Kazakhstan - Income Tax

Kazakhstan - Income Tax

Taxation of international executives

Related content

Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?

31 March.

What is the tax year-end?

31 December.

What are the compliance requirements for tax returns in Kazakhstan?

Residents

Personal income tax withheld at source is due by the 25th day of the month following the month in which income is paid. Employer payroll tax reports are due quarterly by the 15th day of the second month following the calendar quarter.

Resident individuals must file a personal income tax declaration by 31 March of the year following the reporting year if they receive income which is not subject to Kazakh income tax withholding or if they have a foreign bank account outside of Kazakhstan. These individuals are required to remit tax to the state by 10 April.

Non-residents

Personal income tax withheld at the source of payment to non-resident individuals is due by the 25th day of the month following the month in which the income is paid. Employer payroll tax reports are due quarterly by the 15th day of the second month following the calendar quarter.

Non-resident individuals receiving Kazakh-source income which is subject to income tax withholding at the source of payment in Kazakhstan are not required to file tax returns.

Tax rates

What are the current income tax rates for residents and non-residents in Kazakhstan?

Residents

The income tax rate applicable to residents on all types of income except dividend income is 10 percent; dividend income is subject to tax at 5 percent.

Non-residents

The income tax rate applicable to non-residents on employment income is 10 percent. Kazakh-source income other than employment income is taxable at rates ranging from 5 to 20 percent.

Residence rules

For the purposes of taxation, how is an individual defined as a resident of Kazakhstan?

Personal taxation in Kazakhstan depends on an individual’s residency status. Individuals are regarded as tax residents of Kazakhstan for a particular tax year if they spend 183 days or more in Kazakhstan in any period of 12 consecutive months ending in that tax year. A person is regarded as non-resident for the period following his/her last day of presence in Kazakhstan, unless the person becomes resident again in the year following the year in which that person departed from Kazakhstan.

Tax residents are subject to tax in Kazakhstan on their worldwide income. Non-residents are subject to tax in Kazakhstan only on their Kazakhstan-source income. Kazakh-source employment income of a foreign individual who spends less than 183 days in Kazakhstan in any period of twelve consecutive months is not subject to personal income tax if the non-resident individual is an employee of a foreign legal entity with no permanent establishment in Kazakhstan.

Is there, a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country for more than 10 days after their assignment is over and they repatriate.

As mentioned above, a person is regarded as non-resident for the period following his/her last day of presence in Kazakhstan, unless the person becomes resident again in the year following the year in which that person departed from Kazakhstan.

What if the assignee enters the country before their assignment begins?

Foreign individuals who enter Kazakhstan and receive Kazakh-source income which is not subject to income tax withholding in Kazakhstan should register with the tax authorities within 30 calendar days from the start of their economic activity in Kazakhstan or from the moment when they first receive income from a Kazakh source. An individual who enters the country before his/her assignment begins does not have a liability to pay tax to the state unless he/she receives income not subject to income tax withholding during that period. However, the days spent in Kazakhstan before the assignment begins do count towards tax residency.

Termination of residence

Are there any tax compliance requirements when leaving Kazakhstan?

A foreign individual registered with the Kazakh tax authorities is required to deregister as a taxpayer when leaving Kazakhstan. To do so, the foreign individual must submit an application to the tax authorities indicating the reason for deregistering.

What if the assignee comes back for a trip after residency has terminated?

An individual severs his/her tax residency as of the date following the date of his/her departure from Kazakhstan. If he/she returns to Kazakhstan at a later time, days that he/she had spent in Kazakhstan in the previous twelve months continue to be counted for tax residency purposes.

Communication between immigration and taxation authorities

Do the immigration authorities in Kazakhstan provide information to the local taxation authorities regarding when a person enters or leaves Kazakhstan?

There is no regular exchange of information between tax authorities and immigration authorities in Kazakhstan regarding foreign nationals who enter Kazakhstan. However, in theory, the tax authorities could refer to immigration authorities' records to confirm the number of days that a foreign national was present in Kazakhstan. KPMG in Kazakhstan is not aware that this is done in practice. Border authorities routinely stamp the passport of a foreign national each time he/she crosses Kazakhstan's borders with a mark indicating the entry/exit date, so the tax authorities could verify the length of an individual's stay in Kazakhstan from stamps in a passport.

Filing requirements

Will an assignee have a filing requirement in the host country after he/she leaves the country and repatriates?

