In this issue of our newsletter, we offer you an overview of the main amendments and additions to the Tax Code under the Law of Kazakhstan № 165-VII “On Amendments and Additions to the Code of Kazakhstan “On Taxes and Other Mandatory Payments to the Budget” (Tax Code) and the Law of Kazakhstan “On the Enactment of the Code of Kazakhstan "On Taxes and Other Mandatory Payments to the Budget" (Tax Code)" dated December 21, 2022.
Most of the amendments are introduced from January 1, 2023, however, there are changes that are introduced retrospectively. Please be informed that the newsletter presents the main amendments and additions to the Tax Code, but not their complete list.
In our opinion, the main conceptual changes are related to the changes in the results of the desktop tax audit, which you can find in the section "Tax control" (articles 96, 120-1) below.
We will soon issue a separate newsletter with an overview of significant changes from 2023 – limitation of deductions of intra-group expenses and cancellation of tax benefits for dividends.
We hope that this review will be useful in planning your business activities. If you have any questions, please contact us, we will be happy to help.
Grant Thornton tax team
Amendments discussed in 2022 that have not been introduced to the Tax Code
A new principle of "due diligence" was excluded from the draft Law as a practice that worsens the position of taxpayers and creates corruption risks on the part of the tax authorities.
Amendments entering into force retrospectively since 1 April 2018
Article 190. Accounting documents registered in Information System of Electronic VAT-Invoices using Digital Signature are recognized as “accounting documents”. There previously have been disputes related to the official status of accounting documents registered in the Information System of Electronic VAT-Invoices.
Amendments entering into force retrospectively since 1 January 2019
Article 1. The concept of "charitable support" also includes "support to an individual who has suffered as a result of an emergency situation".
Amendments entering into force retrospectively since 1 January 2022
Personal Income Tax (PIT)
Article 331. Given the same purpose of garages and parking spaces, the concept of "parking space" is added to Article 331. Individuals must pay capital gain tax on the sale of parking spaces located in Kazakhstan if they own a parking space less than a year from the date of registration.
Amendments entering into force from 1 January 2023
Article 73. As part of assistance to taxpayers, tax authorities may send informational messages through different software (except for large taxpayers) to the taxpayers, including to the director and (or) employee responsible for budget settlements.
Article 95. Paragraph 2 of this article has been supplemented to the effect that the desktop audit will be carried out after the issuance of electronic VAT-invoices and (or) for the relevant tax period. The audit will be carried out after the expiration of the deadline for submitting tax reports for such a period, established by the Tax Code.
Article 96. This article has undergone some significant changes. In case of detection of violations following the desktop audit, the following is issued:
- high-risk violations – a tax notification, including a detailed description of violations identified by the tax authorities after the desktop audit. The purpose of the desktop audit is to identify the actual turnover of the sale of goods, as well as works and services.
- medium-risk violations – a tax notification including a detailed description of violations identified by the tax authorities after the desktop audit;
- low-risk violations – a letter of advice on violations including a detailed description of violations identified by the tax authorities after the desktop audit.
If a taxpayer agrees with violations specified in a tax notification, the cases of execution of the notification are supplemented by the case of revocation, correction or addition of E-VAT-invoices.
If a taxpayer does not agree with high-risk violations specified in a tax notification, it must submit an electronic/paper explanation along with copies of documents confirming the fact of transactions indicated in the tax notification.
If a taxpayer does not agree with medium-risk violations specified in a tax notification, it must submit an electronic/paper explanation on absence of the violations along with extracts from the tax and (or) accounting ledger and (or) documents related to these violations.
There is no requirement to submit the above list of documents in the current edition of the Tax Code.
There is a new subparagraph 2-1 in this article, which contains the requirements for an explanation if a taxpayer wants to raise disagreement with the violations reflected in tax notifications with medium and high risks. In the current edition of the Tax Code, such requirements are reflected in paragraph 2 of Art. 96.
According to the amendments in paragraph 4 of this article the tax notification is considered to be “unfulfilled” if the violations have not been eliminated in full.
As far as we understand, if a taxpayer wants to disagree with the tax notification, it is necessary to provide the complete list of the required documents specified above and explanations that meet the requirements of the new paragraph 2-1 of Art. 96. Accordingly, the tax authorities will not suspend bank accounts transactions of such taxpayer.
There is a new paragraph, 6-1 in this article, according to which if a taxpayer does not deal with a tax notification on high-risk violations in a timely manner, then the e-VAT invoices system would be blocked for such taxpayer (see new Article 120-1 of the Tax Code below).
Article 120-1. A new article of "Restriction of issuance of e-VAT invoices in the information system of electronic VAT-invoices" is introduced to the Tax Code.
