Налогообложение Резидентов и Неризидентов в Казахстане

Налогообложение Резидентов и Неризидентов в Казахстане

contents

Introduction

1 THEORETICAL ASPECTS OF FISCAL POLICY: TAXATION

1.1 Fiscal policy

1.2 Taxation

1.2.1 MAJOR TAXES and DUTIES

2 Features of Residents and Nonresidents taxation

2.1. Features of Resident

2.2 Permanent establishment of a nonresident

2.3 Nonresidents’ income from sources in the Republic of Kazakhstan

2.4 Procedure for the taxation of the income earned by nonresident

legal entities doing business without creating a permanent

establishment in the Republic of Kazakhstan

2.4.1 Procedure and deadlines for the payment of income tax at the

source of payment

2.4.2 Provisions specific to the calculation and payment of

income tax on

capital gains from the realization of securities

2.5 Procedure for the taxation of the income earned by nonresident

legal entities doing business through a permanent establishment

2.5.1 Procedure for taxation of the net income of a nonresident legal

entity from doing business through a permanent establishment

2.5.2 Procedure for taxation of the income of a nonresident legal

entity in certain cases

2.6 Procedure for the taxation of the income of income of nonresident

individual

2.6.1 Procedure for calculation and payment of the income tax on a

nonresident individual whose activities lead to the creation of a

permanent establishment

2.6.2 Procedure for the taxation of a nonresident individual’s income

in certain cases

2.6.3 Procedure and deadlines for prepayment of the individual income

tax

2.6.4 Statement of anticipated individual income tax and individual

income tax return

2.7 Special provisions regarding international agreements

2.7.1 Proportional distribution of expenses method

2.7.2 Direct deduction of expenses method

2.7.3 Procedure for payment of the income tax on income earned by

nonresidents from activity in the Republic of Kazakhstan not leading to the

creation of a permanent establishment

2.7.4 Procedure for the application of an international agreement with

respect to taxation of income from providing transportation services in

international shipping

2.7.5 Procedure for the application of an international agreement with

regard to the taxation of dividends, interest, and royalties

2.7.6 Procedure for the application of an international agreement with

regard to the taxation of net income from doing business through a

permanent establishment

2.7.7 Procedure for the application of an international agreement with

regard to the taxation of other income from sources in the Republic of

Kazakhstan

2.7.8 General requirements for the filing of a request to apply the

provisions of an international agreement

Conclusion

Appendix A

Appendix B

THE LIST of USED SOURCES

Introduction

The taxes are a necessary part economic activity in a society from the

moment of occurrence the states. Development and change of the forms of the

state system always lead to transformation of tax system. Taxes – is basic

sources of incomes of the state in a modern civilized society. Besides this

especially financial function, taxes are used for economic influence of the

state on public manufacture, its structure, and on condition of scientific

and technical progress. Among economic levers, through which the state

influences market economy, the important place belongs to the taxes. In

conditions of market economy any state widely uses tax policy as the

regulator of influence on the negative event in the market. The taxes, as

well as all tax system, are the powerful tool of management of economy in

terms of the market. The application of the taxes is one of economic

methods of management and maintenance of interrelation of nation-wide

interests with commercial interests of the businessmen and enterprises,

independent from departmental subordination, patterns of ownership and

legal form of the enterprise.

With the help of the taxes determined the mutual relation of the

businessmen, enterprises of all forms is the properties with the state and

local budgets, with banks, and also with higher-level organizations.

Through the taxes the foreign trade activities are adjusted, include the

attraction of the foreign investments.

The tax system in Kazakhstan is based on the Tax code enacted by the

president’s Decree that has the force of Law on Taxes and other obligatory

Payments to the Budget The taxes are the basic source of formation of a

profitable part of the budget of Republic of Kazakhstan. Not last role in

it plays the taxes from the nonresidents. According to the legislation on

Kazakhstan foreign citizens - residents in the Republic of Kazakhstan (RK)

are subject to individual income taxation on their worldwide income.

Foreign citizens - nonresidents are subject to taxation only on income

received from Kazakhstan sources. The following types of nonresidents’

income, among others, should be considered as received from sources in

Kazakhstan:

. Income received from operations in the RK under individual labor

agreements (contracts) or under other agreements of a civil-legal

nature;

. Directors fees and /or other payments received by members of aboard

of a resident legal entity, regardless of the place of the actual

performance of their functions;

. Fringe benefits received in connection with their assignment to

Kazakhstan its rates;

Payment and other conditions are regulated by the chapters 7, 10, 12,

15, 18 and other of Law on Taxes and other obligatory Payments to the

Budget. Taxation of foreign citizens in the RK is also regulated by

Conventions (agreements) on the avoidance of double taxation. In case there

is a Tax Convention signed between Kazakhstan and the other foreign state,

which may be applicable to a foreign employee, then the status of residency

is determined in compliance with this Convention. The Tax Conventions do

not regulate procedure of filing and regularity of tax payments. However,

based on the status of residency of a foreign employee determined by the

Tax Conventions specific reporting and taxation requirements stipulated by

the Kazakhstan tax legislation should be fulfilled with respect to

residents or nonresidents in the RK. In case the foreign employee is a

resident of the other foreign state, then he/she should be considered as a

nonresident for taxation purposes in Kazakhstan. In this case the foreign

employee should file a Certificate on the Estimated Personal In-come Tax

and pay personal income tax through the monthly transfer of advance

payments. In case a foreign employee is considered as a resident of

Kazakhstan, then the statutory rules do not contemplate filing of the

Certificate on the Estimated Personal Income Tax and contemplate in-come

tax payment once a year at the time of filing the income tax return from an

individual for a year.

1. THEORETICAL ASPECTS OF FISCAL POLICY: TAXATION

1.1 Fiscal policy

Fiscal (lat. fiscalis - state) policy (politics) - is the aggregate of

financial measures of the state on regulation of the governmental incomes

and expenditures. It changes significant depending on put strategic tasks,

as for example, anticrisis regulation, maintenance high employment,

struggle with inflation.

The modern fiscal policy defines basic directions of use of financial

resources of the state, means of financing and main sources of updating of

treasury. Depending on concrete - historical conditions in different

countries such policy (politics) has its own features. At the same time in

Developed Countries is used set of common measures. It includes straight

and indirect financial methods of regulation of economy.

To straight ways concern the means of budget regulation. By the means

of the state budget are financed:

1) expense on expanding of reproduction;

2) unproductive expenditures of the state;

3) development of an infrastructure, scientific researches and etc.:

4) realization of structural policy (politics);

5) the support of military producers complex etc.

With help of indirect methods state influences on financial opportunity

of the manufacturers of the goods and services and on the demand sizes of

customer. The important role here plays the System Taxation. Changing the

rates of the taxes on various kinds of the incomes, giving tax privileges,

reducing free minimum of the incomes etc., state aspires to achieve

probably steadier rates of economic Growth and to avoid sharp rises and

falls of manufacture.

To number of the important indirect methods assisting accumulation of

the capital, is the policy (politics) of the accelerated amortization. On

the essence, the state exempts the businessmen from payment taxes with part

of the profit, is artificial redistribute it in amortization fund. So, in

Germany in the beginning 70 years on a number of industries on amortization

it was authorized to write off till 20-30 of % of cost of a fixed capital

in one year. In Great Britain in first year of introduction in using of the

new equipment it was possible to deduct in fund of amortization 50 % of

cost new instruments of manufacture.

However in these cases the amortization is written off in the sizes,

that significant exceeding the valid deterioration basic capital, in

consequences the raise of price on made with the help of this equipment

production. If accelerated amortization expands financial opportunities of

the businessmen, simultaneously it deteriorates the condition of

realization of production and reduces purchasing power of population.

Depending on character of use direct and indirect financial methods

distinguish two kinds of fiscal policy of the state:

a) Discretion

b) Non-discretion.

a) Discretion (lat. discrecio - working on itself discretion) the policy

(politics) means the following. The state consciously regulates its

expenditure and taxation with the purposes of improvements economic of

situation of the country. At the same time government takes into account

the following checked up on practice functional dependences between

financial variable.

The first dependence: the growth of the state expenditures increases

cumulative demand (consumption and investments). Thereof increase output

and employment of the population. Is important to take into account, that

state expenditures influence on cumulative demand the same as to

investments (work as the animator of investment which has developed J.

Keynes). The animator state expenditures MG shows, how much grows total

national product D GNP in result of increase of these expenditures DG:

D GNP =DG ' MG

It is natural, that at reduction of state expenses G reduces the

volume of GNP.

Other functional dependence shows, that increase the sums of the taxes

are reduced the personal available income of household. In this case are

reduced demand and volume of production and employment of a labor. And on

the contrary: decrease (reduction) of the taxes conducts to increase of the

consumer expenditures, production and employment.

