Doing business in Kazakhstan
Corporate income tax
CIT is imposed on the profits of resident legal entities from worldwide sources, and Kazakhstan-source income of nonresident legal entities.
The basic principles are consistent with those used in most developed economies. However, the required standards of documentary support are particularly high in Kazakhstan.
Resident legal entities are taxed on their worldwide income, and nonresidents of Kazakhstan on their income from Kazakh sources.
Nonresidents carrying out business in Kazakhstan through a permanent establishment (PE) are taxed on the profits of the PE, calculated in basically the same way as for residents.
Nonresidents deriving Kazakhstan-source income not through a PE are taxed by withholding.
Taxable income is calculated as the difference between aggregate annual income (AAI) with certain adjustments and statutory deductions. AAI includes practically all forms of income, including capital gains.
Deductions generally include all expenses related to business activities and directed at the receipt of income, although a number of generally minor exclusions also apply.
In addition to normal operating expenses, examples of expenses that are allowed for deduction include the following:
- Interest (within a thin capitalization limit and within actually paid)
- Foreign exchange losses
- Representational expenses up to a limit of 1% of payroll subject to taxation
- Charitable expenses (up to 3% of taxable income)
Depreciation for tax purposes
To qualify as a fixed asset for tax purposes, an asset should be defined as such in the IFRS accounts of the entity.
For tax depreciation purposes, fixed assets are split into four groups:
Assets are depreciated at any rate up to the maximum depreciation rates set out in the table above.
The following items are not considered as fixed assets:
- Intangible assets with an indefinite useful life
- Construction in progress
Expenses actually incurred on use, repair, maintenance and liquidation of fixed assets are defined as “subsequent costs” and are generally deductible in the tax period when they are actually incurred.
Tax rate and compliance
CIT is applied to companies at the current general rate of 20% of taxable income. In addition, net income (after deduction of CIT) of a nonresident’s PE (branch) in Kazakhstan is subject to branch profits tax at a rate of 15%. It is usually reduced by tax treaties.
As a general rule, the tax period is a calendar year. The general CIT tax declaration deadline is 31 March in the year following the reporting period.
As a general rule, all taxpayers (with certain exceptions) are subject to the CIT advance payment procedure, which requires taxpayers to estimate the tax liability for the year and pay the tax in installments monthly, not later that the 25th day of the current month.