A nonresident’s income from capital gains resulting from the realization of securities issued by residents shall be subject to taxation at the rate established under Article 180 of Tax Code, with the exception of capital gains from the realization of stocks and bonds that are on the stock exchange’s official “A” and “B” lists. The corporate income tax shall be calculated independently by the nonresident legal entity, the tax shall be payable within ten business days of the moment at which the income was received, and the filing of a corporate income tax return with the tax authority where the issuer is registered shall be required.
2.5 PROCEDURE FOR THE TAXATION OF INCOME OF NONRESIDENT LEGAL ENTITIES DOING BUSINESS IN THE REPUBLIC OF KAZAKHSTAN THROUGH A PERMANENT ESTABLISHMENT
The procedure for determination of the taxable income, and for the calculation and payment of the corporate income tax on a nonresident legal entity doing business in the Republic of Kazakhstan through a permanent establishment, shall be carried out in accordance with the provisions of Articles 79–135 of Tax Code of RK.
The income of a nonresident legal entity shall include all types of income related to the operation of the permanent establishment.
If a nonresident legal entity does business in the Republic of Kazakhstan that is analogous or similar to that which is performed through a permanent establishment, the income from that business shall be treated as income from doing business through the permanent establishment.
Expenses related directly to earning income from doing business in the Republic of Kazakhstan through a permanent establishment shall be deductible, regardless of whether they were incurred in the Republic of Kazakhstan or outside its borders, with the exception of expenses that may not be taken as a deduction in accordance with this Code.
A nonresident legal entity shall not have the right to deduct the following amounts charged to a permanent establishment in the form of:
1) royalties, honoraria, fees, and other payments for the use of or granting the right to use property or intellectual property of the given nonresident legal entity;
2) commission income for services;
3) interest on loans granted by the given nonresident legal entity;
4) expenditures not related to earning income from the nonresident legal entity’s operations in the Republic of Kazakhstan;
5) expenditures that are not documented;
6) management and general administrative expenses of the nonresident legal entity incurred outside the territory of the Republic of Kazakhstan.
2.5.1 Procedure for taxation of the net income of a nonresident legal entity from doing business through a permanent establishment
The net income of a nonresident legal entity from doing business in the Republic of Kazakhstan through a permanent establishment shall be subject to taxation at the rate of 15 percent. (Net income shall be understood to mean taxable income, less the amount of corporate income tax assessed.) The amount of tax assessed on net income shall be reflected in the corporate income tax return.
A nonresident legal entity shall be required to pay the tax on net income from doing business through a permanent establishment within ten business days of the deadline established for the filing of the corporate income tax return.
2.5.2 Procedure for taxation of the income of a nonresident legal entity in certain cases
The income of a nonresident legal entity that is not registered with a tax authority, which it has earned from doing business in the Republic of Kazakhstan through a permanent establishment, shall be subject to the income tax at the source of payment without any deductions.
The income tax withheld at the source of payment by a tax agent shall be credited against the discharge of the tax obligations of a nonresident doing business through a permanent establishment.
2.6 PROCEDURE FOR TAXATION OF THE INCOME OF NONRESIDENT INDIVIDUALS
The income of a nonresident individual, as defined above, which is not related to a permanent establishment of said individual, should be subject to taxation at the source of payment following the procedure and within the deadlines specified by the provisions of Articles 179–181 of Tax Code of RK, with the exception of:
1) income from individual entrepreneurial activity through a permanent establishment in the Republic of Kazakhstan;
2) interest on bank deposits;
3) payments related to the delivery of goods onto the territory of the Republic of Kazakhstan under foreign trade transactions;
4) capital gains from the realization of securities;
5) income from operations with government securities;
6) interest accumulated (accrued) on debt securities at the time of their purchase, paid by resident buyers (not issuers) to nonresidents.
The obligation and responsibility for the calculation and withholding of the income tax at the source of payment, and for payment of the tax to the state budget, shall be assigned to the person paying the income (including a nonresident doing business in the Republic of Kazakhstan through a permanent establishment). Such a person shall be recognized as a tax agent in accordance with item 1 of Article 10 of Tax Code of RK.A nonresident shall be recognized as a tax agent as of the moment said person begins doing business in the Republic of Kazakhstan, if its period of operation exceeds that established for the creation of a permanent establishment. The income tax shall be withheld at the source of payment by a tax agent regardless of the form and place of payment of the income.
