Business Taxation in Kazakhstan

Comprehensive Overview of Kazakhstan’s Tax System and Corporate Structures

The tax system in Kazakhstan is governed by the Kazakhstan Tax Code, with the current version in effect since January 1, 2018. This replaced the previous 2009 code, and ongoing efforts to develop a new version are underway, though a draft is yet to be published.
Corporate and Personal Income Taxes are levied on both residents and non-residents engaged in business through a permanent establishment (PE) in Kazakhstan. Non-residents without a PE are subject to Withholding Tax (WHT) on income from Kazakhstani sources. Beneficiaries from countries with Double Taxation Treaties (DTT) may enjoy reduced WHT rates, especially on passive income like dividends, interest, and royalties. Kazakhstan currently has DTT agreements with 55 countries, providing significant tax benefits to international investors.
In addition to income taxes, the key taxes in Kazakhstan include Value Added Tax (VAT), Excise Taxes, payroll-related taxes, and taxes specific to subsoil users, such as the Minerals Extraction Tax. Kazakhstan, a member of the World Trade Organization (WTO) and the Eurasian Economic Union (EAEU), voluntarily follows some of the OECD’s tax recommendations, although the country is not a formal member of the organization.

Key Tax Authorities and Legal Framework

The State Revenue Committee (SRC), under the Ministry of Finance, oversees tax administration in Kazakhstan. Established in 2014, the SRC is responsible for implementing tax policies, ensuring timely payment of taxes, and managing customs duties. Kazakhstan follows a continental legal system where tax regulations are codified within a hierarchical framework of laws. The Constitution of the Republic of Kazakhstan forms the base for all legal regulations.

Setting Up Business in Kazakhstan

Foreign investors have multiple options for establishing business vehicles in Kazakhstan, including forming Limited Liability Partnerships (LLP), Joint Stock Companies (JSC), or creating a branch or representative office. Both LLPs and JSCs are separate legal entities, with LLPs offering more simplified management structures. Branches and representative offices, on the other hand, are subdivisions of foreign legal entities and do not hold separate legal status in Kazakhstan.
LLPs are favored by foreign investors due to their flexibility in management and lower regulatory requirements, making them attractive for business operations. JSCs are subject to stricter regulations, especially in sectors like banking and insurance, where corporate governance and shareholder rights protection are critical.

Financing and Tax Implications

Businesses in Kazakhstan can be financed through equity or debt financing. While dividends and interest payments to foreign entities are subject to withholding tax at a rate of 15%, reduced rates may apply under DTTs. The thin capitalization rules limit interest deductions on loans from related entities, especially from countries with preferential taxation.

Corporate Income Tax (CIT) and Deductions

Corporate Income Tax in Kazakhstan is levied at 20%, with annual reporting requirements. Taxable income is calculated by subtracting deductible expenses from gross annual income. Special regulations apply to certain expenses, including depreciation, and there are limits on service fees paid to foreign-related entities. Additionally, Kazakhstan tax law provides benefits for dividends, allowing exemptions in certain cases, especially for securities listed on the Kazakh stock exchange.
Transfer Pricing regulations were recently expanded to cover a wider range of international business transactions, ensuring that prices align with market standards. Non-compliance with these rules can lead to significant tax adjustments and penalties.

Special Tax Regimes and International Investments

Kazakhstan offers various preferential tax regimes through its Special Economic Zones (SEZ), aimed at promoting sectors like tourism, petrochemicals, and logistics. Businesses operating within SEZs can benefit from CIT, VAT, and property tax exemptions, making it an attractive proposition for international investors.
The Astana International Financial Centre (AIFC) offers a unique legal and tax framework, modeled after English law, and provides tax exemptions to participating businesses until 2066. Similarly, Astana Hub, a leading IT start-up incubator, offers tax benefits to IT companies, including exemptions from VAT and CIT, further supporting the growth of Kazakhstan’s digital economy.

Services We Offer:

Our firm specializes in providing expert legal advice on tax and corporate matters in Kazakhstan. Our services include:
  • Tax compliance and advisory services
  • Structuring and optimizing tax liabilities
  • Representation in tax audits and disputes
  • Tax due diligence and inspection support
  • Legal assistance with cross-border tax issues
  • Appeal on tax audit report for tax bodies.