The change of the taxation gives multiply effect. However the

multiplier of the taxes is less than the multiplier of the investments and

state expenditures. Actually increase in unit of a gain of the investments

(and state expenditures) is directly influenced on increase in the volume

of the GNP. At reduction of taxes, grows available income, however part it

goes on the consumption, and stayed share is spent for the savings.

Mentioned functional dependences are used in discretion policy

(politics) of the state for influence on business cycle. Certainly, this

policy (politics) differs on different phases of a cycle.

For example, at crisis the policy (politics) of economic growth will be

carried out.

In interests of growth GNP the state expenditures are increased, the taxes

are reduced, and the growth of the expenditures is combined with reduction

the taxes so that multiply effect on state expenses was more than multiply

effect of the taxes. A result is reduction of recession of manufacture.

When there is an inflationary growth of manufacture (rise, induced by

surplus of demand), the government will carry out policy (politics) that

hold back business activity - reduces the state expenditures, increases the

taxes. These measures are combined so that multiply effect of reduction of

the expenditures was more, than multiplier of growth of the taxes. In

result the cumulative demand is reduced and volume GNP accordingly

decreases.

b) The second kind of fiscal policy - non-discretion, or policy of the

automatic (built - in) stabilizers. The automatic stabilizer - economic

mechanism, which without assistance of the state eliminates an adverse

situation on different phases business cycle. Basic built - in stabilizers

are tax receipt and social payments that are carried out by the state.

On a phase of rise, naturally, the incomes of firms and population

grow. But at the progressive taxation the sums of the taxes increased even

faster. In this period the unemployment is reduced, well being of needy

families is improved. Hence, decrease the payments of the unemployment

benefits and others social expenditures of the state. In a result the

cumulative demand is reduced, and it constrains economic growth.]

The tendency of transfer payment spending to rise during recessions

and fall during expansions results from the bases on which people qualify

to receive these payments. People qualify to receive welfare programs only

if their income falls below a certain level. They qualify for unemployment

compensation by losing their jobs. When the economy expands, incomes and

employment rise, and fewer people qualify for welfare or unemployment

benefits. Spending for those programs therefore tends to fall. When

economic activity falls, incomes fall. people lose jobs, and more people

qualify for aid, so spending for these programs rises.

Taxes affect the relationship between real GDP and personal disposable

income they therefore affect consumption expenditures. They also influence

investment decisions. Taxes imposed on firms affect the profitability of

investment decisions and therefore affect the levels of investment firms

will choose. Payroll taxes imposed on firms affect the costs of hiring

workers; they therefore have -impact on employment and on the real wages

earned by workers.

Exhibit below compares government revenues to government expenditures since

I996. We see that government spending in Kazakhstan has systematically

exceeded revenues, revealing an underlying fiscal deficit between 4 percent

and almost 9 percent of GDP, entailing substantial public sector borrowing

requirements. Until 1994, fiscal deficit had essentially financed through

monetary expansion by the Central bank, with a highly detrimental effect on

the rate of inflation during the period. Since then, the National Bank of

Kazakhstan has adopted a more independent monetary policy, and fiscal

deficits have basically financed either by the proceeds from privatization

of state assets or by borrowing foreign loans.

[pic]

Sources: Statistics Agency of RK, 2001

On a phase of crisis tax receipts automatically fall and reduced the

sum of withdrawals from the incomes of firms and households. Simultaneously

grow payments of social character, including unemployment benefit.

At result the purchasing power of the population is increased, that helps

to overcoming recession of economy.

From mentioned above it is visible, how large place occupies taxation

in financial regulation of macroeconomic. So we can conclude that the main

direction of fiscal policy of the state is improving the legislations and

practice collection of tax.

Let's take example for the most important version of the taxes – the

income tax, which is established on the incomes of physical persons and on

profit of firms. How the size of this tax is defined (determined)?

First is counted the total income - sum of all incomes that are

getting by the physical and legal entities from different sources. From the

total income by the legislation it is usual it is authorized deduct: 1)

industrial, transport, the travelers and advertising expenditures; 2)

various tax privileges (free minimum of the incomes; for example, in USA in

1990 this minimum was 2050 dollars; the sums of the donations, privilege

for the pensioners, disable people etc.). Thus, taxed income is a

difference between the total income and the specified deductions.

It is important to establish optimum tax rate (size of the tax on unit

of taxation). The following rates of the tax differ:

· hard, which are established on unit of object independently on its cost

(for example, motor vehicle);

· proportional, i.e. uniform percent(interest) of payment of the taxes

independently on the sizes of the incomes;

· progressive, growing with increase of the incomes.

The practice shows, that at the extremely high rates of taxes discourages

to work and to the innovation. Sharp increase in 60-70-е years in western

countries of tax burden has resulted the negative consequences. It has

caused " Tax revolts ", wide evasion from the taxes, promoted outflow of

the capitals and flight of the addressees of the high personal incomes in

the countries with one lower level of the taxation.

As it is known, in 70’s neo-conservators have put forward the theory of

Supply. Its authors have established, that growth of the taxation renders

adverse influence on dynamics of manufacture and incomes. Increase of the

taxes at the expense of increase of their rates on certain stage does not

compensate reduction of receipts in the state budget because of fast

narrowing taxed incomes, and then it can be accompanied also by reduction

of total sums of the budget incomes. In a result the high taxes render

constraining influence on the offer of the capital, work and savings.

Basic task of economic policy representatives of the theory of Supply

consider determining the optimum rates of taxation and both tax privileges

and payments. Decrease (reduction) of the taxes is considered as a means

capable to ensure Long-term economic growth and struggle with inflation. It

will strengthen aspiration to receive huge incomes, will render the

stimulating influence will increase by growth of production.

12 Taxation

As required by the Constitution of Kazakhstan, within the tax system of

Kazakhstan, any taxes, levies, and other obligatory payments may be

established only by the laws enacted by the Parliament of the Republic of

Kazakhstan. Parliament may not delegate its constitutional powers to

establish the tax system, taxes or levies, and sanctions for tax violations

to the government or any other authority. Under the Constitution, laws in

general and tax laws in particular enter into effect after the President

signs them.

Tax legislation of the Republic of Kazakhstan consists of the Tax Code

and Normative Legal Acts, and is regulated by International Agreements. Tax

legislation is based on the principles of the mandatory nature of payment

of taxes and other mandatory payments to revenue, certainty and equity of

taxation, unity of the tax system and publicity of tax legislation. The Tax

Code of the Republic of Kazakhstan establishes Kazakhstan taxes, levies,

and general tax principles. A tax takes largest share of budget revenues

(Appendix A).

Companies formed in Kazakhstan under Kazakhstan law are taxed on world-

wide income. Income earned by a foreign company or person through a

permanent establishment in Kazakhstan is taxed in Kazakhstan. Branches of

foreign entities are taxed on Kazakhstan source income (where services are

performed, not where paid for). Income from a Kazakhstan source to a non-

resident and not related to a permanent establishment, is taxed at the

source of the payment, and further, on the total income without deductions,

excluding labor that is taxed as personal income.

Double Tax Treaties In December 1996, a treaty on the Avoidance of

Double Taxation between the United States and Kazakhstan came into force. A

number of treaties on the avoidance of double taxation were ratified in

1998. This includes agreements with the following countries: the Czech

Republic (November 1998), France (November 1998), Sweden (July 1998),

Bulgaria (July 1998), Turkmenistan (July 1998), Georgia (July 1998),

Republic of Korea (July 1998), Germany (November 1998), and Belgium

(November 1998).