Filing of tax reports
Tax agents shall be required to file a statement of income tax withheld at the source of payment with tax authorities where they are registered within the deadlines established under Article 182 of Tax Code of RK.
2.6.1 Procedure for calculation and payment of the income tax on a nonresident individual whose activities lead to the creation of a permanent establishment
A nonresident individual who is engaged in individual entrepreneurial activity in the Republic of Kazakhstan through a permanent establishment shall be a payer of the individual income tax with regard to income related to said activity, less deductions directly tied to this income, with the exception of expenses that are not deductible in accordance with item 5 of Article 184 and the provisions of Tax Code. Dependent personal services (work for hire) provided by a nonresident individual shall not lead to the creation of a permanent establishment of said individual.
2.6.2 Procedure for the taxation of a nonresident individual’s income in certain cases
The income earned by a nonresident individual from sources in the Republic of Kazakhstan that is not subject to the income tax at the source of payment and that is not related to a permanent establishment of said individual, including capital gains from the realization of securities issued by residents, shall be subject to taxation, without taking any deductions, at the rates established under Article 180 of Tax Code. Capital gains from the realization of stocks and bonds that are on the stock exchange’s official “A” and “B” lists shall not be subject to taxation. The calculation and payment of the individual income tax shall be performed by a nonresident individual independently within the deadlines established under item 5 of Article 191 of Tax Code.
2.6.3 Procedure and deadlines for prepayment of the individual income tax
The following nonresident individuals shall pay the individual income tax by making prepayments:
1) nonresident individuals earning income from individual entrepreneurial activity in the Republic of Kazakhstan through a permanent establishment;
2) nonresident individuals earning income defined under subitems 14)–17) of Article 178 of Tax Code, including other income defined under Articles 149–151 of Tax Code, with the exception of income subject to the income tax at the source of payment.
Prepayments of the individual income tax for the period of operation shall be made by a nonresident individual mentioned above, following the procedure and within the deadlines established by Tax Code. The amount of prepayments of the individual income tax, which are payable in equal installments during the period that a nonresident is doing business in the Republic of Kazakhstan, shall be determined on the basis of the amount of tax indicated in a statement of the anticipated amount of individual income tax. Nonresident individuals referred to in subitem 2) shall be required to attach to the statement of the anticipated amount of individual income tax an individual labor agreement (contract) or other agreement of a civil-legal nature confirming the declared amount of taxable income. Prepayments that are made shall be credited against the payment of the individual income tax owed by a nonresident individual for the current tax period. A final settlement and payment of individual income tax shall be effected within ten business days of the date an individual income tax return for the tax period is filed, but not later than ten business day prior to departure from the Republic of Kazakhstan.
2.6.4 Statement of anticipated individual income tax and individual income tax return
Nonresident individuals referred to in Article 191 of Tax Code of RK shall be required to file with tax authorities serving the area where they are staying a statement of the anticipated amount of individual income tax for the period they are in operation, no later than 30 business days from the date of their arrival in the Republic of Kazakhstan. The following nonresident individuals shall file an individual income tax return with tax authorities serving the area where they are staying within the deadline established under Article 172 of this Code, or in the event of the termination of their entrepreneurial activity and their departure from the Republic of Kazakhstan during the current tax period, no later than ten business days prior to their departure:
those earning income from sources in the Republic of Kazakhstan that is not subject to the income tax at the source of payment;
those engaged in entrepreneurial activity in the Republic of Kazakhstan for more than 30 calendar days or earning income from sources in the Republic of Kazakhstan in excess of 500 times the monthly index factor during the tax period.
2.7 SPECIAL PROVISIONS REGARDING INTERNATIONAL AGREEMENTS
The Tax Code of RK gives provisions of an international agreement to avoid dual taxation and prevent evasion of taxation of income or property (capital) to which the Republic of Kazakhstan is a party (referred to hereinafter as an international agreement for the purposes of Articles 193–204 of Tax Code of RK) shall apply to persons who are residents of one or both of the states that have concluded such an agreement. This statement does not extend to a resident of a state with which an international agreement has been concluded if this resident uses the provisions of the international agreement in the interests of another person who is not a resident of a state with which an international agreement has been concluded. The administration of international agreements shall be carried out following the procedure established by the authorized government agency in accordance with the provisions of Articles 193–204 of Tax Code.
