Doing business in Kazakhstan
A European Union-style VAT applies in Kazakhstan. The VAT rate has fallen progressively from 20% in the late 1990s to 12% currently.
Payers and registration
All tax payers registered for VAT purposes are required to charge VAT on their taxable supplies and calculate and report their VAT obligations.
Taxpayers are required to register for Kazakhstan VAT purposes if their total turnover in a calendar year exceeds 30,000 MCI (or approximately US$360,000). Even if an entity is not required to register for VAT purposes, it may usually do so voluntarily by submitting an application to the appropriate tax committee.
Penalties for non-registration are severe: up to 30% of turnover.
For a VAT payer, taxable turnover is the total of practically any type of supply it makes (e.g., sale, exchange or gift) of goods, work and services and the total of its acquisitions of goods, work and services from non-registered nonresidents.
There are a limited number of non-taxable and exempt supplies that are excluded from this rule.
A small number of transactions, such as transfers into the charter capital of a legal entity, are treated as non-taxable.
Goods and services are subject to VAT if, under the place of supply rules, they are deemed to be supplied in Kazakhstan. The place of supply rules are broadly similar to European Union rules; in particular, they deem some supplies that are made outside of Kazakhstan such as consultancy to be made inside Kazakhstan and so to be taxable.
Turnover taxable at a zero rate includes:
- Export sales of goods
- International transportation services
Turnover and imports exempt from VAT include:
- Turnover associated with residential buildings
- Defined financial services
- Transfers of assets under finance leases (interest part)
- Turnover from services rendered by noncommercial organizations
- Turnover from services in the spheres of culture, science and education
- Import of certain assets, the list of which is generally approved by the Government
VAT paid on services and goods purchased by a VAT payer (i.e., input VAT), including reverse-charge VAT already paid and VAT paid at customs, should generally be available for offset (credit) when determining a taxpayer’s VAT liability to the budget.
However, offset is not available for VAT incurred for the purpose of making supplies that are either exempted or deemed to be supplied outside of Kazakhstan.
VAT calculation and VAT offset carry-forward
The VAT liability of a taxpayer is calculated as output VAT (i.e., VAT charged by a taxpayer) less input VAT (i.e., VAT paid by a taxpayer to its suppliers) in a reporting period.
The excess of input VAT over output VAT may generally be carried forward against future VAT liabilities. In practice, obtaining refunds requires significant effort, although the rules do prescribe a procedure for refunds under certain conditions.
Non-recoverable input VAT
Input VAT is not allowed for offset if it is paid in connection with the receipt of the following:
- Goods, work, and services not related to taxable turnover
- Passenger cars that are purchased as fixed assets
- Goods, work, and services, when a VAT invoice is issued that is not in compliance with the requirements of the Tax Code
VAT registration is separate from the tax registration that occurs as part of the “one-stop shop.” The deadline for the registration is within 10 business days of the end of the month in which the turnover threshold is exceeded.
VAT rate and compliance
The VAT rate is 12% and the tax period for VAT is a calendar quarter. The submission deadline for the VAT return is the 15th day of the second month following the reporting period. The deadline for payment of VAT liability is the 25th day of the second month following the reporting period.
Under the place of supply rules, certain services are deemed to be supplied at the location of the business activity of the purchaser of services. These services include: consulting, audit, engineering, design, marketing, legal, accounting, advocacy, advertising, information processing services, provision of personnel, lease of movable property, communication services.
Where such services are rendered by a nonresident not registered for VAT purposes in Kazakhstan, the Kazakhstan purchaser of these services is required to self-assess and pay VAT to the budget via a reverse-charge mechanism.
The obligation to pay the reverse-charge VAT will be on the Kazakh purchaser of the services, which should be allowed to offset the amount of the reverse-charge VAT paid against output VAT, subject to the general offset procedure.
The Tax Code contains certain procedures and monthly compliance requirements for import of goods to Kazakhstan from the Customs Union countries (Russia and Belarus).