Doing business in Kazakhstan
Individual income tax
Residents and nonresidents of Kazakhstan (receiving income from a Kazakh source) are subject to personal income tax.
Residents are taxed on their worldwide income. Nonresidents are taxed on Kazakhstan-source income only, regardless of where it is paid.
Income is generally deemed to be from a Kazakh source if it is paid for work performed in Kazakhstan. Kazakhstan-source income also includes, but is not limited to, interest income from residents and nonresidents having a permanent establishment in Kazakhstan and dividends from resident legal entities.
For tax purposes, foreign individuals are considered residents if they are present in the country for 183 or more days in any consecutive 12-month period ending in that year.
Local individuals are always considered residents of Kazakhstan if their center of vital interests is located in Kazakhstan. The center of vital interests is deemed to be located in Kazakhstan if all of the following conditions are fulfilled:
- The individual is a citizen of Kazakhstan or has permission to live in Kazakhstan (residence permit).
- The family or close relatives of the individual reside in Kazakhstan.
- The individual or members of the family of the individual own, or otherwise have at their disposal, immovable property in Kazakhstan permanently available for residence.
Income from employment consists of all compensation, whether received in cash or in kind, subject to minor exceptions, regardless of the place of payment of such income.
Self-employment and business income
The income of individuals engaged in self-employment activities (individual entrepreneurs) is subject to income tax.
Tax is levied on an individual’s annual business income, which consists of gross income less expenses incurred in obtaining that income.
Generally, investment income is included in taxable income.
Exemptions include the following:
- Interest income on deposits paid to individuals by licensed financial organizations
- Income from Kazakhstan state securities
Certain items should not be regarded as income of the individual:
- Business trip per diems within established norms and reimbursement of certain business trip expenses
- Accommodation and meal expenses within established norms for rotating workers while they are at work sites
- The excess of the market value of the stock option at the time of the exercise over the exercise price of the option
Certain items are exempt from income tax, including the following:
- Medical expenses within established norms
- Dividends and interest on securities that, at the time of the accrual of such dividends and interest, are on the official list of a stock exchange operating in the territory of Kazakhstan
- Dividends received from a resident legal entity where the shares or participating interests have been possessed for more than three years, provided that the legal entity is not a subsurface user (during the period for which dividends are paid) and 50% or more of the value of the assets of the legal entity at the date of payment of the dividends is comprised of assets of the entity that is not a subsurface user
Capital gains are subject to tax at the specified rates.
Capital gains derived from the open trade sale of securities listed on a stock exchange operating in Kazakhstan at the date of sale are exempt from the tax.
Capital gain from the disposal of securities that were purchased by an individual through an option is the positive difference between the selling price and the purchase price. The purchase price should include the price of exercising an option and option purchase price.
Personal deductions and exemptions
The minimum monthly salary (MMS)for an employee determined by the Law on Republic Budget and effective on the date of income accrual for the corresponding month for which income is calculated is deductible from an employee’s monthly salary.
The total amount of tax deduction for the year should not exceed the total amount of the MMS determined by the Law on Republic Budget and effective at the beginning of each month of the current year.
Other deductions include the following:
- Obligatory pension fund contributions
- Voluntary pension fund contributions
- Insurance premiums for the individual's own benefit under accumulative insurance agreements
If the amount of the MMS exceeds the amount of the employee’s monthly taxable income, reduced by the amount of obligatory pension fund contributions, the excess can be carried over to subsequent months within the calendar year to reduce the employee’s taxable income.
The following tax rates are applicable to resident and nonresident individuals depending on type of income:
Income received in foreign currency is converted to tenge at the exchange rate on the date the income is received.
Tax registration of foreign individuals in Kazakhstan
The most common cases when foreign individuals need to be registered for tax purposes in Kazakhstan are the following:
- When opening bank accounts at banks that are tax residents of Kazakhstanan
- When receiving Kazakhstan-source income not taxed at the source of payment in Kazakhstan
- When becoming a tax resident of Kazakhstan
The tax year in Kazakhstan is the calendar year.
A tax agent should be responsible for withholding and remitting income tax from payments made to resident and nonresident individuals.
Under the withholding mechanism, a tax agent withholds and transfers to the state budget personal income tax, which should be remitted on a monthly basis by the 25th day of the month following the month in which income was paid.
The tax agent must file a personal income tax and social tax report (which includes pension fund contributions and social insurance contributions) on a quarterly basis by the 15th day of the second month following the reporting quarter.
If a tax agent is not available in Kazakhstan, resident and nonresident individuals are responsible for the calculation of personal income tax liabilities and filing the Kazakhstan tax return. The filing deadline for the Kazakhstan tax return is March 31 of the year following the reporting year, and the income tax liability, if any, should be settled within 10 calendar days of the filing deadline.
Kazakhstan tax returns should be filed by the following tax-resident individuals:
- Individual entrepreneurs
- Private notaries and advocates
- Individuals who received property income
- Individuals who received income not taxed at the source of payment in Kazakhstan, including income outside Kazakhstan
- Individuals having funds in foreign bank accounts outside Kazakhstan
Kazakhstan tax nonresident individuals whose Kazakhstan-source income is subject to withholding in Kazakhstan have no obligation to file a Kazakhstan tax return.