2024 Kazakhstan Tax Code: Key Amendments

On December 12, 2023, the President of the Republic of Kazakhstan signed Law No. 45-VIII On Amendments and Additions to the Code of the RK "On Taxes and Other Obligatory Payments to the Budget" (Tax Code) (hereinafter, the “Tax Code”) and the Law of the RK On Enactment of the Code of the RK ”On Taxes and Other Obligatory Payments to the Budget” (Tax Code) (hereinafter, the “Law”).

Some key changes, to which we would like to draw your attention, are set out below:

1. Limitation of deductions of intangible services rendered by a related party

A retrospective amendment was introduced to Articles 264 and 288 of the Tax Code imposing a threshold of 3% from the taxable income for CIT deductibility of intragroup services acquired from non-resident related parties.

Under these amendments, 3% CIT deductibility limitation should apply only to transactions with suppliers based in jurisdictions included into the list of states with preferential taxation.

These changes are effective retrospectively from 1 January 2023.

2. Deduction of expenses related to the acquisition of digital assets

According to the amendments introduced to the Tax Code in February 2023, residents were not allowed to deduct expenses for CIT purposes related to the acquisition and/or expenses associated with obtaining digital assets traded outside the digital asset exchange registered in the territory of the International Financial Center “Astana”. According to the new amendments, subparagraph 1 of Article 264 of the Tax Code was excluded.

These changes are effective from 1 January 2024.

3. Turnover of digital assets

From 1 January 2024, sales of digital assets are exempt from VAT (new paragraph 4 of Article 397 of the Tax Code).

4. Calculation of the charge for digital mining

A single rate was introduced for calculating the charge for digital mining. Previously, the rates were set depending on the price per 1 kilowatt-hour of electricity consumed.

The charge will now be calculated at the rate of 2 tenge per 1 kilowatt-hour of electricity consumed during the reporting period (the new version of Article 606.3 of the Tax Code).

This is effective from 1 January 2024.

5. Deductions of certain types of expenses

According to the amendments, expenses incurred by the National Infrastructure Operator in connection with the provision of backbone railway network services for the transportation of passengers by rail to a rail carrier, which is engaged in the transportation of passengers, baggage, cargo baggage, and postal items on a free-of-charge basis, will be deductible for CIT purposes, including those with the application of a temporary reduction factor of 0 to the tariff for regulated backbone railway network services for the transportation of passengers by rail in accordance with the legislation of the RK (new paragraph 18 of Article 243 of the Tax Code).

These changes are effective from 1 January 2024.

6. Taxation of operations with government securities

Amendments were made on CIT benefits on transactions with government securities, with different effective dates of such changes:

From 1 March 2024, the right to reduce taxable income in respect of income received by commercial banks from government securities issued by the National Bank of the RK is cancelled (Article 2.2.3 of the Law).

From 1 January 2030, provisions providing CIT benefits for reducing taxable income in respect of income related to interest and capital gains from the sale of government securities for resident and non-resident legal entities are cancelled (the new version of Article 288.2 of the Tax Code and Article 645.9.6).

7. Changes in taxation of interest payments for listed securities

For non-resident individuals and legal entities, similar to dividends on listed securities, an exemption from withholding tax (“WHT”) and personal income tax at the source of payment on interest payments will be provided for the securities listed on the official list of stock exchanges operating in Kazakhstan as of the date of accrual of such interest payments. This exemption is subject to the condition that such securities were traded on the exchange during the tax period in accordance with the criteria determined by the Government of the RK (the new version of Article 645.9.3 of the Tax Code and subparagraph 3 of Article 654 of the Tax Code).

These changes are effective from 1 January 2024.

8. Regarding the adjustment of income by the dividends received for CIT purposes

According to last year’s amendments to the Tax Code, from 1 January 2023, the dividends received by the resident legal entities on securities that were not traded on KASE and/or AIX should have been subject to CIT at the rate of 20% (without adjusting such income). At the same time, the resident legal entities could exclude dividends received on unlisted shares and participatory interests from their aggregate annual income by adjusting such income.

According to the new amendments, all dividends received by the resident legal entities are subject to exclusion from the aggregate annual income (Article 241.2.4 of the Tax Code is excluded).

