Dear readers,

Over the course of 2022, Bulgaria, China and Spain have submitted notifications to the Depository of the Organization for Economic Cooperation and Development (OECD) on the completion of internal procedures for the entry into effect of the MLI provisions in respect of several jurisdictions, including Kazakhstan.

What does this mean? / What is the impact?

According to the MLI provisions, benefits under Kazakhstan’s tax treaties concluded with Bulgaria, China and Spain shall not be granted if it is reasonable to conclude that obtaining those benefits was one of the principal purposes of any (underlying) arrangement or transaction, unless it is established that granting those benefits would be in accordance with the object and purpose of the relevant provisions of the corresponding tax treaty (so-called “Principal Purpose Test” or “PPT”).

In this regard, starting from 1 January 2023, transactions between residents of Kazakhstan and residents of Bulgaria, Spain, and China must comply with the PPT in order to apply benefits under the relevant tax treaties in respect of income received from Kazakh sources or sources in the aforementioned countries.

Please also note that to apply the provisions of Kazakhstan’s tax treaties concluded with Bulgaria, China and Spain in respect of passive income (i.e. dividends, interest and royalties), it is necessary that Kazakh residents and residents of the respective countries are regarded as the beneficial owners of such income.

How can we help?

KPMG specialists will be glad to provide you with comprehensive support on the following:

  • analysis of the current ownership / financing structures, as well as transactions, as to assess the impact of the upcoming amendments;
  • provision of recommendations on potential restructuring options as to minimize tax exposure;
  • development and implementation of the proposed transition plan from the current to the target structure;
  • assistance with the preparation of a confirmation letter with regard to the status of the foreign recipient of income to be used for tax treaty application purposes;
  • provision of recommendations on the structure of the so-called “defense file” confirming the right to apply respective tax benefits.