Kazakhstan has double tax treaties with more than 20 countries, which

generally follow the OECD Model Income Tax Convention.

|Withholding Tax Rates for Treaty Countries |

| |Dividends | |

| |Major |Legislati|Major |Interest|Royaltie|

|Country of Recipient |Rate |ve Rate |Holding| |s |

| |(%) |(%) | |(%) |(%) |

| | | |(%) | | |

|Azerbaijan |10 |15 |- |10 |10 |

|Belarus |15 |15 |- |10 |15 |

|Bulgaria |10 |15 |- |10 |10 |

|Canada |5 |15 |10 |10 |10 |

|Czech Republic |10 |15 |- |10 |10 |

|Germany |5 |15 |25 |10 | 10 |

|Hungary |5 |15 |25 |10 |10 |

|India |10 |15 |- |10 |10 |

|Iran |5 |15 |20 | 10 | 10 |

|Italy |5 |15 |10 | 10 | 10 |

|Kyrgyzstan |10 |15 | |10 |10 |

|Lithuania |5 |15 |25 |10 |10 |

|Mongolia | 10 |15 |- |10 | 10 |

|Netherlands | 5|15 |10 |10 | 10 |

|Pakistan | 12.5 |15 |10 | 12.5 |15 |

|Poland |10 |15 |20 |10 |10 |

|Russia |10 |15 |- |10 |10 |

|South Korea | 10 |15 |10 |10 | 10 |

|Sweden | 5|15 |10 |10 | 10 |

|Turkey |10 |15 |- |10 | 10 |

|Ukraine |5 |15 |25 |10 | 10 |

|United Kingdom |5 |15 |10 | 10 | 10 |

|United States |5 |15 |10 | 10 | 10 |

|Uzbekistan |10 |15 |- |10 | 10 |

|( Belgium |5 |15 |10 |10 | 10 |

|Georgia |15 |15 |- |10 | 10 |

|Iran |5 |15 |20 |10 | 10 |

|Mongolia |- |- |- |- | -|

|Rumania |10 |10 |- |10 | 10 |

|Turkmenistan |10 |15 |- |10 | 10 |

|France |5 |15 |10 |10 | 10 |

|Czech Republic |10 |15 |- |10 | 10 |

|South Korea |5 |15 |10 |10 | 10 |

|a. Source: Guide on Taxation and Investment in Kazakhstan in 2002, |

|Deloitte & Touche |

|Notes: |

|(double taxation treaties with 9 countries listed below are ratified |

|only by Kazakhstan. |

Tax payment is based on the calendar year, with annual declarations

due by end March of the following year (and tax payment within ten days of

declaration). Annual financial statements are due April 30 following the

reporting year.

Kazakhstan Tax Code, enacted in April 1995, currently apple an

international taxation model based on principles of equity, economic

neutrality and simplicity. The Parliament approved amendments to the Tax

Code by a law dated July 16, 1999; the law was published and became

effective August 3, 1999. Following amendments were made in 01 July 2001

and the New Tax Code has become effective January 1, 2002. The Ministry of

State Revenues issued tax instructions clarifying the determination and

payment of taxes. Resident persons and local enterprises pay taxes on

worldwide income; foreign enterprises and non-residents pay taxes only on

income from local sources. One is a resident and tax-liable for both direct

and indirect income in Kazakhstan if he/she has been physically present in

Kazakhstan for 183 days in any consecutive 12-month period.

The penalty for violation of foreign currency regulations constitutes

20 percent of the transaction amount. There are no limitations on the

penalty amount to be charged.

All tax laws must be contained in the Tax Code, which covers taxation at

all levels of government: central, oblast and local.

13 MAJOR TAXES and DUTIES

Enterprise Profits Tax is levied on legal entities at the rate of 30%,

but 20% in SEZs, and 10% on direct use of land as a sole production asset.

All Kazakhstan and foreign legal entities doing business through a

permanent establishment must register with the tax authorities regardless

of whether they will pay taxes in Kazakhstan or not. Enterprise-related

provisions in the Tax Code include: withholding on dividends and interest

(15%); taxes on royalties, rentals and service fees; excise and local

taxes, and land (10%), property and vehicle taxes; business registration

fees, and fees to engage in selected activities. Branches of foreign

enterprises operating in Kazakhstan pay a "branch profits tax" applied to

their after-tax income. Most business expenses are deductible, including

wages, but there are limits on deductibility of reserves for bad debts

(actual losses deductible), and research and development. Depreciation is

based on pooled asset accounts. Losses can be carried forward for three

years.

Individual Income Tax: Individuals resident in Kazakhstan are subject to

personal income taxation on their worldwide income. Nonresident individuals

are subject to taxation only on income from Kazakhstan sources. Marginal

rates after a small basic deduction, range from 5% to 30% with top rates

applied to incomes over $33,700 per year. Most tax is withheld at the

source of payment. The tax applies to non-residents' income that is sourced

in Kazakhstan only, and to residents' income worldwide, including interest,

dividends, capital gains and other income. Taxable income from a Kazakhstan

source includes income received under a contract for work or from provision

of services, when performed in Kazakhstan, regardless of where it is

actually paid. Foreigners must register with local tax authorities and

receive a Tax Registration Number within ten days of beginning work under

contract in Kazakhstan, or when they become otherwise tax liable as a

resident, or receive Kazakhstan sourced income at 500 times a monthly

computed basis (about $4,500/year). Foreigners paid abroad must make

quarterly estimated payments of income tax and a yearly income tax

declaration (due March 31st following the tax year). Foreigners paid

locally will have their individual income tax withheld at the source of

payment and sent to the Budget by the employers.

Value Added Tax (VAT) applicable to all goods, work and services,

including imports to Kazakhstan. The VAT on imports is usually 16%, and

applies to services and goods. Credit for VAT paid on inputs, including

Capital investment, is offset against tax on sales. No VAT is paid on

exports except to other CIS countries, where by agreement, exports are

fully taxed and imports are not taxed (origin principle).

The article provides that sales of textile, sewing, leather processing,

and shoe industry products will be zero-rated (0 percent VAT on sales) for

residents of Kazakhstan for sales within Kazakhstan. This change represents

an important stimulus for the domestic light industry development.

Natural Resources Taxes include: bonuses paid for the right to

resource exploration, royalties paid for the privilege of exploitation and

excess profits taxes paid when profits exceed amounts anticipated in

setting royalties. Tax rates are set by the Cabinet of Ministers and differ

among resources, and are unique to each location and taxpayer. Prohibited:

special benefits including lock-in of profits tax rates at conclusion of a

Production Sharing Agreement (contract).

Securities Transaction Tax on new issues of non-government securities,

including stocks and bonds: 0.5% of nominal value. Proceeds from secondary

transactions are taxed at 0.3%, and 0.1% for government securities. Issuer

is liable for tax on initial issues; buyer is liable for tax on secondary

transactions.

Unified Land Tax is levied on peasants and farmers who use private or

leased land in their business. The payers of the unified land tax are

exempt from corporate income tax, VAT on sales, land tax, transport tax,

and property tax. The rate of the unified land tax is set at 0.1 percent of

the appraised land value (determined by the Land Committee).

Other Taxes: A fee for the use of the words "National," "Kazakhstan,"

"Republic," and their derivatives has been included into the list of taxes

in the Tax Code, Business assets are taxed at 0.5% yearly, and individual-

owned real estate is taxed at 0.1%. Vehicles are taxed annually depending

on vehicle type and engine size.

Double Taxation. A foreigner won't be taxed in Kazakhstan if:

. he/she is present in the country for less than 183 days in a year and

. his/her income is paid by a non-resident of Kazakhstan and

. his/her income is not taken as a deduction in computing corporate

income tax by a permanent establishment in Kazakhstan.

In not distinct cases, where the person is liable to taxation by law in

his/her own country and in Kazakhstan, he/she is deemed to reside where

he/he has a permanent home, or if he/she has a permanent home in both

places, where his/her personal and economic relationships are centered, or

in case this cannot be determined, where he/she currently lives and works

("habitual abode"). An individual may offset income tax paid in Kazakhstan

against tax owing in his/her home country.

Additional Payments applicable to businesses

Pension Contributions: Employers must pay two categories of pension

payment:

15% of payroll paid by companies monthly to the State Center for Pension

Payments to be spent on existing pensioners and on state pensions for

current employees; ?

10% of employees' gross salaries, not affecting the net pay, transferred

for each employee to an accumulation pension fund of that employee's

choice.

Excise :Excise duty is imposed on taxable items produced in, or

imported into, Kazakhstan as well as on certain types of activities.

Excise duty is imposed on alcohol and tobacco products, motor fuels,

diesel, motor vehicles, salmon and sturgeon roe, firearms, crude oil

and jewelry. Excise duty is also imposed on gambling businesses and

lotteries.

Taxable Products

(1) Alcohol

Excise duty is imposed on alcohol articles covered by Harmonized

System numbers 2204 (wine from fresh grapes), 2205 (vermouth and other

wines from fresh grapes flavored with plants or aromatic substances), 2206

(other fermented beverages), 2207 and 2208 (ethyl alcohol, spirits,

liqueurs and other alcoholic beverages). Excise duty for alcohol products

is levied at various rates in KZT per liter.

(2) Tobacco

Excise duty is imposed on tobacco articles covered by Harmonized

System numbers 2402 (cigars, cheroots and cigarettes), 2403 (other

manufactured tobacco and tobacco substitutes, tobacco extracts and

essences). Excise duty for tobacco products is levied at various rates in

Euros per 1000 items.

(3) Motor Fuels

Excise duty is imposed on certain motor fuels covered by Harmonized

System number 2710 (diesel, gasoline and jet engine fuels). Excise duty

for motor fuels is levied at various rates in EURO per 1000 kg.

