Tax NewsFlash - July 2024

Dear Readers,

With the adoption of the Law On Science and Technology Policy, the state introduced amendments¹ to the Tax Code aimed at stimulating scientific activities. The amendments impacted the procedure for deducting expenses for research, scientific-technical, and experimental-design work (R&D) and the provision of tax benefits.

Requirements for Confirmation of R&D Deductions

Article 254 of the Tax Code regulating tax deductions for research expenses, will also regulate deductions for experimental-design work and the creation of scientific centers. This is reflected in the updated title of this article.

The amendments detail and supplement the requirements for documentary confirmation of tax deductions for R&D works:

• R&D expenses, excluding capital expenditures, are deductible upon a notification from the state authorities in the field of science in accordance with the legislation of Kazakhstan on science and technology policy.
• Expenses for conducting R&D must be confirmed by reports on scientific activities and documents confirming the expenses.
•  Expenses for acquiring R&D must be confirmed by executed technical assignments and acceptance acts of completed stages.

Expenses for financing the creation of scientific centers at research universities are deductible upon a notification from the corresponding state authorities.

Corporate Income Tax Benefits

The amendments provide for a reduction in taxable income by 50% of the deductions for:

• R&D expenses related to the creation of industrial property objects, including work covered by protective documents.
• Acquisition of exclusive rights to intellectual property for the commercialization of R&D results.

This benefit applies only if a taxpayer conducts the work in Kazakhstan and confirms the R&D activities and/or the implementation of their results by the appropriate documentation.

The income of accredited entities engaged in scientific activities, derived from financing the creation of scientific centers at research universities, is classified as income from the social activities of organizations involved in social work. Such organizations are eligible for corporate income tax exemption, provided they meet certain requirements.

The amendments will come into effect on 1 January 2025.