Yes, an assignee must properly file a final personal income tax declaration with the tax authorities by 31 March of the year following the year of departure and only then can deregister as a taxpayer.

Economic employer approach

Do the taxation authorities in Kazakhstan adopt the economic employer1 approach to interpreting Article 15 of the OECD treaty? If no, are the taxation authorities in Kazakhstan considering the adoption of this interpretation of economic employer in the future?

There is no explicit reference to OECD principles, but in our experience the tax authorities in Kazakhstan generally apply the economic employer concept in applying the dependent services article of Kazakhstan's tax treaties. If salary costs are deducted in Kazakhstan, we believe the individual does not qualify for treaty relief.

De minimus number of days

Are there a de minimus number of days before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?

Kazakh-source employment income of a foreign individual who spends less than 183 days in Kazakhstan in any period of twelve consecutive months is not subject to personal income tax if the non-resident individual is an employee of a foreign legal entity with no permanent establishment in Kazakhstan. For tax treaty purposes there is no de minimus approach to the economic employer concept.

Types of taxable compensation

What categories are subject to income tax in general situations?

Kazakh-source income with respect to employment includes all remuneration, whether received in cash or in-kind, for work performed in Kazakhstan, regardless of where such income is paid. As a rule, all types of compensation and benefits that an employee receives for employment services constitute taxable income. These include, but are not limited to, the following:

  • cost-of-living allowances
  • foreign service premiums
  • school tuition reimbursements or allowances
  • reimbursements of foreign and/or home-country taxes
  • reimbursement of home leave costs
  • housing allowances or the imputed value of housing provided by the employer
  • company car (although there are no guidelines on how to tax the benefit)
  • provision of domestic assistance
  • relief of an employee’s debt to his/her employer
  • discount element of goods provided to an employee at a reduced price or free of charge
  • other benefits-in-kind.

Tax-exempt income

Are there any areas of income that are exempt from taxation in Kazakhstan? If so, please provide a general definition of these areas.

  • Interest on bank deposits if the banks paying the interest are licensed by the National Bank of Kazakhstan.
  • Interest and gains from a sale of securities issued by the government of Kazakhstan.
  • Interest and dividends paid on securities officially listed on the Kazakh stock exchange on the date of accrual of the interest and dividends.
  • Dividends received from a Kazakh legal entity, provided that the individual receiving the dividends has held the ownership stake in the legal entity paying the dividends for more than three years as of the dividend payment date, the legal entity paying the dividends is not a petroleum or mining business within the whole period for which the dividends are paid and less than 50 percent of the value of the legal entity paying the dividends comes from the property of a petroleum or mining business in Kazakhstan at the moment of the dividend payment.
  • Gains from sales of ownership stakes in Kazakh legal entities, provided that less than 50 percent of the value of the legal entity in which the stake is sold comes from the property of a petroleum or mining business in Kazakhstan at the moment of the sale.
  • Gains from a sale of stocks or bonds officially listed on the Kazakh stock exchange if the stocks or bonds are sold through a public trade on the stock exchange.
  • The value of property, including money, received in the form of gifts or inheritances from other individuals.

Expatriate concessions

Are there any concessions made for expatriates in Kazakhstan?

There are no special tax regimes or concessions for expatriates in Kazakhstan.

Salary earned from working abroad

Is salary earned from working abroad taxed in Kazakhstan? If so, how?

Salary earned from working abroad is not regarded as Kazakh-source income. Hence, only a tax resident must report such income in Kazakhstan and pay tax on it. Such a tax resident is required to file an annual personal income tax declaration by 31 March of the year following the reporting year and remit the personal income tax to the state by 10 April.

Taxation of investment income and capital gains

Are investment income and capital gains taxed in Kazakhstan? If so, how?

Kazakh tax legislation provides a tax exemption for the following types of investment income earned by either resident or non-resident individuals:

  • interest on bank deposits if the banks paying the interest are licensed by the National Bank of Kazakhstan
  • interest and gains from sales of securities issued by the government of Kazakhstan
  • interest and dividends paid on securities officially listed on the Kazakh stock exchange on the date of accrual of the interest and dividends
  • dividends received from a Kazakh legal entity, provided that the individual receiving the dividends has held the ownership stake in the legal entity paying the dividends for more than three years as of the dividend payment date , the legal entity paying the dividends is not a petroleum or mining business within the whole period for which the dividends are paid and less than 50 percent of the value of the legal entity paying the dividends comes from the property of a petroleum or mining business in Kazakhstan at the moment of the dividend payment
  • gains from sales of ownership stakes in a Kazakh legal entity, provided that less than 50 percent of the value of the legal entity in which the stake is sold comes from the property of a petroleum or mining business in Kazakhstan at the moment of the sale
  • gains from a sale of stocks or bonds officially listed on the Kazakh stock exchange if the stocks or bonds are sold through a public trade on the stock exchange.

