On 30 November 2016, Kazakhstan adopted certain amendments to its Tax Code (the Tax Amendments). Most of the Tax Amendments take effect on 1 January 2017. Below we summarize some of the most important Tax Amendments:
VAT Registration Threshold
Under the Tax Amendments, the existing VAT registration threshold (i.e., turnover of at least 30,000 calculation indices or about USD 190,000 per annum) will be preserved during 2017 and will decrease gradually as follows:
- in 2018 – to 25,000 monthly calculation indices (approximately USD 158,000);
- in 2019 – to 20,000 monthly calculation indices (approximately USD 126,000,000); and
- in 2020 – to 15,000 monthly calculation indices (approximately USD 95,000).
Also, the Tax Amendments re-introduce the previously cancelled provision allowing taxpayers to register as VAT payers on a voluntary basis.
VAT on Loans
Previously, interest on loans was subject to VAT (12%) except for loans by banks, some state entities and certain other types of lenders.
Under the Tax Amendments, VAT will no longer apply to interest on loans, regardless of the type of lender.
Administrative Appeals of Tax Audit Acts
Previously, before going to courts taxpayers could appeal tax audit acts to a higher tax authority and then to the supreme tax authority (i.e., the State Revenues Committee of the Ministry of Finance).
Under the Tax Amendments, a special appeal commission is to be created under the State Revenues Committee of the Ministry of Finance by 1 July 2017. This commission will review all pre-court appeals against tax audit acts on a nationwide basis.
In addition, from 1 July 2017 certain taxpayers will be given the right to receive draft tax audit acts and provide objections to them before they are issued. The categories of taxpayers which will enjoy this right and the procedure of submitting objections are to be determined by the State Revenues Committee (this has not yet been done).
Tax Residence Certificates
Previously, for purposes of applying the benefits of double tax treaties it was generally necessary for the recipient of income to provide an apostilled or legalized certificate of its tax residency in the relevant treaty country to the Kazakhstani counterparty. In practice, this requirement was sometimes difficult to comply with as certain countries do not issue residency certificates in paper form and instead issue them only in electronic form.
Under the Tax Amendments, from 2017 tax residency certificates may be submitted as a paper copy of an electronic certificate which is stored at the website of the relevant foreign tax authority. Such paper copy does not need to be apostilled or legalized.
Electronic VAT Invoices
Previously, all VAT payers were supposed to switch to electronic VAT invoices from 1 January 2017 (for certain types of VAT payers this requirement was introduced in 2016).
However, due to the lack of sufficient infrastructure and public awareness it has been decided to postpone this requirement to 1 January 2018 for the 300 largest taxpayers and to 1 January 2019 for all other VAT payers.
Also, in early 2016 taxpayers transacting with certain products which are subject to special WTO customs duty rates (the WTO Products) were required to issue electronic invoices. This requirement was introduced by an Order of the Ministry of Finance, which was controversial as these requirements arguably should have been introduced by the Tax Code. Under the Tax Amendments, the requirement to issue electronic invoices in relation to transactions with the WTO Products is introduced with effect from 1 January 2017. This means that taxpayers who failed to issue electronic invoices with respect to the WTO Products during 2016 cannot be held liable (and those which have already been held liable potentially may demand compensation).
Electronic Consignment Notes
There was previously a requirement that, from 1 January 2017, all products which are imported into or are shipped within Kazakhstan should be reflected in an electronic consignment note. Detailed implementing procedures are to be adopted by the State Revenues Committee.
The Tax Amendments postpone the introduction of this requirement to 1 January 2020.
Financial Entity Reporting Regarding Foreigners
Kazakhstan is a party to a number of bilateral and multilateral international treaties on exchange of information on tax matters (including the 1988 Convention on Mutual Administrative Assistance in Tax Matters).
With a view to implementing these treaties, the Tax Amendments require financial entities (including banks and insurance companies) to submit to the tax authorities certain information (such as account holders and operations with the account) about foreign individuals, foreign companies, and local companies which are beneficially owned by foreign individuals or companies. This information will need to be provided on a regular basis and on a one-off basis at the request of the tax authorities. Implementing procedures must be adopted by a joint act of the State Revenues Committee and the National Bank.
Previously, the deadline for starting universal reporting of assets, liabilities and income by individuals who are tax residents of Kazakhstan was 1 January 2017 for certain state officials and employees of state-owned entities and 1 January 2020 for others.
The tax authorities have acknowledged, however, they are not yet ready for administering universal reporting. Accordingly, the Tax Amendments postpone the introduction of universal reporting for all types of taxpayers to 1 January 2020.
At the same time, certain elements of universal reporting will soon be in effect under a law which was adopted in 2015.2 In particular, from 1 January 2017 individuals who are tax residents of Kazakhstan will have to report to the tax authorities on foreign real estate and shares in foreign companies owned by them.
Breaches of the universal reporting requirements may lead to a fine of up to approximately USD 100.