(4) Motor Vehicles

Excise duty is imposed on motor vehicles covered by Harmonized System

numbers 8703 (motor cars and other vehicles designed for the transportation

of persons). Excise duty for motor vehicles is levied at various rates

normally in EURO per vehicle’s engine bulk or customs value.

Such taxes as corporate income tax, value added tax, personal income

tax, and excise taxes account for the largest portion of budget revenues

(Appendix B).

Features of Residents and Nonresidents taxation

2.1 Features of Resident

Residents of the Republic of Kazakhstan are individuals who reside

permanently in the Republic of Kazakhstan, or whose center of vital

interests is located in the Republic of Kazakhstan. An individual shall be

considered to reside permanently in the Republic of Kazakhstan for the

current tax period if he spends at least 183 calendar days in any

consecutive 12-month period ending in the current tax period in the

Republic of Kazakhstan. An individual shall also be considered to reside

permanently in the Republic of Kazakhstan for the current tax period if the

number of days spent in the Republic of Kazakhstan in the current tax

period and the preceding two tax periods, determined by applying the

following coefficients to each tax period, is equal to at least 183

calendar days:

1 – the number of days spent in the current tax period;

1/3 – the number of days spent in the tax period immediately preceding the

current tax period;

1/6 – the number of days spent in the tax period before the one immediately

preceding the current tax period.

If an individual has lived in the Republic of Kazakhstan in the

current tax period for fewer than 30 calendar days, said individual shall

not be considered to reside permanently in the Republic of Kazakhstan. In

addition, an individual shall be considered a nonresident for the period

following the last day spent in the Republic of Kazakhstan, unless said

person becomes a resident in the year following the year in which the

person’s stay in the Republic of Kazakhstan ended.

An individual’s center of vital interests shall be considered to be

located in the Republic of Kazakhstan if the following conditions are met

simultaneously:

1) an individual is a citizen of the Republic of Kazakhstan or has a permit

to reside in the Republic of Kazakhstan (residency permit);

2) an individual’s family and/or close relatives reside in the Republic of

Kazakhstan;

3) real property owned by an individual and/or members of his family or

held by them on some other basis is located in the Republic of Kazakhstan,

and the individual has access to it at any time for use as a residence for

himself and/or members of his family.

Individuals who fall into the following categories and who are

citizens of the Republic of Kazakhstan or who have filed an application for

citizenship of the Republic of Kazakhstan or for a permit to reside

permanently in the Republic of Kazakhstan without becoming a citizen of the

Republic of Kazakhstan, shall be considered resident individuals,

regardless of the time spent in the Republic of Kazakhstan and any other

criteria provided below:

persons sent abroad on official business by government agencies,

including employees of diplomatic and consular institutions and

international organizations, as well as family members of said individuals;

crew members of means of transport belonging to legal entities or

citizens of the Republic of Kazakhstan, which make regular international

trips;

military and civilian personnel at military bases and those serving in

military units, groups, contingents, or formations deployed outside the

Republic of Kazakhstan;

persons working at facilities located outside the Republic of

Kazakhstan which are owned by the Republic of Kazakhstan or constituent

territories of the Republic of Kazakhstan (including on the basis of

concession contracts);

students and persons undergoing on-the-job and practical training

outside the Republic of Kazakhstan for educational purposes or to gain

practical experience, for the entire period of instruction or practical

training;

teachers and scientific personnel located outside the Republic of

Kazakhstan for the purpose of teaching, consulting, or performing

scientific work, for the entire period they are teaching or performing said

work.

Also legal entities established in accordance with the legislation of

the Republic of Kazakhstan, and/or other legal entities whose effective

headquarters (or actual administrative offices) are located in the Republic

of Kazakhstan, shall also be considered residents of the Republic of

Kazakhstan. Effective headquarters (or actual administrative offices) shall

be understood to mean the place where the principal management takes place

and where strategic commercial decisions are made which are necessary for

the performance of a legal entity’s entrepreneurial activity.

2.2 Permanent establishment of a nonresident

A permanent establishment of a nonresident in the Republic of

Kazakhstan shall be defined as a place of business through which the

nonresident performs all or part of its entrepreneurial activity, including

activity performed through an authorized person, and specifically:

1) any place of doing business related to the production, processing,

assembly, packaging, delivery, or realization of goods, regardless of the

duration of the activity;

2) any management office, branch, division, representative office,

bureau, office, agency, factory, workshop, production shop, laboratory,

store, or warehouse of a nonresident, regardless of the duration of the

activity;

3) any place of doing business related to the extraction of natural

resources, including the extraction of hydrocarbons: an underground mine, a

quarry, an oil and/or gas well, an open-pit mine, land-based or offshore

derricks and/or wells, regardless of the duration of the activity;

4) any place of doing business (including monitoring or supervisory

activity) related to a pipeline, gas line, the exploration and/or

development of natural resources, the installation, set-up, assembly, start-

up, adjustment, and/or servicing of equipment, regardless of the duration

of the activity;

5) any other place of doing business related to the operation of slot

machines (including accessories), computer networks and communications

channels, amusement parks, the transportation or other infrastructure,

regardless of the duration of the activity.

A construction site, an installation or assembly project, and the

performance of planning work shall constitute a permanent establishment

regardless of the duration of the work. In this context a construction site

(project) shall be understood to mean specifically the place where work is

performed to erect and/or renovate real property, including the

construction of buildings and structures and/or the performance of

installation work, the construction and/or rebuilding of bridges, roads,

and canals, the laying of pipelines, the installation of power engineering,

industrial, and other equipment, and/or the performance of other similar

work. A construction site (project) shall cease to exist as of the day

following the day on which the operating certificate for the project (or

the acceptance certificate for the work performed) is signed and the

construction has been paid for in full.

A nonresident shall also create a permanent establishment in the

Republic of Kazakhstan if the nonresident:

1) collects insurance premiums and/or provides insurance or

reinsurance coverage for risks in the Republic of Kazakhstan through an

authorized agent;

2) provides services on the territory of the Republic of Kazakhstan

continuously for more than 90 calendar days in any consecutive 12-month

period ending in the given tax period, through employees or personnel hired

for these purposes;

3) is a participant in a simple partnership (joint operating

agreement) created in accordance with the legislation of the Republic of

Kazakhstan and operating on the territory of the Republic of Kazakhstan;

4) holds exhibitions in the Republic of Kazakhstan for a fee and/or at

which goods are sold;

5) on the basis of a contractual relationship grants a resident or

nonresident the right to represent its interests in the Republic of

Kazakhstan, or to act or conclude contracts (agreements, accords) on its

behalf.

A nonresident engaged in entrepreneurial activity in the Republic of

Kazakhstan through an independent intermediary (a broker and/or other

independent agent acting on the basis of an agency, commission, or

consignment agreement or another similar type of agreement), who is not

authorized to sign contracts on behalf of the nonresident, shall not be

considered to be creating a permanent establishment. An independent

intermediary shall be understood to mean a person operating within the

context of his usual (principal) business, who is both legally and

economically independent of the nonresident.

2.3 Nonresidents’ income from sources in the Republic of Kazakhstan

The following types of income shall be considered nonresidents’ income from

sources in the Republic of Kazakhstan:

1) income from the realization of goods, the performance of work, or

the delivery of services in the Republic of Kazakhstan;

2) income earned from management, financial (with the exception of

services involving the insurance and/or reinsurance of risks), consulting,

auditing, marketing, legal (with the exception of attorney’s services),

agency, and information services provided to residents or nonresidents

doing business in the Republic of Kazakhstan through a permanent

establishment, and related to said permanent establishment, regardless of

where the services are actually provided;

3) capital gains resulting from:

the realization of property located on the territory of the Republic of

Kazakhstan;

the realization of securities issued by residents, as well as a share

interest in a resident legal entity or in property located in the Republic

of Kazakhstan;

4) income from concession of the right of claim on a debt to residents

or nonresidents in connection with doing business in the Republic of

Kazakhstan through a permanent establishment;

5) charges (fines, penalties) for failure to fulfill or improper

fulfillment of obligations by residents and nonresidents, which have arisen

in the course of operations by said nonresidents in the Republic of

Kazakhstan, including obligations under contracts (agreements, accords) for

the performance of work (delivery of services) and/or under foreign trade

contracts for the delivery of goods;

6) income in the form of dividends received from a resident legal

entity, and income from a share interest in such a legal entity;

7) income in the form of interest, with the exception of interest on

debt securities, received from:

residents;

nonresidents with a permanent establishment or property located in the

Republic of Kazakhstan, if the debt owed by these nonresidents applies to

their permanent establishment or property;

8) income in the form of interest on debt securities, received from:

resident issuers;

nonresident issuers with a permanent establishment or property located

in the Republic of Kazakhstan, if the debt owed by these nonresidents

applies to their permanent establishment or property;