Other Kazakh-source dividend and interest income paid to individuals is subject to income tax withheld at the source of payment.

Residents are required to self-assess Kazakh personal income tax on the following types of investment income:

  • foreign-source dividend or interest income
  • gains from a sale of foreign securities or ownership stakes in a foreign legal entity
  • gains from a sale of ownership stakes in a Kazakh legal entity if more than 50 percent of the value of the legal entity in which the stake is sold comes from the property of a petroleum or mining business in Kazakhstan at the moment of the sale.

Non-residents are required to self-assess Kazakh personal income tax on the following types of investment income, unless tax was withheld at the source of payment:

  • gains from sales of ownership stakes in a Kazakh of foreign legal entity if more than 50 percent of the value of the legal entity in which the stake is sold comes from property of a petroleum or mining business in Kazakhstan at the moment of the sale.

Gains from stock option exercises

According to Kazakhstan tax legislation, the excess of the market value of a stock over the stock option exercise price is not regarded as income to the individual exercising the stock option.

Principal residence gains and losses

A gain realized on a sale of immovable property owned for less than one year is regarded as property income. A gain realized on such property held more than 1 year is not taxable.

Resident individuals should self-assess and pay income tax on property income at a rate of 10 percent. Non-residents should self-assess and pay income tax on such gains at a rate of 15 percent.

Kazakhstan tax legislation does not provide a tax deduction for a loss incurred on a sale of immovable property.

Capital losses

Kazakhstan tax legislation does not address deductions for capital losses for personal income taxation purposes.

Personal use items

Kazakhstan tax legislation does not provide a tax deduction for the cost of personal use items.

Gifts

Any in-kind benefit provided by an employer to an individual is taxable in Kazakhstan. The value of property received in the form of gifts from other individuals is exempt from taxation.

Additional capital gains tax (CGT) issues and exceptions

Are there additional capital gains tax (CGT) issues in Kazakhstan? If so, please discuss?

There are no additional capital gain tax issues in Kazakhstan.

Are there capital gains tax exceptions in Kazakhstan? If so, please discuss?

There are no capital gains tax exceptions in Kazakhstan, other than those mentioned above.

Pre-CGT assets

Not applicable for Kazakhstan tax purposes.

 

Deemed disposal and acquisition

Not applicable for Kazakhstan tax purposes.

General deductions from income

What are the general deductions from income allowed in Kazakhstan?

Residents have the right to deduct the following:

  • obligatory and voluntarily pension fund contributions made to pension funds in Kazakhstan
  • a monthly amount equal to the official minimum monthly salary
  • interest that a resident individual pays to the Kazakhstan State Residential Construction Bank on a loan to renovate, construct or acquire a home
  • Insurance premiums contributed under cumulative insurance agreement for the own benefit of a resident
  • Medical expenses (with the exception of cosmetic surgery expenses) within the overall deduction limit of KZT182,872

Registered individual entrepreneurs have the right to deduct the following expenses associated with the generation of income:

  • business-related expenses (the deductions for some expenses are subject to limits)
  • interest expense (interest expense deductibility can depend on debt-to-equity ratios, but it is unclear how this applies to a registered entrepreneur)
  • charitable donations (up to 3 percent of taxable income from entrepreneurial activity).

Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in Kazakhstan?

Tax reimbursements are included in the employee’s income in the year when the reimbursement is made.

Calculation of estimates/prepayments/withholding

How are estimates/prepayments/withholding of tax handled in Kazakhstan? For example, Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYG), etc.

Kazakh tax legislation does not provide for an advance tax payment mechanism for personal income tax. Monthly tax withholdings are calculated by applying the standard personal income tax rate to actual accrued income.

Pay-as-you-go (PAYG) withholding

Employers in Kazakhstan must withhold personal income tax from all payments they make to employees, regardless of the nationality or tax residency status of the employees.

