Tax Newsflash - December 2023

Dear Readers,

The President signed a law¹ on amendments to the Tax Code and the Law on the Implementation of the Tax Code. We offer you a brief overview of the most important changes to the tax legislation.

With respect to corporate income tax, the amendments:

•  Exempt from taxation the income of microfinance organizations arising from the write-off of individuals’ bad debts. The annual amount of the forgiven debt is limited to 20% of the principal and related interests of microloans at the beginning of the year (p.5 of Article 232 of the Tax Code) – Effective from 1 January 2024 to 1 January 2027;
• Repeal the 2022 amendment that taxed Kazakh entities’ income from dividends on securities in the absence of active trading of the securities on the stock exchanges in Kazakhstan. The amendments reinstate the tax exemption for tax residents receiving dividends on securities listed on the stock exchanges in Kazakhstan, regardless of the securities' participation in exchange trading (excluding p.4 of p.2 of Article 241 and p.5 of p.1 of Article 307 of the Tax Code) – Effective from 1 January 2023;
• Bound the restriction on deductions for intangible services from nonresident related parties only to services from nonresidents registered in the states with the preferential tax regime (p.23 of Article 264, p.3-2 of p.1 of Article 288 of the Tax Code) – Effective from 1 January 2023;
• Eliminate the tax exemption of income from state securities (p.3 and p.4 of p.2 of Article 288 of the Tax Code) – Effective from 1 January 2030.

The amendments expand the list of taxable incomes for nonresidents (individuals and legal entities):

• Similar to dividends, interest on securities listed on the stock exchanges in Kazakhstan will be subject to taxation in the absence of active trading of such securities on the exchange (p.3 of p.9 of Article 645, p.3 of Article 654 of the Tax Code);
• The law cancels the tax exemption of income from state securities (p.6 of p.9 of Article 645, p.5 of Article 654 of the Tax Code) – Effective from 1 January 2030.

In the sphere of digital asset taxation, the law:

• Repeal the amendment made in February 2023, under which expenses related to the acquisition of digital assets were not deductible if the digital assets were sold outside the AIFC exchange (excluding p.1-1 of Article 264 of the Tax Code);
• Exempt a realization of digital assets from VAT (p.4 of Article 397 of the Tax Code);
• Establish the fixed fee for digital mining at 2 tenge per kilowatt-hour of consumed electricity, regardless of the cost of the consumed energy (p.1 of Article 606-3 of the Tax Code);
• Apply the minimum 1 tenge rate of payment for digital mining per kilowatt-hour of consumed electricity for generating installations not connected to the unified power system of Kazakhstan (p.2 of Article 606-3 of the Tax Code).

The amendments exempt the following incomes of individuals from taxation (p.2 of Article 319 of the Tax Code):

• Professional payments funded by the employer in accordance with the Labor Code;
• Capital gains from selling parking spaces owned for more than a year;
• Income from the write-off of bad debts on loans (loan, microloan) by entities that accepted the right to the loan (loan, microloan);
• Target accumulations in the form of payments from the Unified Accumulative Pension Fund directed to an individual pension accounts;
• Material benefit from savings on the cost of goods, works, services related to purchases for bonuses accrued for previous purchases.

The law establishes a unified filing deadline for tax declarations within the framework of universal declaration – September 15 of the year following the reporting year (Article 632, Article 635 of the Tax Code).

The tax amendments differentiate the tax relief timelines for SEZ participants based on the magnitude of their investments. The legislation classifies SEZ participants into three categories contingent upon the project's financial scale:

1. Category A – project cost up to 3 000 000 times the Monthly Index factor (MIF);
2. Category B – project cost ranging from 3 000 000 to 14 500 000 times the MIF;
3. Category C – project cost exceeding 14 500 000 times the MIF.

Additionally, Category B incorporates SEZ participants with project costs ranging from 1 000 000 to 14 500 000 times the MIF, provided they are engaged in the production of certain goods (food products, textile and leather items, computers, electronic devices, and optical equipment).

The amendments establish the following durations for the application of the tax exemptions for SEZ participants in accordance with their respective categories (p.11 of Article 709 of the Tax Code):

• Category A - for a period of 7 years;
• Category B - for a period of 15 years;
• Category C - for a period of 25 years.

The stipulated tax relief durations should not exceed the term of the activity agreement or the operational lifespan of the SEZ. If approved, the novel provisions will be applicable to taxpayers who enter into activity agreements after 1 January 2024.

To enhance the tax administration procedures the amendments:

• Exempt taxpayers using cash registers with data fixation and/or transmission functions from the obligation to keep reports, accounting books, and receipts for a period of five years, as all data is stored by the Fiscal Data Operator (p.5, p.3 of Article 13 of the Tax Code);
• Introduce the possibility of deferring the payment of state fees in courts for a period of up to one year. A court grants the deferment to individuals or legal entities based on their financial position (Article 51-2 of the Tax Code);
• Remove the requirement for notarization of documents confirming the taxpayer's location for justification of the absence during a tax audit (p.5 of Article 70 of the Tax Code);
• Improve the in-house control procedure (Article 96, Article 118 of the Tax Code) – Effective from 12 February 2024;
• Provide a taxpayer with an option of receiving decisions on the restriction of issuing electronic VAT invoices in person or by mail, not only by electronic means (p.3 of Article 120-1 of the Tax Code) - Effective from 12 February 2024;
• Provide taxpayers interacting with the tax authorities electronically with an option to submit a complaint on the notification of inspection results and receive a decision on the complaint electronically through the "e-government" web portal (p.1 of Article 178, p.3 of Article 182 of the Tax Code).

The majority of the amendments will enter into force on 1 January 2024, except for certain provisions for which the effective dates are specified above.