Doing business in Kazakhstan
In Kazakhstan the tax administration rules are complex, and penalties for even minor infringements can be significant. Many taxpayers are audited, and it is vital to manage the tax audit process.
Tax reports (including returns and calculations) are compiled by the taxpayer, tax agent or their representatives. Tax reports can be compiled on paper or electronically in the Kazakh or Russian languages.
Tax audits can generally be divided into the following main categories:
- Comprehensive tax audit
- Thematic (targeted) tax audit
- Cross-check tax audit
Tax audits can cover any period within the statute of limitations, which is generally five years. Generally, tax audits can be intrusive and time-consuming and sometimes may even result in a seizure of documents and investigations of violations by the financial police.
Upon completion of a tax audit, the tax authorities usually issue a tax audit act. (If no violations of the tax legislation are discovered, an appropriate note is made in the tax audit act.)
On the basis of the results recorded in the act, the tax authorities issue a “notification” on the assessed amounts of taxes and other obligatory payments to the budget, and related penalties and interest.
Taxpayers have the right, within deadlines, to appeal acts of the tax authorities to a higher body of the tax authorities or the court.
Penalties and interest
The Code of Administrative Violations establishes administrative penalties for non-compliance with tax regulations, including the following:
- Under-declared taxes: 30%–50% of the under-declared tax amount
- Understatement of advance corporate income tax payment by more than 20%: penalty of 40% of the understated tax
- Failure to withhold taxes: 30%–50% of the non withheld tax
- Concealment of taxable items: 150%–200% of taxes to be paid on the concealed amount
Interest is applied to late tax payments at 2.5 times the official National Bank annual refinancing rate (currently 5.5%) of the unpaid tax for each day of delay.
In addition, the concept of criminal liability with respect to taxes is applied in Kazakhstan. A criminal violation by an organization is generally perceived to occur when the tax amount misreported exceeds 20,000 MCI (or approximately US$240,000).
Such violations can result in investigation by the financial police and even in prosecution of individuals who are held to be responsible for violations.
Non-binding tax clarifications may be obtained from the tax authorities in Kazakhstan. A taxpayer may apply to the tax authorities where it is registered, or to a higher body of the tax authorities, if required.
The tax authorities usually provide their opinion on specific tax queries in the form of a letter. However, such letters are only of an advisory character and do not have full legal force. Generally, such letters can be canceled or recalled.