Similarly, the dividends received on securities that were not traded are excluded from the income of the resident legal entities subject to a withholding tax (Article 307.1.5 of the Tax Code is excluded).

These changes are effective retrospectively from 1 January 2023.

9. Income of organizations engaged in microfinance activities (“MFO”) from reduction of created provisions (reserves)

The new amendment states that for provisions (reserves) created by MFO (which are entitled to deduct the expenses on creating provisions) the amounts of provisions (reserves) deducted in the reporting and/or previous tax periods, when reducing the amount of claims against a debtor, are not recognized as income from the reduction in provisions (reserves) for bad debts on microcredit and related interest. In this case, the maximum limit on the size of the ratio of the total bad debt on microcredits and related interest forgiven for the tax period to the principal debt on microcredits and related interest at the beginning of the tax period is equal to 0.2 (new Article 232.5.9-1 of the Tax Code).

These is effective from 1 January 2024.

10. Taxation of organizations and individual entrepreneurs operating in the special economic zone

Amendments were made to the term of application of reductions of taxes and/or charges by 100% (new Article 709.11 of the Tax Code). Now the term of application of such benefit depends on the categories established by the legislation of the RK for special economic and industrial zones, but cannot exceed the term of the agreement on operational activities and the operational life of the special economic zone:

• 7 years for category A;
• 15 years for category B;
• 25 years for category C.

These changes are effective from 1 January 2024.

11. Changes in the deadlines for submitting 250.00 and 270.00 tax forms

According to the implemented amendments, the Declaration of Assets and Liabilities (250.00 tax form) shall be filed no later than September 15 of the year when the obligation to submit the tax form arises. The deadline for submission of the Declaration of Income and Property (270.00 tax form) is no later than September 15 of the year following the reporting year. Please note that the above-mentioned deadlines have been established for both paper and electronic tax return submissions.

12. Implementation of occupational payments to be made by employers

Amendments were made to labor legislation providing for occupational payments at the expense of the employer for employees who are engaged in work with harmful working conditions and meet certain criteria.

This payment shall not be considered as such individual’s income. The rules for occupational payments to be made at the employer’s expense are effective from 1 January 2024.

13. Changes in in-house audit (desk audit)

From 1 January 2024, the following amendments and additions to the in-house audit (desk audit) under the Law will come into force:

• When responding with an explanation to the notification to eliminate violations with an average degree of risk, the taxpayer will not be obliged, but has the right to attach extracts from the accounting and/or tax accounting registers and/or supporting documents and/or indicate the circumstances of disagreement.
• When submitting an explanation to the notification to eliminate violations with a high degree of risk, the notification may be recognized by the tax authority as unfulfilled if the tax authority disagrees with the circumstances specified in the taxpayer’s explanation.
• If the notification was not fulfilled by eliminating violations or providing an explanation (if applicable), a decision on recognizing the notification as unfulfilled is not made, i. e., in this case, the notification is recognized as unfulfilled automatically.
• The expense transactions on the taxpayer’s bank accounts are suspended only if the taxpayer failed to fulfill the notification. In particular, if the explanation on the notification is submitted duly and on time (except for cases provided for by Article 96.3 of the Tax Code), but the tax authority has issued a decision to recognize the notification as unfulfilled, the expense transactions on the bank accounts are not subject to suspension.

14. State fee for citizens’ appeals submitted to the Constitutional Court of the RK

From 1 January 2024, citizens will not be charged the state fee for appeals submitted to the Constitutional Court of the RK.

15. Changes in the consular fee rate approval process

According to the approved amendments, the consular fee rates for services provided in the RK and abroad will be determined by the tax authorities together with the Ministry of Foreign Affairs (“MFA”). Additionally, for consular services provided abroad, the MFA will be able to set additional fees for urgency based on the principle of mutuality. These changes are effective from 1 January 2024.

Authors:

• Dinara Tanasheva, Partner, Head of the Tax and Legal Services for Kazakhstan and Central Asia
• Roman Yurtayev, Partner, Head of Business Tax Advisory Services
• Doniyorbek Zulunov, Partner, Head of International Tax Services
• Vladimir Fesenko, Partner, Head of People Advisory Services