Local companies and foreign companies that have a registered permanent establishment in Kazakhstan are required to remit withheld taxes to the state by the 25th day of the month following the month in which income is paid and file a quarterly personal income tax and social tax report by the 15th day of the second month following the calendar quarter.

PAYG installments

Individuals receiving Kazakh-source income not taxable at the source of payment in Kazakhstan are responsible for calculating and remitting personal income tax on such income. Such individuals must file an annual personal income tax declaration by 31 March of the tax year following the year of income receipt. Personal income tax is due by 10 April.

When are estimates/prepayments/withholding of tax due in Kazakhstan? For example, monthly, annually, both, etc.

Personal income tax withheld at the source of payment is due by the 25th day of the month following the month of income payment.

Relief for foreign taxes

Is there any Relief for Foreign Taxes in Kazakhstan? For example, a foreign tax credit (FTC) system, double taxation treaties, etc?

A foreign tax credit is available for a tax resident for foreign tax paid on foreign-source income. The amount of the foreign tax credit may not exceed the Kazakhstan tax payable on the same income.

Kazakhstan recognizes the prevalence of its tax treaties over its domestic tax legislation, so foreign employees should be able to claim benefits under the relevant tax treaty if they qualify for them.

General tax credits

What are the general tax credits that may be claimed in your country? Please list below.

Not applicable for Kazakh tax purposes.

Sample tax calculation

3This calculation assumes a married taxpayer resident in Kazakhstan with two children whose assignment begins 1 January 2012 and ends 31 December 2012. The taxpayer’s base salary is USD100,000.

  2012 USD
Salary 100,000
Bonus 20,000
Cost-of-living allowance 10,000
Housing allowance 12,000
Company car 6,000
Moving expense reimbursement 20,000
Education allowance 3,000
Interest income from non-local sources 6,000

Exchange rate used for calculation: USD1 = KZT150.

Other assumptions

  • All earned income is attributable to local sources.
  • Bonuses are paid at the end of the tax year and accrue evenly throughout the year.
  • Interest income is not paid in Kazakhstan.
  • The company car is used for business and private purposes and originally cost USD50,000. The company measures the value of company car use as the amount of annual depreciation expense recorded in its accounting records.
  • The employee is regarded as a tax resident throughout the assignment.
  • Tax treaties and totalization agreements are ignored for the purpose of this calculation.

Calculation of taxable income

Year-ended 2012 KZT
Days in Kazakhstan during year 315
Earned income subject to income tax  
Salary 15,000,000
Bonus 3,000,000
Cost-of-living allowance 1,500,000
Housing allowance 1,800,000
Moving expense reimbursement 3,000,000
Education allowance 450,000
Total earned income 24,750,000
Other income 900,000
Total income 25,650,000
Person deduction of official minimum monthly salary (191,988)
Dependent spouse deduction 0
Dependent children deduction 0
Total Deductions: (191,988)
Total taxable income 24,458,012

Calculation of tax liability

  2012

KZT
Taxable income as above 24,458,012
Kazakhstan tax thereon 2,445,801
Less:  
Domestic tax rebates (dependent spouse rebate) 0
Total Kazakhstan tax 2,445,801

* The company car is excluded from taxable income, because there is no guidance on how to value the benefit. Reporting this income probably creates more risk than not reporting it, because once it is reported, the tax authorities might question the value of the benefit.

Footnotes

1Certain tax authorities adopt an "economic employer" approach to interpreting Article 15 of the OECD model treaty which deals with the Dependent Services Article. In summary, this means that if an employee is assigned to work for an entity in the host country for a period of less than 183 days in the fiscal year (or, a calendar year of a 12-month period), the employee remains employed by the home country employer but the employee's salary and costs are recharged to the host entity, then the host country tax authority will treat the host entity as being the "economic employer" and therefore the employer for the purposes of interpreting Article 15. In this case, Article 15 relief would be denied and the employee would be subject to tax in the host country.

2For example, an employee can be physically present in the country for up to 60 days before the tax authorities will apply the ‘economic employer’ approach.

3Sample calculation generated by KPMG Tax and Advisory LLC,, a Kazakh member firm of KPMG International, based on the Tax Code).

© 2016 KPMG Tax and Advisory LLC, company incorporated under the Laws of the Republic of Kazakhstan, subsidiary of KPMG Europe LL P, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Connect with us

 

Request for proposal

 

Submit

KPMG's new digital platform

KPMG's new digital platform