9) income in the form of royalties received from residents or

nonresidents in connection with doing business in the Republic of

Kazakhstan through a permanent establishment;

10) income from the leasing of property located in the Republic of

Kazakhstan;

11) income earned from real property located in the Republic of

Kazakhstan;

12) income in the form of insurance premiums paid under agreements for

the insurance or reinsurance of risks arising in the Republic of

Kazakhstan;

13) income from providing transportation services for international

shipments, one of the parties of which is the Republic of Kazakhstan;

14) income from operations in the Republic of Kazakhstan under

individual labor agreements (contracts) or under other agreements of a

civil-legal nature;

15) honoraria for managers and/or other payments received by members

of a top administrative body (council of directors, board, or other similar

body) of a resident legal entity, regardless of where the actual

performance of the administrative duties assigned to such persons takes

place;

16) supplemental payments made in connection with residing in the

Republic of Kazakhstan;

17) income in the form of compensation for expenditures borne by an

employer to provide material and social benefits or other material

advantages to nonresident individuals working in the Republic of

Kazakhstan, including expenditures on meals, housing, enrollment of

children at educational institutions, and expenses related to leisure

activities, including vacation travel for their family members;

18) pension payments effected by resident pension savings funds;

19) income paid to people employed in the arts: theater, film, radio

and television performers, musicians, artists, and athletes from activities

in the Republic of Kazakhstan, regardless of the person to whom payments

are made;

20) winnings paid by residents;

21) income earned from providing independent personal (professional)

services in the Republic of Kazakhstan;

22) income in the form of property located in the Republic of

Kazakhstan that is received free of charge, including income from such

property;

23) other income not covered under the preceding subitems that arises

on the basis of activities performed in the Republic of Kazakhstan.

2.4 PROCEDURE FOR THE TAXATION OF INCOME EARNED BY NONRESIDENT LEGAL

ENTITIES DOING BUSINESS WITHOUT CREATING A PERMANENT ESTABLISHMENT IN THE

REPUBLIC OF KAZAKHSTAN

Income earned by a nonresident legal entity that defined above that is

not related to a permanent establishment in the Republic of Kazakhstan

shall be subject to the income tax at the source of payment without any

deductions, at the rates set below.

Rates for the income tax at the source of payment

The income of a nonresident from sources in the Republic of Kazakhstan

not related to a permanent establishment shall be subject to taxation at

the source of payment at the following rates:

|1) dividends, income from a share interest, and interest |15 percent |

|income | |

|2) insurance premiums paid under agreements for the |10 percent |

|insurance of risks | |

|3) insurance premiums paid under agreements for the |5 percent |

|reinsurance of risks | |

|4) income from providing transportation services in |5 percent |

|international shipments | |

|5) income defined under Article 178 of Tax Code of RK, with |20 percent |

|the exception of income referred to in subitems 1)–4) of | |

|this article | |

The payment of income shall be defined as the mean the transfer of

money in cash and/or noncash form, securities, goods, property, and the

performance of work or delivery of services. The following shall not be

subject to taxation at the source of payment:

1) payments related to the delivery of goods onto the territory of the

Republic of Kazakhstan under foreign trade transactions;

2) income from providing services related to the opening and maintenance of

correspondent accounts of resident banks and the performance of settlements

on them;

3) capital gains from the realization of securities;

4) income from operations with government securities;

5) payments related to an adjustment, based on quality, in the selling

price of crude oil transported via the unified pipeline system outside the

Republic of Kazakhstan;

6) interest accumulated (accrued) on debt securities paid by resident

buyers (not issuers) to nonresidents at the time of their purchase.

The taxation of a nonresident’s income at the source of payment shall

be effected regardless of whether said nonresident turns over this income

to third parties and/or to its subdivisions in other states. The procedure

for the calculation and withholding of income tax at the source of payment

from interest on debt securities shall be established by the authorized

government agency. The person paying income (including a nonresident doing

business in the Republic of Kazakhstan through a permanent establishment)

is liable and responsible for the calculation and withholding of the income

tax at the source of payment, and for payment of the tax to the state

budget. Such a person shall be recognized as a tax agent in accordance with

item 1 of Article 10 of Tax Code. A nonresident shall be recognized as a

tax agent as of the moment said person begins doing business in the

Republic of Kazakhstan, if its period of operation exceeds that established

for the creation of a permanent establishment. The income tax shall be

withheld at the source of payment regardless of the form and place of

payment of the income.

2.4.1 Procedure and deadlines for the payment of income tax at the source

of payment

Income tax withheld from the income of a nonresident legal entity at

the source of payment shall be payable to the state budget:

1) on the amount of income paid – within five business days of the end of

the month in which payment was effected;

2) on the amount of income accrued but not paid, when the income is taken

as a deduction, within ten business days of the deadline established for

the filing of a corporate income tax return.

The provision of this subitem shall not extend to interest on debt

securities, the maturities of which fall after expiration of the deadline

established by this subitem.

Tax agents shall be required to file a statement of income tax

withheld at the source of payment with tax authorities where they are

registered, on a quarterly basis no later than the 15th of the month

following the reporting quarter in which an obligation to withhold income

tax at the source of payment occurred.

2.4.2 Provisions specific to the calculation and payment of income tax on

capital gains from the realization of securities

A nonresident’s income from capital gains resulting from the

realization of securities issued by residents shall be subject to taxation

at the rate established under Article 180 of Tax Code, with the exception

of capital gains from the realization of stocks and bonds that are on the

stock exchange’s official “A” and “B” lists. The corporate income tax shall

be calculated independently by the nonresident legal entity, the tax shall

be payable within ten business days of the moment at which the income was

received, and the filing of a corporate income tax return with the tax

authority where the issuer is registered shall be required.

2.5 PROCEDURE FOR THE TAXATION OF INCOME OF NONRESIDENT LEGAL ENTITIES

DOING BUSINESS IN THE REPUBLIC OF KAZAKHSTAN THROUGH A PERMANENT

ESTABLISHMENT

The procedure for determination of the taxable income, and for the

calculation and payment of the corporate income tax on a nonresident legal

entity doing business in the Republic of Kazakhstan through a permanent

establishment, shall be carried out in accordance with the provisions of

Articles 79–135 of Tax Code of RK.

The income of a nonresident legal entity shall include all types of

income related to the operation of the permanent establishment.

If a nonresident legal entity does business in the Republic of

Kazakhstan that is analogous or similar to that which is performed through

a permanent establishment, the income from that business shall be treated

as income from doing business through the permanent establishment.

Expenses related directly to earning income from doing business in the

Republic of Kazakhstan through a permanent establishment shall be

deductible, regardless of whether they were incurred in the Republic of

Kazakhstan or outside its borders, with the exception of expenses that may

not be taken as a deduction in accordance with this Code.

A nonresident legal entity shall not have the right to deduct the

following amounts charged to a permanent establishment in the form of:

1) royalties, honoraria, fees, and other payments for the use of or

granting the right to use property or intellectual property of the given

nonresident legal entity;

2) commission income for services;

3) interest on loans granted by the given nonresident legal entity;

4) expenditures not related to earning income from the nonresident legal

entity’s operations in the Republic of Kazakhstan;

5) expenditures that are not documented;

6) management and general administrative expenses of the nonresident legal

entity incurred outside the territory of the Republic of Kazakhstan.

2.5.1 Procedure for taxation of the net income of a nonresident legal

entity from doing business through a permanent establishment

The net income of a nonresident legal entity from doing business in

the Republic of Kazakhstan through a permanent establishment shall be

subject to taxation at the rate of 15 percent. (Net income shall be

understood to mean taxable income, less the amount of corporate income tax

assessed.) The amount of tax assessed on net income shall be reflected in

the corporate income tax return.

A nonresident legal entity shall be required to pay the tax on net

income from doing business through a permanent establishment within ten

business days of the deadline established for the filing of the corporate

income tax return.

2.5.2 Procedure for taxation of the income of a nonresident legal entity

in certain cases

The income of a nonresident legal entity that is not registered with a

tax authority, which it has earned from doing business in the Republic of

Kazakhstan through a permanent establishment, shall be subject to the

income tax at the source of payment without any deductions.

The income tax withheld at the source of payment by a tax agent shall be

credited against the discharge of the tax obligations of a nonresident

doing business through a permanent establishment.

2.6 PROCEDURE FOR TAXATION OF THE INCOME OF NONRESIDENT INDIVIDUALS

The income of a nonresident individual, as defined above, which is

not related to a permanent establishment of said individual, should be

subject to taxation at the source of payment following the procedure and

within the deadlines specified by the provisions of Articles 179–181 of Tax

Code of RK, with the exception of:

1) income from individual entrepreneurial activity through a permanent

establishment in the Republic of Kazakhstan;

2) interest on bank deposits;

3) payments related to the delivery of goods onto the territory of the

Republic of Kazakhstan under foreign trade transactions;

4) capital gains from the realization of securities;

5) income from operations with government securities;

6) interest accumulated (accrued) on debt securities at the time of their

purchase, paid by resident buyers (not issuers) to nonresidents.

