Tax NewsFlash - January 2022

Dear Readers,

In this NewsFlash issue, we would like to remind you of some legislative changes signed before December 2021 with effective date in January 2022.

Income Tax

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

Small-size manufacturers operating under the statutory tax regime may reduce taxable income by the cost of an acquisition or construction of buildings for production purposes.

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 factor¹ related to purchase from VAT non-payers.

VAT

VAT registration threshold is reduced to 20 000 times monthly index factor.

From 1 January 2022, electronic sales of goods and services by foreign entities to individuals in Kazakhstan is subject to VAT.

Electronic Invoicing

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.

Customs Value of Goods

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 approved² the list of these goods.

EEU International Trade Commodity Codes

On 1 January 2022, a new version of the EEU Classifier of International Trade Commodity Codes came into effect. The updated classifier contains more than 350 amendments to the International Trade Commodity Codes. The corresponding amendments were introduced to the List of Exemptions of the WTO.

Social Entrepreneurship

Social entrepreneurship were granted the following tax benefits:

• 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.

Special Mobile Application

Individual entrepreneurs may work under a new simplified tax regime using a special mobile application - E-Salyq Business. The regime implies simplified registration and tax compliance procedures via the E-Salyq Business mobile application. The individual income tax rate for this regime is one percent.

The Ministry of Finance approved the rules for the special mobile application and the procedure for interaction between banks and banking organizations and the tax authorities to share information on the payments to individual entrepreneurs using the E-Salyq Business application.

Obligatory Medical Insurance

The rate for the employer’s contributions to the Social Medical Insurance Fund increased to three percent. The rate for the obligatory social medical insurance contributions from income payable to employees and individuals working under service agreements remained the same - two percent of taxable income.

Excise Taxes

A Governmental resolution³ introduced excise taxes on gasoline, petroleum solvents, a blend of light carbohydrates and ecological fuel.

Digital Mining

There is a new mandatory payment – payment for digital mining. Taxpayers mining cryptocurrencies are 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.

Taxpayers engaged in activities related to digital assets (issue, trade, exchange) are regarded as financial monitoring entities. In addition, these taxpayers are required to notify the state authorities on information technology of the start or termination of their activities.

Environmental Payments

On 1 January 2022, the tax amendments related to the introduction of the new Environmental Code came into effect. The term emissions into the environment was replaced with negative impact on the environment. The amendments reverted to the state revenue authorities the responsibility for monitoring the fulfillment of the environmental payments. The amendments also introduced changes to the procedure for the determination of taxable base and rates for the environmental payments.

Anti-Money Laundering

The anti-money laundering legislation extended the definition of a Politically Exposed Person (PEP) to include both, individuals entrusted with prominent public functions in Kazakhstan and by a foreign country. Accordingly, domestic PEPs, their spouses and close relatives will be subject to the enhanced due diligence measures similar to foreign PEPs, if they receive services from financial monitoring entities.

A threshold on real estate transactions subject to financial monitoring is reduced from KZT 200 million to KZT 50 million.

Administration

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.