Significant indirect tax developments at a glance
There have been changes in Kazakh tax legislation with respect to the ‘place of supply’ rule and invoicing process. Starting from July 1 2014, a taxpayer may choose to use a tax system to issue an electronic VAT invoice.
No significant changes are expected.
Scope and Rates
VAT applies to taxable sales of goods and services within Kazakhstan and to imports of goods into Kazakhstan. Contributions to the authorized capital are not regarded as a taxable turnover for VAT purposes.
Taxable supplies of goods include:
- transfers of title to goods, including the sale, exchange and payment of salary (wage) in kind;
- free-of-charge transfers of goods;
- transfers of goods under a finance lease contract.
Taxable supplies of services are any supplies of services, both chargeable and non-chargeable, as well as the following:
- transfers of copyright or intellectual property.
- services performed by an employer for the benefit of an employee as a form of wages; and
- loan extension.
The standard rate of VAT is 12 percent.
Turnovers taxable at the zero rate include that deriving from:
- export sales of goods;
- international transportation services;
- sales of goods in the territory of special economic zones under certain conditions.
There is a list of certain types of activities that under certain conditions are exempt from VAT, for example:
- certain services related to international transportation;
- turnover associated with residential buildings;
- certain financial services;
- transfers of assets under finance leases, if the import of the assets is exempted from VAT
- services provided by non-profit organizations
- turnover from sales of goods, work, services associated with medical and veterinary activities, the list of which is approved by the Government
- the import of certain assets, the list of which is approved by the Government, etc.
- An excise duty is imposed mainly when the sale of excisable goods takes place.
Registration as a VAT payer is required for individual entrepreneurs, Kazakh legal entities and foreign companies that conduct business activities through a representative or branch office in Kazakhstan, which have cumulative taxable revenues in excess of 30,000 MCI (“Monthly calculation index - currently, approximately USD 304,000) during a calendar year. 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.
A company carrying out commercial activities in Kazakhstan in absence of tax registration may be penalized in the amount of 30 percent of turnover occurred in the period after the date when the company’s obligation to register for VAT purposes has arisen.
Foreign companies that do not have a registered representative or branch office in Kazakhstan are not eligible for VAT registration in Kazakhstan.
There is no concept of fiscal representatives in Kazakhstan.
There is no VAT grouping concept in Kazakhstan.
VAT returns should be submitted quarterly. Submission of the VAT Declaration is due by the 15th day of the second month following the reporting quarter.
Taxpayers may submit their VAT returns electronically via the special software.
No, there are none.
The Kazakhstan National Bank’s exchange rate is applicable effective on the date of the invoice.
Local/established businesses which incur VAT
No, it is not possible in Kazakhstan.
Overseas businesses with no local presence and no local VAT/GST registration
No, it is not possible in Kazakhstan.
Not applicable, no VAT refund is available to companies that are not a registered VAT payer in Kazakhstan.
VAT payers are entitled to recover input VAT; provided that they meet the following conditions:
- input VAT relates to a taxable output supply;
- the taxpayer has a proper VAT invoice to support the claim;
- VAT on imported goods is paid to the state budget and it is not refundable in accordance with the customs procedure;
- self-charged VAT for nonresidents’ services is remitted to the state budget
VAT paid to the suppliers on the purchase of goods or services is not creditable if the goods or services are used for VAT exempt sales. VAT on representation expenses and on business trips can be credited within the established limits.
International Supplies of Goods and Services
Exports - Goods
Export sales are subject to 0 percent VAT.
Exports - Services
Services are subject to exemption from VAT if the services are deemed provided outside of Kazakhstan. The place of provision of services is determined in accordance with Kazakh tax law.
Imports - Goods
Importers must pay import VAT before goods are cleared through customs. There is no requirement for importers to register as a VAT taxpayer in Kazakhstan in order to fulfill their obligation on import VAT payment.
VAT exemptions at the time of import are available for certain types of equipment, pharmaceuticals, raw materials and spare parts.
Import VAT is paid by an importer of the goods at the customs point.
Imports - Services
Services are subject to VAT if they are deemed provided in Kazakhstan. There are special rules for determining the place of supply of cross-border services for VAT purposes depending on the nature of these services.
Under the general rule the services are deemed to be supplied in Kazakhstan if the supplier of services is a Kazakh legal entity or a foreign legal entity which has its place of management in Kazakhstan or which conducts business activity in Kazakhstan through a permanent establishment (if the services are provided through this permanent establishment).
There is a list of services which are deemed to be supplied at the location of the business activity of the purchaser of services. These services include: consulting, accounting, audit, legal, advocacy, engineering, information processing services, etc. Where such services are rendered by a non-resident not registered for VAT purposes in Kazakhstan, a Kazakh buyer of these services is required to self-assess and pay VAT to the budget via a reverse-charge mechanism.
A Kazakh buyer of imported services is required to self-assess and pay VAT to the budget via a reverse-charge mechanism. The buyer of imported services should be VAT registered in order to –self-assess and pay VAT for non-resident.
