Tag Archive: Kazakhstan

1. Updates to Kazakhstan’s VAT Refund Rules

   8 April 2024 12:38 pm Leave a Comment

   Updates to Kazakhstan’s VAT Refund Rules: Introduction

   On 12 March 2024, the Kazakhstani finance ministry announced significant revisions to the VAT Refund Rules, marking an important change in how businesses interact with tax authorities for VAT refunds.

   This article looks at these crucial modifications.

   Overview of the changes

   The essence of these updates lies in addressing the controversies surrounding the VAT refund validation process.

   Courts have recently highlighted the improper practice by tax authorities of demanding exhaustive supplier chain reports, or “Pyramid” reports, extending through numerous levels.

   The revised VAT Refund Rules aim to streamline this process, albeit with nuances that may conflict with existing Tax Code provisions.

   These changes became effective on 26 March 2024.

   Key changes

   Specifying Conditions for Pyramid Reports

   A noteworthy modification is to paragraph 45-1 of the VAT Refund Rules, which now delineates specific scenarios for the creation of Pyramid reports.

   Notably, these reports will encompass all direct suppliers involved in horizontal monitoring, moving away from the previous broader scope.

   Exceptions to this requirement have been clarified, simplifying compliance for businesses.

   Enhanced Definition and Procedure for Pyramid Reports

   The procedure for generating Pyramid reports has been refined, with a clear focus on direct suppliers.

   The amendment provides a precise definition of “direct supplier” and introduces the concept of “related parties,” aiming to mitigate tax evasion by tracing transactions to their origin.

   Risk-based Generation of Pyramid Reports

   The rules now prioritize the generation of Pyramid reports based on potential tax evasion risks identified among suppliers.

   This shift focuses on concrete indicators of risk, such as restrictions on e-invoices or legal challenges against the supplier, enhancing the tax authorities’ ability to detect and address evasion schemes.

   Clarification of Risk Exemptions

   With the introduction of paragraphs 52-1 and 52-2, the VAT Refund Rules now clearly outline situations where identified risks are disregarded.

   This update aims to ensure that discrepancies are not automatically equated with tax evasion, providing a fairer framework for businesses.

   Broader Scope for Counter-Audits

   Lastly, the amendments expand the circumstances under which tax authorities can conduct counter-audits on suppliers, including intermediaries and freight forwarders.

   This broadened scope is intended to tighten scrutiny and ensure compliance throughout the supply chain.

   Updates to Kazakhstan’s VAT Refund Rules – Conclusion

   The recent amendments to Kazakhstan’s VAT Refund Rules represent a significant shift in the regulatory landscape.

   By refining the conditions under which Pyramid reports are generated and clarifying procedures, the changes aim to balance the need for effective tax collection with the operational realities of businesses.

   As these changes unfold, businesses operating in Kazakhstan must stay informed and compliant to navigate the evolving tax environment successfully.

   Final thoughts

   If you have any queries about this article on the Updates to Kazakhstan’s VAT Refund Rules, or Kazakh tax in general, then please get in touch.

2. Developments in Kazakhstan for 2024

   25 March 2024 4:10 pm Leave a Comment

   Developments in Kazakhstan for 2024 – Introduction

   In this article, we consider some of the developments in the off-ing for Kazakhstan slated for 2024.

   Digital Mining Regulation

   The dawn of 2024 brings new regulations for the digital mining sector, transitioning from a notification-based system to a structured licensing regime.

   This change not only aims to formalize digital mining activities but also introduces specific requirements for digital miners, including the establishment of an automated system for commercial metering of electrical energy and telecommunications systems.

   Lifting the Moratorium on Business Inspections

   Kazakhstan marks 2024 with the termination of the business inspections moratorium that had been in place since 1 January  2020.

   This moratorium, originally designed to shield small and micro-businesses from unscheduled state inspections, is giving way to a new era of regulatory oversight.

   The government plans to introduce an innovative automated control system to halve the frequency of on-site inspections, a move articulated by Minister of National Economy Askar Kuantyrov as a significant shift towards minimizing state intervention and reducing penalties for businesses.

   With this system, inspections are slated only for entities presenting an elevated risk, as indicated by the system’s assessments.

   Universal Revenue Declaration Advances

   2024 also welcomes the third stage of the universal revenue declaration, compelling leaders and founders of legal entities, alongside individual entrepreneurs and their spouses, to submit a comprehensive Declaration of Assets and Liabilities.

   This progression from the initial stages introduced in 2021 underscores Kazakhstan’s commitment to enhancing transparency and fiscal accountability among its business and public service sectors.

   Oil, Gas, and Subsoil Use Law Amendments

   Significant amendments to the laws governing oil, gas, and subsoil use took effect on January 1, 2024.

   These amendments seek to modernize the industry’s practices by updating the rules for metering crude oil and gas condensate and introducing a sophisticated information system for the accounting of crude oil, gas condensate, and processing products.

   Tightening Currency Control Measures

   Starting January 1, 2024, Kazakhstan has refined its currency control measures to bolster oversight on foreign exchange transactions.

   This includes the introduction of a new procedure for the repatriation of national and/or foreign currency for export or import, aimed at ensuring adherence to regulations and facilitating accurate and compliant foreign exchange activities.

   Wind Power Collaboration with the UAE

   Highlighting Kazakhstan’s dedication to sustainable energy development, the government ratified an agreement with the United Arab Emirates for the implementation of wind power station projects.

   This agreement not only symbolizes international cooperation in the fight against global warming but also sets the stage for the development of significant renewable energy projects in Kazakhstan.

   Innovations in Land Law and Electronic Auctions

   The Ministry of Agriculture has implemented reforms to the procedures for selling land plots at electronic auctions, facilitating a more transparent and efficient process.

   These reforms include the formation of land plot lists for auctions and the submission of self-prepared proposals for vacant land plots suitable for auction.

   Developments in Kazakhstan for 2024 – Conclusion

   These regulatory changes and initiatives represent Kazakhstan’s strategic approach to fostering economic growth, enhancing regulatory compliance, and advancing sustainable development.

   As the nation embarks on these new paths, businesses and stakeholders are encouraged to adapt and align with the evolving regulatory landscape to leverage opportunities and navigate potential challenges effectively.

   Final thoughts

   If you have any queries about this article on the Developments in Kazakhstan for 2024, or tax matters in Kazakhstan, then please get in touch.

   We would also like to hear from experts in Kazakhstan who might like to join our platform. For more details, please see here.

3. Kazakhstan’s recent tax amendments & double tax treaties

   9 January 2023 10:22 am Leave a Comment

   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.