Tax NewsFlash - August 2021

Dear Readers,

On 24 June 2021, the President signed a law¹ introducing changes to the Tax Code and to the Law on the Introduction of the Tax Code (hereinafter, the “Amendments”). The Amendments establish certain tax measures to support business and to stimulate entrepreneurial activities. We offer you a brief overview of the introduced changes.

Amendments effective from 1 January 2021

The Amendments extend until 31 December 2021 the deadline for submission (including legalization) of foreign tax residency certificates for 2019 and 2020.

Amendments effective from 1 July 2021

The tax authorities may inform taxpayers of any tax obligations (not only vehicle, property or land tax) via electronic messages (e-mails or SMSs).

The tax authorities may suspend bank account transactions of a taxpayer only if the taxpayer’s outstanding tax liabilities exceed the amount of six times the monthly index factor (17,502 tenge in 2021).

Sanitary and anti-epidemic expenses that an employer incurs for its employees in connections with pandemic are not regarded as personal income to the employees and are deductible for corporate income tax purposes.

The Amendments grant newly created enterprises in the processing industry (except for the metallurgical industry) the right to credit an additional input VAT against turnover related to sales of manufactured products. A taxpayer may apply the tax benefit for two years after its state registration. Entities introducing into operation buildings, constructions, machinery or equipment for production purposes in the processing industry (except for the metallurgical industry) may also qualify for the additional VAT credit. To qualify for the additional VAT credit, the manufactured products must meet the criteria of sufficient processing confirmed by a certificate of origin and the production is either absent or does not cover the needs of Kazakhstan.

Changes effective from 1 January 2022

Banks will be able to resume a taxpayer’s bank account transactions as the taxpayer settles the outstanding tax liabilities before the tax authorities revoke the corresponding order on the suspension of the bank account transactions.

A cash register check indicating a buyer’s identification number may serve as a supporting document (similar to an electronic VAT invoice) for the deduction of expenses exceeding 1000 times the monthly index factor related to purchase from VAT non-payers.

Wholly-owned subsidiaries of the national state companies will be able to fully deduct interest expenses related to loans from the parent companies.

The Amendments grant small-size manufacturers operating under the statutory tax regime the right to reduce taxable income by the cost of an acquisition or construction of buildings for production purposes.

The electronic invoicing obligation would not apply to sales of imported goods or goods from the Virtual Warehouse Mode if the buyer of the goods is an ultimate consumer or a micro-entrepreneur. However, the seller will be required to issue a VAT invoice upon the buyer’s request.

To prevent an understatement, the customs value of certain goods imported from the member states of the Eurasian Economic Union will be determined on the basis of the state-approved minimum price level. The Government will approve the list of these goods.

The Amendments introduce a new mandatory payment – payment for digital mining. Taxpayers mining cryptocurrencies will be required to remit the digital mining payments to the state on a quarterly basis at a rate of one tenge per kilowatt-hour of the consumed electricity.

The Amendments introduce a new special mobile application tax regime. The regime implies simplified registration and tax compliance procedures via a mobile application. The regime is designed for individual entrepreneurs performing certain types of work/services without hiring employees. The individual income tax rate for this regime is one percent.

The Amendments provide the following tax benefits to social entrepreneurship:

·        Taxpayers included in the register of social entrepreneurs may reduce their taxable income by the amount of expenses incurred to train employees from socially vulnerable categories of the population. The amount of decrease is limited to 120 times the monthly index factor per employee for a tax year.

·        The property tax rate for social entrepreneurs will be 0.5 percent.

Changes effective from 1 January 2023 to 1 January 2025

The special retail tax regime will apply only to certain types of public catering activities approved by the Government. The Amendments double the income tax rate for this regime (corporate income tax for legal entities and personal income tax for individual entrepreneurs) from three to six percent.

¹ Law No. 53-VII of the Republic of Kazakhstan On Amendments and Addenda to the Code of the Republic of Kazakhstan On Taxes and Other Mandatory Payments to the Budget (the Tax Code) and Law of the Republic of Kazakhstan On the Introduction of the Code of the Republic of Kazakhstan On Taxes and Other Mandatory Payments to the Budget (the Tax Code), dated 24 June 2021