Kazakhstan’s recent tax amendments & double tax treaties

Introduction

In December 2022, Kazakhstan amended its tax legislation.

We set out some of the relevant amendments in this article.

Additional restrictions on treaty benefits – dividends, royalties and interest

New restrictions will be imposed in relation to Kazakhstani companies seeking to apply double tax treaty benefits.

The changes relate to the following payments made to a foreign related party:  

• dividends,
• royalty; or
• interest

In particular, where a related party is in receipt of income, then the treaty rates may only be applied if the recipient is subject to an effective income tax rate of at least 15% on receipt in its home country.

This change was effective from 1 January 2023.

Definition of Withholding Agents in Share Deals

Here, individuals that are not classed as independent contractors will now become withholding agents in relation to capital gains in respect of share deals.

As such, they will need to deduct and withhold capital gains tax from the purchase price of shares. They will then need to pay this over to the authorities.

This change will take effect from 21 February 2023.

Next steps

For those with, or clients with, subsidiaries in Kazakhstan, we would suggest reviewing these changes in line with any proposals to pay dividends, royalties or interest.

Further, those dealing with individuals who will now be brought within the capital gains tax withholding requirements then they should ensure they consider their compliance with these obligations.

 If you have any queries relating to the Kazakhstan’s recent tax amendments or tax matters in Kazakhstan more generally, then please do not hesitate to get in touch.

The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.