Doing business in Kazakhstan
Withholding tax (WHT) — other than individual income tax — applies to most types of Kazakhstansource income paid to nonresidents that are not registered for tax purposes in Kazakhstan, and even to some who are if due care is not taken.
The rules are complex and inconsistent and there are some instances in which WHT could apply to payments that involve no presence in Kazakhstan.
It is vital to have a thorough understanding of how WHT may affect your business. There are also significant administrative requirements to receive the benefits of tax treaties.
Tax agents withhold tax from the gross Kazakhstan-source income of a nonresident. Any tax-registered entity that pays Kazakhstan-source income is potentially a tax agent.
- Nonresidents’ income from the sale of goods or performance of work or services in Kazakhstan, including income from export sales
- Income from management, financial (except for insurance or reinsurance of risks), consultancy, legal (except for representation in court and notary services) and auditing services performed outside of Kazakhstan
- Any income of tax haven entities regardless of where the underlying operations take place
- Capital gains from sales of shares or interests in Kazakhstan entities or foreign legal entities that derive most of their value from Kazakhstan
- Capital gains from sales of Kazakhstan property subject to registration
Tax rates and compliance
Most of the double tax treaties concluded by Kazakhstan either provide for exemption from Kazakh WHT or allow the reduction of WHT rates to 5%–10% provided that the treaty provisions are met.
However, application of the benefits is also subject to rules in the Tax Code concerning documentary evidence.
The rules are very specific as to the documentation required and it is recommended that the tax agent generally possesses it at the time payment is made if treaty relief is to be applied. Otherwise tax must be withheld in full and a refund could be claimed subsequently.
The payment of withholding tax is made by the tax agents. The general rules are:
- With respect to accrued and paid amounts, not later than 25 calendar days following the month when the payment was made
- With respect to accrued but not yet paid amounts, if they are deducted for corporate income tax purposes, not later than 10 calendar days following the deadline for corporate income tax return submission
- With respect to prepayment, not later than 25 calendar days after the end of a month in which income was accrued to the nonresident
In accordance with the Tax Code, the tax agents should submit the WHT return within the following deadlines:
- not later than the 15th day of the second month following the quarter when the WHT obligation arose, or
- not later than 31 March of the year following the tax period in which the accrued, but not paid, income was deducted for corporate income tax purposes (and for the 4th quarter in general)./li>