If the provisions of an international agreement regarding the determination of taxable income of a nonresident legal entity from doing business in the Republic of Kazakhstan through a permanent establishment allow for the deduction of management and general administrative expenses incurred for the purpose of earning said taxable income both in the Republic of Kazakhstan and outside its borders, one of the following methods shall be used to determine these expenses:
1) The proportional distribution of expenses method;
2) The direct deduction of expenses method.
A nonresident legal entity may choose for itself one of these methods for the deduction of management and general administrative expenses. The method chosen for the deduction of management and general administrative expenses charged to a permanent establishment (including the procedure for calculation of the index factor used in the proportional distribution of expenses method) shall be applied annually and may be changed only with the approval of a tax authority.
2.7.1 Proportional distribution of expenses method
When the proportional distribution of expenses method is used, the amount of management and general administrative expenses referred to in Article 195 of Tax Code of RK that are charged to a permanent establishment as a deduction shall be determined as the product of these expenses and the index factor. The index factor shall be calculated by one of the following methods:
1) the ratio of gross annual income earned by a nonresident legal entity from doing business in the Republic of Kazakhstan through a permanent establishment during the tax period to the total gross annual income of the nonresident legal entity as a whole for the same tax period;
2) the average of the following three indicators:
the ratio of gross annual income earned by a nonresident legal entity from doing business in the Republic of Kazakhstan through a permanent establishment during the tax period to the total gross annual income of the nonresident legal entity as a whole for the same tax period;
the ratio of the value of fixed assets recorded in the financial statement of the permanent establishment in the Republic of Kazakhstan as of the end of the tax period, to the total value of the fixed assets of the nonresident legal entity as a whole in the same tax period;
the ratio of the wages fund for personnel employed at the permanent establishment in the Republic of Kazakhstan as of the end of the tax period to the wages fund for personnel of the nonresident legal entity as a whole in the same tax period.
A nonresident legal entity can determine independently which of the aforementioned methods for calculation of the index factor will be used.
The amount of management and general administrative expenses arrived at through these calculations shall be taken as a deduction charged to the permanent establishment only if supporting documents are available. Supporting documents shall include:
1) a copy of the financial statements of the nonresident legal entity in which the following is indicated, depending on the index factor chosen by the nonresident legal entity:
the total amount of gross annual income as a whole;
the total amount of the wages fund as a whole;
the original and residual value of fixed assets as a whole;
the total amount of expenses, with an item-by-item breakdown, including a breakdown of the total amount of management and general administrative expenses;
2) a copy of an audit opinion based on an audit of the nonresident legal entity’s financial statements (if an audit of the legal entity’s financial statements has been performed).
A statement of the aforementioned expenses that are taken, as a deduction charged to a permanent establishment in the Republic of Kazakhstan shall be attached to the corporate income tax return filed with the appropriate tax authority of the Republic of Kazakhstan. In the event that the amount of management and general administrative expenses subject to proportional distribution is not indicated in the financial statements, these expenses shall not be taken as deductions charged to a permanent establishment.
2.7.2 Direct deduction of expenses method
When the direct deduction method is used for a nonresident’s management and general administrative expenses, these expenses shall be taken as a deduction charged to a permanent establishment in the Republic of Kazakhstan if they can be determined directly and were incurred directly for the purposes of earning income from doing business in the Republic of Kazakhstan through a permanent establishment. Said expenses shall be taken as deductions charged to a permanent established only if supporting documents are available. Supporting documents shall include:
1) accounting records confirming expenses incurred by the nonresident legal entity on the territory of the Republic of Kazakhstan for the purposes of earning income from doing business through the permanent establishment;
2) copies of accounting records confirming expenses incurred by the nonresident legal entity outside the Republic of Kazakhstan for the purposes of earning income from doing business in the Republic of Kazakhstan through the permanent establishment.