The obligation and responsibility for the calculation and withholding

of the income tax at the source of payment, and for payment of the tax to

the state budget, shall be assigned to the person paying the income

(including a nonresident doing business in the Republic of Kazakhstan

through a permanent establishment). Such a person shall be recognized as a

tax agent in accordance with item 1 of Article 10 of Tax Code of RK.A

nonresident shall be recognized as a tax agent as of the moment said person

begins doing business in the Republic of Kazakhstan, if its period of

operation exceeds that established for the creation of a permanent

establishment. The income tax shall be withheld at the source of payment by

a tax agent regardless of the form and place of payment of the income.

Filing of tax reports

Tax agents shall be required to file a statement of income tax

withheld at the source of payment with tax authorities where they are

registered within the deadlines established under Article 182 of Tax Code

of RK.

2.6.1 Procedure for calculation and payment of the income tax on a

nonresident individual whose activities lead to the creation of a

permanent establishment

A nonresident individual who is engaged in individual entrepreneurial

activity in the Republic of Kazakhstan through a permanent establishment

shall be a payer of the individual income tax with regard to income related

to said activity, less deductions directly tied to this income, with the

exception of expenses that are not deductible in accordance with item 5 of

Article 184 and the provisions of Tax Code. Dependent personal services

(work for hire) provided by a nonresident individual shall not lead to the

creation of a permanent establishment of said individual.

2.6.2 Procedure for the taxation of a nonresident individual’s income in

certain cases

The income earned by a nonresident individual from sources in the

Republic of Kazakhstan that is not subject to the income tax at the source

of payment and that is not related to a permanent establishment of said

individual, including capital gains from the realization of securities

issued by residents, shall be subject to taxation, without taking any

deductions, at the rates established under Article 180 of Tax Code. Capital

gains from the realization of stocks and bonds that are on the stock

exchange’s official “A” and “B” lists shall not be subject to taxation. The

calculation and payment of the individual income tax shall be performed by

a nonresident individual independently within the deadlines established

under item 5 of Article 191 of Tax Code.

2.6.3 Procedure and deadlines for prepayment of the individual income tax

The following nonresident individuals shall pay the individual income

tax by making prepayments:

1) nonresident individuals earning income from individual entrepreneurial

activity in the Republic of Kazakhstan through a permanent establishment;

2) nonresident individuals earning income defined under subitems 14)–17) of

Article 178 of Tax Code, including other income defined under Articles

149–151 of Tax Code, with the exception of income subject to the income tax

at the source of payment.

Prepayments of the individual income tax for the period of operation

shall be made by a nonresident individual mentioned above, following the

procedure and within the deadlines established by Tax Code. The amount of

prepayments of the individual income tax, which are payable in equal

installments during the period that a nonresident is doing business in the

Republic of Kazakhstan, shall be determined on the basis of the amount of

tax indicated in a statement of the anticipated amount of individual income

tax. Nonresident individuals referred to in subitem 2) shall be required to

attach to the statement of the anticipated amount of individual income tax

an individual labor agreement (contract) or other agreement of a civil-

legal nature confirming the declared amount of taxable income. Prepayments

that are made shall be credited against the payment of the individual

income tax owed by a nonresident individual for the current tax period. A

final settlement and payment of individual income tax shall be effected

within ten business days of the date an individual income tax return for

the tax period is filed, but not later than ten business day prior to

departure from the Republic of Kazakhstan.

2.6.4 Statement of anticipated individual income tax and individual

income tax return

Nonresident individuals referred to in Article 191 of Tax Code of RK

shall be required to file with tax authorities serving the area where they

are staying a statement of the anticipated amount of individual income tax

for the period they are in operation, no later than 30 business days from

the date of their arrival in the Republic of Kazakhstan. The following

nonresident individuals shall file an individual income tax return with tax

authorities serving the area where they are staying within the deadline

established under Article 172 of this Code, or in the event of the

termination of their entrepreneurial activity and their departure from the

Republic of Kazakhstan during the current tax period, no later than ten

business days prior to their departure:

those earning income from sources in the Republic of Kazakhstan that is not

subject to the income tax at the source of payment;

those engaged in entrepreneurial activity in the Republic of Kazakhstan for

more than 30 calendar days or earning income from sources in the Republic

of Kazakhstan in excess of 500 times the monthly index factor during the

tax period.

2.7 SPECIAL PROVISIONS REGARDING INTERNATIONAL AGREEMENTS

The Tax Code of RK gives provisions of an international agreement to

avoid dual taxation and prevent evasion of taxation of income or property

(capital) to which the Republic of Kazakhstan is a party (referred to

hereinafter as an international agreement for the purposes of Articles

193–204 of Tax Code of RK) shall apply to persons who are residents of one

or both of the states that have concluded such an agreement. This statement

does not extend to a resident of a state with which an international

agreement has been concluded if this resident uses the provisions of the

international agreement in the interests of another person who is not a

resident of a state with which an international agreement has been

concluded. The administration of international agreements shall be carried

out following the procedure established by the authorized government agency

in accordance with the provisions of Articles 193–204 of Tax Code.

If the provisions of an international agreement regarding the

determination of taxable income of a nonresident legal entity from doing

business in the Republic of Kazakhstan through a permanent establishment

allow for the deduction of management and general administrative expenses

incurred for the purpose of earning said taxable income both in the

Republic of Kazakhstan and outside its borders, one of the following

methods shall be used to determine these expenses:

1) The proportional distribution of expenses method;

2) The direct deduction of expenses method.

A nonresident legal entity may choose for itself one of these methods

for the deduction of management and general administrative expenses. The

method chosen for the deduction of management and general administrative

expenses charged to a permanent establishment (including the procedure for

calculation of the index factor used in the proportional distribution of

expenses method) shall be applied annually and may be changed only with the

approval of a tax authority.

2.7.1 Proportional distribution of expenses method

When the proportional distribution of expenses method is used, the

amount of management and general administrative expenses referred to in

Article 195 of Tax Code of RK that are charged to a permanent establishment

as a deduction shall be determined as the product of these expenses and the

index factor. The index factor shall be calculated by one of the following

methods:

1) the ratio of gross annual income earned by a nonresident legal entity

from doing business in the Republic of Kazakhstan through a permanent

establishment during the tax period to the total gross annual income of the

nonresident legal entity as a whole for the same tax period;

2) the average of the following three indicators:

the ratio of gross annual income earned by a nonresident legal entity from

doing business in the Republic of Kazakhstan through a permanent

establishment during the tax period to the total gross annual income of the

nonresident legal entity as a whole for the same tax period;

the ratio of the value of fixed assets recorded in the financial statement

of the permanent establishment in the Republic of Kazakhstan as of the end

of the tax period, to the total value of the fixed assets of the

nonresident legal entity as a whole in the same tax period;

the ratio of the wages fund for personnel employed at the permanent

establishment in the Republic of Kazakhstan as of the end of the tax period

to the wages fund for personnel of the nonresident legal entity as a whole

in the same tax period.

A nonresident legal entity can determine independently which of the

aforementioned methods for calculation of the index factor will be used.

The amount of management and general administrative expenses arrived

at through these calculations shall be taken as a deduction charged to the

permanent establishment only if supporting documents are available.

Supporting documents shall include:

1) a copy of the financial statements of the nonresident legal entity in

which the following is indicated, depending on the index factor chosen by

the nonresident legal entity:

the total amount of gross annual income as a whole;

the total amount of the wages fund as a whole;

the original and residual value of fixed assets as a whole;

the total amount of expenses, with an item-by-item breakdown, including a

breakdown of the total amount of management and general administrative

expenses;

2) a copy of an audit opinion based on an audit of the nonresident legal

entity’s financial statements (if an audit of the legal entity’s financial

statements has been performed).

A statement of the aforementioned expenses that are taken, as a deduction

charged to a permanent establishment in the Republic of Kazakhstan shall be

attached to the corporate income tax return filed with the appropriate tax

authority of the Republic of Kazakhstan. In the event that the amount of

management and general administrative expenses subject to proportional

distribution is not indicated in the financial statements, these expenses

shall not be taken as deductions charged to a permanent establishment.

