (actual management body) located in Kazakhstan.
Foreign tax relief. A foreign tax credit is available for foreign tax paid on income earned abroad, unless such income is exempt from tax in Kazakhstan. The amounts that may be offset are determined for each country separately and equal the lowest amount of the following:
• The amount actually paid in a foreign state on income received by a taxpayer outside of Kazakhstan
• The amount of income tax on income received by a taxpayer outside Kazakhstan, calculated in accordance with the Tax Code and the provisions of an international treaty
Depreciation rates for subsurface users may be doubled in the tax year in which fixed assets are first placed into service in Kazakhstan if these fixed assets are used in the business for at least three years.
Relief for losses. Enterprises may generally carry forward tax losses from business activities to offset annual taxable profits in the following 10 tax years. Loss carrybacks are not allowed.
Groups of companies. The Tax Code does not include any measures permitting related enterprises to offset profits and losses among group members.
D. Other significant taxes
The following table summarizes other significant taxes.
Nature of tax
Value-added tax; imposed on supplies of goods, work and services that are considered to be supplied in Kazakhstan, as well as on imports of goods
rate
Exports of goods 0
Value-added tax; imposed on electronic trade of goods and provision of services to individuals by foreign companies in electronic form 12
Export duties on certain types of goods (for example, crude oil and specified oil products); the duty is calculated as a specific percentage of the customs value, with a minimum duty of a specified amount of euros or US dollars per unit of measurement Various Import duty on certain goods; the duty is calculated as a specific percentage of the customs value, with a minimum duty of a specified amount of euros or US dollars per unit of measurement
Percentage rates Various
Excise taxes on certain goods; the tax is calculated as a specified amount of tenge per unit or a specified percentage of the customs value
Percentage rates Various
Property tax; imposed on annual average balance-sheet value of immovable property
Payroll taxes
Pension fund contributions; withheld from employees’ salaries; the maximum base used to calculate the monthly contributions is KZT4.25 million (approximately USD9,437)
Additional professional pension fund contributions; paid by employers for employees working in hazardous health conditions (according to a list of professions); calculated at a flat rate 5
Pension fund contributions made by the employer; paid by employer at its own expense; calculated at a flat rate
Social insurance contributions paid by employers and self-employed individuals; the base used to calculate the monthly contributions may not exceed KZT595,000 (approximately USD1,321)
Percentage rate
Medical insurance contributions paid by employers and self-employed individuals; the base used to calculate the monthly contributions may not exceed KZT850,000 (approximately USD1,887)
Percentage rate 3
Rent tax on crude oil and gas condensate for export
Percentage rates 0 to 32
Other taxes include land tax and vehicle owners’ tax.
E. Miscellaneous matters
Foreign-exchange controls. The currency in Kazakhstan is the tenge (KZT).
The principal measures governing foreign-exchange controls in Kazakhstan are the Law on Currency Regulations and Currency Control and the resolutions of the National Bank of Kazakhstan. The foreign-exchange control system operates largely through the following two sets of rules:
• Rules for residents (that is, Kazakhstan citizens and foreign citizens having a Kazakh residency permit, Kazakhstan legal entities (except international organizations), representative offices and branches of Kazakhstan legal entities, international organizations located in Kazakhstan (in case their residency status is established by international agreement), Kazakhstan foreign establishments, branches of foreign financial organizations with the right to perform banking and/or insurance activities in Kazakhstan and branches (representative offices) of foreign nonfinancial organizations that are permanent establishments of such foreign nonfinancial organizations in Kazakhstan)
• Rules for nonresidents (that is, foreign citizens, foreign legal entities and organizations, as well as their branches [representative offices]) without permanent establishments in Kazakhstan, branches (representative offices) of foreign nonfinancial organizations for which the status of nonresident is established by the terms of relevant agreements, international organizations, and diplomatic and other official representative offices of foreign countries