Amount subject to VAT/GST
The amount of VAT chargeable turnover is based on the price of goods, work and services agreed between the supplier and customer, excluding VAT amount.
The VAT base for imported goods includes the purchase price of the goods, transportation costs, other incidental expenses related to import, excise duties, customs duties, and customs clearance fees payable upon customs clearance of the goods.
The date of sales turnover is determined as following:
- for sales of goods – the day when the goods are handed over by the supplier to the customer;
- for sales of works, services – the day when a corresponding act of acceptance of works or services are signed.
Issuance of a VAT invoice is obligatory for all taxpayers in Kazakhstan. The VAT invoice must be issued within five days after the sale of goods or services is deemed occurred for VAT purposes.
Taxpayer who are not registered VAT payers issue a VAT invoice with a note of “without VAT.”
A VAT invoice (a schet-faktura) in an established format must be issued upon sale of goods / provision of services / performance of works / transfer of property rights.
A VAT invoice should contain, in particular, the following data:
- a serial number and date of the invoice
- the name, address and identification numbers of the seller and buyer
- the name of the delivered (shipped) goods (description of the executed works, rendered services) and unit of measurements (if it’s possible to indicate)
- the value of goods (works, services), property rights for the entire quantity of delivered goods (shipped) on the invoice (executed works, rendered services), transferred property rights net of tax
- the VAT rate
- the VAT amount
- the value of the entire quantity of delivered (shipped) goods (executed works, rendered services), transferred property rights under the invoice including VAT.
Incorrect VAT invoices (i.e. invoices with missing details or including errors) may result in the Tax Authorities challenging a purchaser's right to recover the VAT charged on the invoice.
There is no simplified form of VAT invoice in Kazakhstan. Input VAT not supported by properly issued VAT invoice cannot be recovered, except for air fare and railway tickets. VAT-payers are allowed to recover VAT based on the air and railway tickets provided that the VAT registration number of the carrier is properly included in the ticket.
VAT invoices can be issued electronically. This new provision was put into effect July 1 2014.
Self-billing where a customer prepares the invoice for the supplier is not possible in Kazakhstan.
In case of foreign trade activities it is allowed to specify the sales consideration/amount and the VAT in a foreign currency in addition to the amounts in Kazakh tenge.
Transfers of Business
No, there is none.
Options to Tax
Head Office and Branch transactions
The head office and the branch of a Kazakh entity constitute one legal entity; therefore, the transactions between them do not constitute sales and, consequently, are not subject to VAT. Transfers of goods between the head office (or other branches) and Kazakh branch of a foreign legal entity are generally subject to import VAT at the customs.
A VAT payer is allowed to adjust its output VAT for VAT related to its bad debt receivable from Kazakh entities and representative or branch offices of foreign companies in Kazakhstan, if such receivables are unpaid within 3 years from the due date.
Transactions between related parties that are registered as VAT payers in Kazakhstan can be subject to transfer price adjustments if such transactions directly relate to the subsequent export of goods only.
Underpayment of taxes triggers the following major types of sanctions:
- penalties for tax underpayment / non-payment imposed over the assessment of underpaid tax (penalties and late payment interest)
- penalties for other types of incompliance with tax law (e.g., non-registration, presenting false information to the tax authorities, non-filing tax returns etc.)
- tax penalties may be imposed on companies and individual entrepreneurs
- administrative penalties (the amount depends on the violation) – may be applied to company’s management
- criminal proceedings (penalties, imprisonment and others) – may be initiated against the company’s management for violation of tax law.
How often do tax audits take place?
There are the following types of tax audits in Kazakhstan:
- Comprehensive (not more than once a year)
A thorough inspection examining compliance with all (or most) taxes and other obligatory payments to the state budget / tax authorities
- Thematic (not more than twice a year with respect to the same tax)
A review of the compliance restricted to particular taxes or obligatory payments to the Budget/ tax authorities
A review of a company’s affairs to assist in the audit of the transactions with a third party as part of the audit of that third party
Are there audits done electronically in your country (e-audit)? If so, what system is in use?
The Kazakh tax authorities may conduct a desk audit electronically by comparing the data that a taxpayer reported on its various tax reports (e.g. revenue reported for income tax purposes with sales reported for VAT purposes). The tax authorities may also compare the data that a taxpayer reported on its VAT declarations with the corresponding data that the taxpayer’s suppliers and/or buyers reported on their VAT declarations.
Is it possible to apply for formal or informal advance rulings from the (indirect) tax authority?
Yes, however the clarifications of the Kazakh tax authorities are not legal binding.
Are rulings and decisions issued by the tax authorities publicly available in your country?
The Kazakh tax authorities’ clarifications on application of the tax legislation are generally publicly available in Kazakhstan.
The main differences with EU VAT rules may be summarized as follows:
- no VAT grouping
- no separate VAT registration i.e. a company needs to be a Kazakh taxpayer in order to be in a position to apply for a VAT registration;
- recovery of input VAT is possible only for registered VAT-payers in Kazakhstan etc.
No, except for the VAT exemption and zero rates mentioned earlier.