2.7.3 Procedure for payment of the income tax on income earned by nonresidents from activity in the Republic of Kazakhstan not leading to the creation of a permanent establishment
The procedure for payment of the income tax provided for under this statement shall apply to the income of a nonresident from activity in the Republic of Kazakhstan that does not lead to the creation of a permanent establishment in accordance with the provisions of an international agreement, with the exception of income referred to in Articles 199–202 of Tax Code Of RK, except as otherwise provided under said statements. A nonresident mentioned above of this article that earns income from sources in the Republic of Kazakhstan shall have the right to apply the procedure for payment of the income tax provided for under this article. In the event that the provisions of this article are not applied, a tax agent shall be required to withhold the income tax at the source of payment and transfer it to the state budget in accordance with the generally established procedure. A nonresident earning income, a tax agent, and a resident bank (referred to hereinafter as a bank) identified by a tax agent, shall conclude a conditional bank deposit agreement following the form agreed upon by the parties to the agreement, taking into account the provisions of this article. Within ten business days of the signing of a conditional bank deposit agreement, a tax agent shall be required to register the agreement with a tax authority, and a copy of the agreement, as well as a copy of the payment document confirming the transfer of income tax to a conditional bank deposit, shall be submitted to the tax authority. The provisions of this article shall extend only to conditional bank deposit agreements that have been registered with a tax authority. Conditional bank deposit agreements, the terms of which do not contradict the provisions of this article, shall be subject to registration. At the time income is paid to a nonresident, a tax agent shall be required to withhold income tax at the source of payment at the rate specified under Article 180 of Tax Code, and to transfer the tax that has been withheld to the conditional bank deposit at a bank, in favor of the nonresident. In the case of compliance with the terms of an international agreement, in order to obtain a refund of income tax that has previously been withheld, a nonresident shall file a request with the tax authority following the procedure and form established by the authorized government agency.. The tax authority shall review said request and the required documents, it shall make a decision regarding the request, and it shall notify the nonresident and the bank of the decision. Upon receipt of a request for a refund of income tax that has been withheld, which has been certified by a tax authority, a bank shall grant the nonresident who submitted the request the right to dispose of funds placed in the conditional bank deposit, up to the amount indicated in the request, plus bank interest that has accrued. In the event that a nonresident does not agree with a negative decision by the tax authority, the nonresident shall have the right within ten business days of the receipt of such a decision to file a request with the authorized government agency (with the involvement of the competent authority of the nonresident’s country of residence, if necessary), asking that the matter be reviewed again to determine the proper application of the provisions of the international agreement, and the tax authority shall be notified at the same time of the appeal of its decision. In the event that a negative decision is made regarding a request and if no notification of an appeal of the tax authority’s decision is received from a nonresident within the established deadline, within ten business days of the nonresident’s receipt of the refusal to apply the provisions of an international agreement, the tax authority shall forward a collection order to the bank calling for transfer of the amount indicated in the request and placed in a conditional bank deposit, plus bank interest that has accrued, to the state budget, accompanied by a document confirming the refusal to exempt the nonresident from taxation. A bank shall be required, within one business day of the receipt from the tax authority of documents referred above, to transfer the amount of income tax placed in the conditional bank deposit, plus bank interest that has accrued, to the state budget. The amount of tax collected shall be credited against the nonresident’s obligations to the state budget. Conditional bank deposits shall be opened in the national currency or in a foreign currency. In the event that conditional bank deposits are opened in a foreign currency, the income tax and bank interest shall be transferred to the budget in the national currency, after being converted at the official rate of the National Bank of the Republic of Kazakhstan at the time the tax is paid. A nonresident and a tax agent shall not have the right to dispose of income tax placed in a conditional bank deposit until a decision of some kind is reached by the tax authority. In the event that the terms of a conditional bank deposit agreement are violated and income tax that has been withheld is not transferred to the state budget in a timely manner, through the fault of the bank, the bank shall bear liability in accordance with legislative acts of the Republic of Kazakhstan. If it is not possible for a bank to meet its obligations to transfer income tax placed in a conditional bank deposit to the state budget, the obligation to transfer income tax collected at the source of payment, bank interest, and fines for the late transfer of tax to the state budget shall be assigned to the tax agent. Tax authorities shall be required to maintain a record of the amount of income tax: