A package of tax amendments ("Tax Amendments") effective 1 January 2015 introduces a pre 1 January 2014 limited tax amnesty, a tax registration requirement for foreign CEOs and restrictions on the tax exemption for finance leases.
Under the Tax Amendments, taxpayers will be released from liability to pay tax fines and default interest on any unpaid (or underpaid) taxes which had accrued before 1 January 2014 and which had not been paid to the tax authorities by 1 October 2014. The procedure for applying the amnesty will be determined by the Committee on State Revenues of the Ministry of Finance.
This amnesty does not apply to certain categories of taxpayers, such as subsoil users, major taxpayers (according to a Government list), and taxpayers who initiated international arbitration proceedings against Kazakhstan in connection with their tax liabilities.
Tax registration of foreign CEOs
Foreign CEOs of local companies and foreign heads of local branches and representative offices of foreign companies must to register for tax purposes in Kazakhstan and should have obtained a Kazakhstani individual identification number (IIN) by 1 January 2015. Following that, their legal entity, branch or representative office should update its tax registration details accordingly. The drafters of the Tax Amendments claim that this change is aimed at simplifying the introduction of electronic VAT invoices in Kazakhstan. But, in the absence of further detail, the relationship between these two concepts is unclear.
What is clear, however, is that obtaining the local INN will not result in additional tax implications for foreign managers, such as creating a tax residence in Kazakhstan or an obligation to pay tax on income from non-Kazakhstani sources.
A failure to comply with the requirement may lead to a relatively small fine on the foreign CEO/head. More importantly, entities, branches and representative offices which do not ensure that their CEO/head is duly registered will cease to be VAT payers from 1 January 2015 (which in some situations may adversely affect their VAT position).
Before the Tax Amendments, Kazakhstani entities which were engaged in the financial leasing business were exempt from corporate income tax on interest payments under financial lease agreements. The exemption applied regardless of the types of leased assets.
The Tax Amendments limited the scope of the tax exemption to financial leases of agricultural and biological assets which provide for transfer of title to the leased assets to the lessee upon expiration of the lease.