Tax NewsFlash - May 2024

Dear Readers,

In a letter¹ addressed to a group of Senate deputies, the Prime Minister outlined some provisions of the proposed new Tax Code.

Corporate Income Tax for the Social Sector

The proposed Tax Code suggests establishing a corporate income tax rate of no more than 10% for social sector organizations, allowing them to distribute dividends to their founders.

Personal Income Tax Exemptions

The new tax provisions propose to exempt from personal income tax pension payments from the Unified Accumulative Pension Fund, with exceptions for payments to individuals leaving Kazakhstan and inherited funds.

VAT Payment System "e-Tamga"

The new system will be based on simple digital solutions. All VAT payments in the system will be made on the basis of electronic VAT invoices. The transparency and integrity of the system will eliminate fictitious transactions and the possibility of tax evasion. In the future, such a system should simplify and automate the VAT refund procedure.

Initially, "e-Tamga" will be implemented in a pilot phase on a voluntary basis, allowing for the refinement of business processes before a full-scale rollout.

Regulations for Pilot Projects

The proposed Tax Code includes detailed provisions for conducting pilot projects in tax administration. These provisions specify the rights and obligations of participants and the state revenue authorities, limit the duration of pilot projects to three years, ensure voluntary participation, and exempt participants from penalties. Public notification of the start date of pilot projects through mass media is also mandated.

Given the short-term nature of pilot projects and their focus on specific taxpayer categories, the government did not support the formal legislative codification of pilot project rules.

Desk Tax Review

This year, the format of desk tax review has transformed into an automated service model, eliminating the human factor and simplifying the notification execution procedures.

The tax authorities recognize notifications as unfulfilled only for violations identified with a high degree of risk. Notifications with a medium degree of risk that do not fall under exceptions are automatically recognized as fulfilled.

The new Tax Code also considers changing the concept of "elimination of violations" notifications to "potential discrepancies" notifications, indicating a more lenient approach to tax discrepancies. These changes are aimed at simplifying tax administration, increasing transparency, and reducing the administrative burden on taxpayers.

Vehicle Tax

The new provisions explore a differentiated approach to vehicle taxation based on the vehicle's year of manufacture, proposing reduced coefficients for older vehicles.

Excise Tax on Sugar-Sweetened Beverages

The government considered introducing an excise tax on sugar-sweetened beverages but rejected the proposal due to the projected 26.4% reduction in production and the need to balance economic interests. This decision reflects a cautious approach to fiscal policy, weighing public health benefits against potential economic drawbacks.