2.7.2 Direct deduction of expenses method

When the direct deduction method is used for a nonresident’s

management and general administrative expenses, these expenses shall be

taken as a deduction charged to a permanent establishment in the Republic

of Kazakhstan if they can be determined directly and were incurred directly

for the purposes of earning income from doing business in the Republic of

Kazakhstan through a permanent establishment. Said expenses shall be taken

as deductions charged to a permanent established only if supporting

documents are available. Supporting documents shall include:

1) accounting records confirming expenses incurred by the nonresident legal

entity on the territory of the Republic of Kazakhstan for the purposes of

earning income from doing business through the permanent establishment;

2) copies of accounting records confirming expenses incurred by the

nonresident legal entity outside the Republic of Kazakhstan for the

purposes of earning income from doing business in the Republic of

Kazakhstan through the permanent establishment.

2.7.3 Procedure for payment of the income tax on income earned by

nonresidents from activity in the Republic of Kazakhstan not leading to

the creation of a permanent establishment

The procedure for payment of the income tax provided for under this

statement shall apply to the income of a nonresident from activity in the

Republic of Kazakhstan that does not lead to the creation of a permanent

establishment in accordance with the provisions of an international

agreement, with the exception of income referred to in Articles 199–202 of

Tax Code Of RK, except as otherwise provided under said statements. A

nonresident mentioned above of this article that earns income from sources

in the Republic of Kazakhstan shall have the right to apply the procedure

for payment of the income tax provided for under this article. In the event

that the provisions of this article are not applied, a tax agent shall be

required to withhold the income tax at the source of payment and transfer

it to the state budget in accordance with the generally established

procedure. A nonresident earning income, a tax agent, and a resident bank

(referred to hereinafter as a bank) identified by a tax agent, shall

conclude a conditional bank deposit agreement following the form agreed

upon by the parties to the agreement, taking into account the provisions of

this article. Within ten business days of the signing of a conditional bank

deposit agreement, a tax agent shall be required to register the agreement

with a tax authority, and a copy of the agreement, as well as a copy of the

payment document confirming the transfer of income tax to a conditional

bank deposit, shall be submitted to the tax authority. The provisions of

this article shall extend only to conditional bank deposit agreements that

have been registered with a tax authority. Conditional bank deposit

agreements, the terms of which do not contradict the provisions of this

article, shall be subject to registration. At the time income is paid to a

nonresident, a tax agent shall be required to withhold income tax at the

source of payment at the rate specified under Article 180 of Tax Code, and

to transfer the tax that has been withheld to the conditional bank deposit

at a bank, in favor of the nonresident. In the case of compliance with the

terms of an international agreement, in order to obtain a refund of income

tax that has previously been withheld, a nonresident shall file a request

with the tax authority following the procedure and form established by the

authorized government agency.. The tax authority shall review said request

and the required documents, it shall make a decision regarding the request,

and it shall notify the nonresident and the bank of the decision. Upon

receipt of a request for a refund of income tax that has been withheld,

which has been certified by a tax authority, a bank shall grant the

nonresident who submitted the request the right to dispose of funds placed

in the conditional bank deposit, up to the amount indicated in the request,

plus bank interest that has accrued. In the event that a nonresident does

not agree with a negative decision by the tax authority, the nonresident

shall have the right within ten business days of the receipt of such a

decision to file a request with the authorized government agency (with the

involvement of the competent authority of the nonresident’s country of

residence, if necessary), asking that the matter be reviewed again to

determine the proper application of the provisions of the international

agreement, and the tax authority shall be notified at the same time of the

appeal of its decision. In the event that a negative decision is made

regarding a request and if no notification of an appeal of the tax

authority’s decision is received from a nonresident within the established

deadline, within ten business days of the nonresident’s receipt of the

refusal to apply the provisions of an international agreement, the tax

authority shall forward a collection order to the bank calling for transfer

of the amount indicated in the request and placed in a conditional bank

deposit, plus bank interest that has accrued, to the state budget,

accompanied by a document confirming the refusal to exempt the nonresident

from taxation. A bank shall be required, within one business day of the

receipt from the tax authority of documents referred above, to transfer the

amount of income tax placed in the conditional bank deposit, plus bank

interest that has accrued, to the state budget. The amount of tax collected

shall be credited against the nonresident’s obligations to the state

budget. Conditional bank deposits shall be opened in the national currency

or in a foreign currency. In the event that conditional bank deposits are

opened in a foreign currency, the income tax and bank interest shall be

transferred to the budget in the national currency, after being converted

at the official rate of the National Bank of the Republic of Kazakhstan at

the time the tax is paid. A nonresident and a tax agent shall not have the

right to dispose of income tax placed in a conditional bank deposit until a

decision of some kind is reached by the tax authority. In the event that

the terms of a conditional bank deposit agreement are violated and income

tax that has been withheld is not transferred to the state budget in a

timely manner, through the fault of the bank, the bank shall bear liability

in accordance with legislative acts of the Republic of Kazakhstan. If it is

not possible for a bank to meet its obligations to transfer income tax

placed in a conditional bank deposit to the state budget, the obligation to

transfer income tax collected at the source of payment, bank interest, and

fines for the late transfer of tax to the state budget shall be assigned to

the tax agent. Tax authorities shall be required to maintain a record of

the amount of income tax:

1) placed in conditional bank deposits;

2) paid to nonresidents who have the right to apply the provisions of

international agreements;

3) transferred to the state budget.

2.7.4 Procedure for the application of an international agreement with

respect to taxation of income from providing transportation services in

international shipping

Income from providing transportation services in international

shipping in which the Republic of Kazakhstan is one of the parties, earned

by a nonresident legal entity that has the right to apply the provisions of

an international agreement, shall be exempt from taxation without the

filing of a request for application of the provisions of the international

agreement, on the basis of a document confirming residency, if the legal

entity has a permanent establishment in the Republic of Kazakhstan that is

related to this activity. In this case the nonresident legal entity shall

be required to maintain a separate record of income earned from providing

transportation services in international shipping (which is not subject to

taxation pursuant to an international agreement) and from providing

transportation services on the territory of the Republic of Kazakhstan

(subject to taxation), and also to reflect said income in a corporate

income tax return. The total amount of taxable income indicated in a

corporate income tax return shall be reduced by the amount of taxable

income that is exempt from taxation pursuant to an international agreement,

calculated on the basis of the separate accounting records. In the event of

the unlawful application of the provisions of an international agreement,

which results in nonpayment, or incomplete payment of tax to the state

budget, the taxpayer shall bear liability in accordance with legislative

acts of the Republic of Kazakhstan.

Income earned by a nonresident legal entity that has the right to

apply the provisions of an international agreement, from the operation of

means of transport in international shipping in which the Republic of

Kazakhstan is one of the parties, without the creation of a permanent

establishment in the Republic of Kazakhstan, shall be exempt from taxation

in accordance with the procedure established under Article 198 of Tax Code.

2.7.5 Procedure for the application of an international agreement with

regard to the taxation of dividends, interest, and royalties

At the time that income is paid to a nonresident in the form of

dividends, interest, or royalties, a tax agent shall have the right to

apply the provisions of the respective international agreement without the

filing by the nonresident of a request for application of the provisions of

an international agreement, on the basis of a document confirming

residency, if the nonresident in question is the final recipient of the

income and has the right to apply the provisions of an international

agreement. A tax agent shall be required to indicate in the statement of

income tax collected at the source of payment which is filed with a tax

authority the amount of income paid (accrued) and taxes withheld in

accordance with the provisions of international agreements, the income tax

rates, and the names of the international agreements. In the event of the

unlawful application of the provisions of an international agreement which

results in nonpayment or incomplete payment of tax to the state budget, the

tax agent shall bear liability in accordance with legislative acts of the

Republic of Kazakhstan.

2.7.6 Procedure for the application of an international agreement with

regard to the taxation of net income from doing business through a

permanent establishment

A nonresident shall have the right to apply the provisions of an

international agreement with regard to the taxation of net income from

doing business in the Republic of Kazakhstan through a permanent

establishment without filing a request for application of the provisions of

an international agreement, on the basis of a document confirming

residency, if the nonresident in question is the final recipient of the net

income and has the right to apply the provisions of the respective

international agreement. A nonresident legal entity shall be required to

indicate in a corporate income tax return the tax rate, the amount of tax

on net income, and the name of the international agreement on the basis of

which the respective tax rate was applied. In the event of the unlawful

application of the provisions of an international agreement which results

in nonpayment or incomplete payment of tax to the state budget, the

taxpayer shall bear liability in accordance with legislative acts of the

Republic of Kazakhstan.