In case of non-execution within the established period and (or) recognition of the tax notification on high-risk violations as unfulfilled, the tax authorities will block the issuance of e-VAT-invoices.
The tax authorities will cancel the restriction within one business day after elimination of the violations.
Article 145. Tax audits carried out in a special order based on the assessment of the taxpayer’s degree of risk are replaced by the concept of "risk assessment based periodic tax audits".
Risk assessment based periodic tax audits are audits authorized by the tax authorities in relation to taxpayers (tax agents) based on the results of an analysis of their tax returns, information from authorized state authorities, as well as information obtained from official and open sources of information.
Article 158. Paragraph 3 of this article has been supplemented to the effect that if a taxpayer (tax agent) refuses to receive a tax audit report, a corresponding entry is made in the tax audit report with a protocol (act) compiled. In this case, the date of delivery of the tax audit report is the date of compilation of the protocol (act).
Taxation of insurance companies
Article 190 (and other related in the Tax Code). The Tax Code is being amended in connection with the application of the new IFRS for Insurance industry from January 1, 2023 to regulate the taxation issues.
Corporate Income Tax (CIT)
Article 243. A taxpayer's expenses related with contributions to the social medical insurance fund will be subject to deduction based on accrued expenses. In the current edition of the Tax Code, such expenses are deductible within the limits of accrued and (or) paid for the relevant tax period and (or) prior tax periods.
Article 244. The document confirming the fact of travel (including a boarding pass) is no longer required as a basis for deduction for business trips.
Value Added Tax (VAT)
Article 412. The article is supplemented by paragraph 2-1, according to which, when e-VAT-invoices issuance is blocked in accordance with the newly introduced article 120-1, the e-VAT invoice shall be issued on paper.
Such e-VAT invoice must be entered to the e-VAT-invoices system within 15 calendar days from the date of cancellation of the restriction on issuing e-VAT-invoices.
Article 431. The period for VAT reimbursement has been reduced from 155 to 75 working days. As for taxpayers of VAT that are taxed at a zero rate, the reimbursement period remains the same - 50 working days.
Article 440. Paragraph 5 has been supplemented with respect to taxable imports into the EAEU – when temporarily imported goods are on the territory of Kazakhstan for more than two years from the date of import, import of such goods is recognized as taxable import from the date of registration of such goods.
Articles 606-4, 606-5.
The Law introduces a tax return submission obligation for digital mining companies.
The payment deadline for the digital mining fee has been changed from the 20th to the 25th day of the month following the reporting quarter.
Tax return for 2022 is submitted to the tax authorities at the taxpayer's location no later than March 31, 2023.
Universal filing for individuals
Articles 631 and 634.
In their tax returns “on assets and liabilities” (tax form 250.00) and “on income and property” (tax form 270.00) individuals subject to anti-corruption restrictions in accordance with the Law of Kazakhstan “On Combating Corruption” must indicate money held in foreign bank accounts regardless of the amount of the bank accounts.
Taxation of non-residents
Article 644. The list of Kazakh-sourced income of non-residents has been updated and supplemented with the following subparagraphs:
1) Subparagraph 5 has been changed to “income of a person registered in a foreign state in the form of obligations on the received advance payment (prepayment), not taxed in accordance with subparagraph 5-1) of this Article, if one of the following conditions is met”
2) A new subparagraph 5-1 has been added with the following content: “income of a person registered in a foreign state in the form of obligations on the received advance payment (prepayment) if the following conditions are present simultaneously:
- there is no double taxation convention with the state where the non-resident is coming from;
- the term of the agreement (contract) is more than two years”.
3) A new sub-paragraph 26-1 has been added with the following content "insurance payments to non-resident individuals made under a pension annuity agreement".
When paying certain type of Kazakh-sourced income to a non-resident legal entity that is not registered in Kazakhstan, individuals will become tax agents (responsible for calculating, withholding and transferring income tax withholding to the budget).
Article 667. Additional requirements have been introduced for the application of double tax treaties modified by the MLI with respect to payments made to non-residents related parties in the form of dividends, interest and (or) royalties:
- such income must be included as a taxable income of a non-resident in its home country and shall not be excluded from taxable income and (or) refunded;
- nominal tax rate in the country of residence of such non-resident must at least be 15 percent.
Articles 776-1 – 776-6. A new section “Single payment from wages” is being introduced for employees of micro and small businesses.
Amendments entering into force from 1 January 2024
Article 16. Electronic taxpayers have the right to designate an authorized representative by issuing a taxpayer electronic document through the web applications of the tax authorities.
Article 606-2. The list of digital mining fee payers has been expanded. Thus, payers of the fee are those providing the infrastructure for digital mining. In the current edition of the Tax Code, only those engaged in digital mining are the payers of the fee.