2.7.7 Procedure for the application of an international agreement with

regard to the taxation of other income from sources in the Republic of

Kazakhstan

A nonresident earning income from sources in the Republic of

Kazakhstan, with the exception of those referred to in Articles 198–201 of

Tax Code, shall have the right to file a request to apply the provisions of

an international agreement, following the form established by the

authorized government agency, with the tax authority where the tax agent is

registered, prior to the payment of the income. A tax authority shall

review the request, and if the information indicated in the request is

valid, it shall certify the request as filed.In the event of the unlawful

application of the provisions of an international agreement, the tax

authority shall deny the request and inform the nonresident of its reasons

for doing so. In the event that a nonresident does not agree with a tax

authority’s negative decision, the nonresident shall have the right to file

a request with the authorized government agency (with the involvement of

the competent authority of the nonresident’s country of residence, if

necessary), asking that the matter be reviewed again to determine the

proper application of the provisions of the international agreement.

2.7.8 General requirements for the filing of a request to apply the

provisions of an international agreement

A request to apply the provisions of an international agreement,

following the form established by the authorized government agency, shall

be accepted by a tax authority provided that the following requirements are

met:

1) the application is accompanied by:

copies of contracts (agreements, accords) for the performance of work

(delivery of services) or for other purposes;

copies of charter documents;

a breakdown of income from providing transportation services in

international shipping and on the territory of the Republic of Kazakhstan;

a certificate of work performed when the nonresident performs various types

of work, an operational use certificate when construction work is

performed, and an invoice or payment document confirming the receipt of

income for services provided;

2) the tax agent submits accounting records confirming the amount of income

accrued and/or paid and the taxes withheld;

3) there is confirmation of the applicant’s residency by a competent or

authorized body of the applicant’s state, with which the Republic of

Kazakhstan has concluded an international agreement (on the request form

itself or in the form of an attached document confirming residency). For

the purposes of this article and Articles 198–202 of this Code, a

nonresident that has the right to apply the provisions of the respective

international agreement, in the event of a change in its registration data

in the country of residence, shall be required to present a document

confirming residency that indicates the changes in these data, following

the procedure established by said articles;

4) diplomatic or consular authorities provide legal validation of the

signature and official seal of the agency that certified the residency of

the nonresident (a document confirming residency), following the procedure

established by the legislation of the Republic of Kazakhstan or an

international agreement to which the Republic of Kazakhstan is a party.

Certificate of taxes withheld and paid in the Republic of Kazakhstan

Nonresident can request from tax authority a certificate indicating

the amount of income earned from sources in the Republic of Kazakhstan and

the taxes withheld and tax authority shall provide it.

Kazakhstan creates not worst Tax system among CIS counties for Foreign

Direct Investment. Country realized many term and conditions to attract

investors and make simply legislation. Within county work many foreign

companies and foreigners in different industries. Domestic enterprises make

the business with nonresidents enterprises or with their branches and their

representatives, which located in territory of Kazakhstan within framework

of external trade agreements.

Foreigners earn here money by using our natural resources, or by

providing services to our company. And it is important how much they will

pay tax to Kazakhstan budget. By level of collection of tax depend the

level of social support that may do by government. The following special

tax privileges are available for the effective realization of investment

projects in the priority sectors:

. state grants;

. exemption from land and property tax for a period up to 5 years after

the conclusion of the contract;

. exemption from income tax for a period of up to 5 years from the

moment of receiving the taxable supply, but for not more than 8 years

from the conclusion of the contract;

. full or partial exemption from customs duty assessments for

importation of equipment and raw materials needed to fulfill the

investment project.

In 1997 there were developed direct foreign investments in the amount of

$1830.8 mln., with regard to repayment of credit according to the schedule

there were developed $1176.8 mln.

The main direct investors in 1997 were non-residents from the states of

far abroad, among which the first place on developing direct foreign

investments belongs to Japan with investments in $ 381.5 mln, then - USA ($

207.4 mln.) and Great Britain ($ 241.4 mln.).

Level of Taxation usually depends on status of company or persons. It is

very important is a company/ person resident or not, does nonresident

perform entrepreneurship through permanent establishment or not. Resident

entities are taxable on their worldwide income received or accrued within a

reporting period (calendar year) at the 30% basic tax rate (The amount of

taxable income is determined by subtracting deductible expenses and

deductions on fixed assets from gross income). Income of nonresident

entities derived from carrying on business in Kazakhstan through a

permanent establishment is subject to taxation under the same rules as

income of Kazakhstan residents. Nonresident entities are subject to

taxation on income received from Kazakhstan sources. Incomes from

Kazakhstan sources, except income in the form of dividend (15%),

remunerations (the interest) (15%), insurance payments (10%),

telecommunication or transport services in international network or

transportation between RK and the other state (5%), taxed on corresponding

to rate, are taxed by tax beside the source of the payment at rate 20

percents. As we can see nonresidents pay at less tax rates as residents. So

nonresident taxation have important meaning to Kazakhstan. It means that if

government will not clearly realize this problem, government may find miss

a big amount of money in budget, that may needed for other thing; defense,

education, social security etc. In the cases then foreigners or local

company/ person decide use Nonresident taxation legislation to reduce its

tax burden. Government should clearly determine the conception of Residency

and Nonresidential, to avoid abuse in determination of residency. Clearly

determine taxed incomes of nonresidents through permanent establishment.

Determine list of the taxable incomes of nonresidents.

Clear and stable taxes let to improve investment climate in Republic,

also it lead to development of entrepreneurship in Kazakhstan, because now

many domestic companies receive, commonly, services from foreign companies

in applying new technologies, training of staff, reclamation of new types

of services, expanding markets for goods and services.

Conclusion

Since independence the legal system of the country has undergone

considerable reforms. The new constitution and a number of new

constitutional laws on state system and governmental bodies of Kazakhstan

have been passed. Amendments were introduced to the Civil, Criminal and Tax

Codes, trade and investment regulations and other legal acts regulating the

major aspects of the country life.

Taxes – is basic sources of incomes of the state so the dominant

motivation for taxation in any counties is to finance public administration

and the public provision of economic and social service. Second motivations

are the redistribution of income and correction of market imperfections.

But also tax creates distortions in the economy that reduce the real income

of taxpayers by more than amount of revenue that is transferred to the

government. This occurs when taxpayers either modify their behavior in an

attempt to reduce their tax burdens or spend resources in evading taxes.

Taxes are used for economic influence of the state on public manufacture,

its structure, and on condition of scientific and technical progress. By

tax government may discourage domestic production and foreign investments.

So government should balanced between public provision of economic and

social service, and level of taxation. The appropriate level of taxation

depends on a country’s desired role for the state, the efficiency and

equity of its public spending, and the efficiency and equity of its tax

structure and administration. The Government of Kazakhstan is clearly aware

of this and continues to make steady progress in developing its tax system

to fit the realities of modern business in the global economy.

Consideration of Nonresident taxation is important because this tax

may use as a loophole for avoiding or decreasing tax burden of taxpayers.

Level of tax payments is critical to the economic development of Kazakhstan

as sovereign state.

So it can decrease level of tax collection and level of social

expenditures. Lead to social instability in society.

Appendix A

[pic]

Sources: Statistics Agency of RK, 2001

[pic]

Sources: Statistics Agency of RK, 2001

Appendix B

[pic]

Sources: Statistics Agency of RK, 2001

The tax revenue in the consolidated budget has shown a rising trend in

the last two years. The performance of domestic taxes (particularly VAT and

Excises) has been improving.

| |Income |Income | | |Land |Ownership |Social|Property |

| |Tax |Tax | | |Tax |Tax |Tax |Tax |

| |from |from | | | | | | |

| |Legal |Physica| | | | | | |

| |Entatie|l | | | | | | |

| |s |Persons|VAT |Excises| | | | |

|1999|54759 |35329 |89030 |18956 |4644 |24537 |70463 |15210 |

|2000|163529 |51016 |115132|19285 |5506 |26693 |9907 |14763 |

[pic]

Sources: Statistics Agency of RK, 2001

THE LIST of USED SOURCES

1. Law of Republic of Kazakhstan from January 1, 2002 " Law on Taxes and

other obligatory Payments to the Budget "

2. " Law on Taxes and other obligatory Payments to the Budget " Chapter 7

“Features of Taxation on Nonresidents Income” (with changes from January 1,

2002)

3. Bulletin of Accountant, “Tax Code about Taxation of Operation with

Nonresidents of RK " (Print house “BIKO” Almaty, 2001) / 1 – 35/

4. Hodorovich, Mihail Ivanovich 1997, Taxation of Individuals /p25 – 40/

5. Lessons of Tax Reform, World Bank Publication /15 – 25/

6. National Statistics Agency of Republic of Kazakhstan, Short Statistics

annual edition of Republic of Kazakhstan (Almaty, 2001) /130 – 135/

7. Kazakhstan Public Expenditure Review, June 27, 2000 (Document of the

World Bank)

p /12- 15/

8. Macroeconomics, Timothy Tregarthen 1996 /p328 –340/