Transfer Pricing in Kazakhstan

Transfer pricing framework — Kazakhstan

Kazakhstani transfer pricing rules are governed by both the Tax Code No. 214-VIII and the Law on Transfer Pricing No. 67-IV dated 5 July 2008 (as amended). The arm's length principle requires that transactions between related parties be priced as if conducted between independent parties in comparable circumstances. The Kazakhstani transfer pricing framework is broadly aligned with OECD Transfer Pricing Guidelines, though there are specific local requirements that differ from OECD practice. Bond Stone advises on transfer pricing compliance as part of every intercompany structuring mandate.

Controlled transactions — what is covered

Transfer pricing control under the Law on Transfer Pricing No. 67-IV covers international business transactions — transactions between a Kazakhstani resident and a non-resident not registered in Kazakhstan, and transactions of Kazakhstani residents outside Kazakhstan. It also covers transactions in Kazakhstan directly connected with them where a party sells minerals it extracted as a subsoil user, has tax benefits, or made a loss in the last two tax periods, or where the parties have different CIT rates (Article 3). Management fees, technical services, royalties, intercompany loans, and goods supply between related parties are all subject to transfer pricing scrutiny.

Thin capitalisation — interest deductibility limit

Interest paid to related parties and to persons registered in low-tax jurisdictions, and interest on third-party loans backed by a related party, is subject to thin capitalisation limits under Article 263 of Tax Code No. 214-VIII. The deductible amount of such interest is capped by the ratio of average equity to average liabilities multiplied by a limit coefficient of 4, or 7 for financial organisations, and the excess is non-deductible. Bond Stone advises on structuring intercompany financing arrangements to comply with thin capitalisation rules while maximising interest deductibility within the permitted limits.

Transfer pricing methods

Kazakhstani transfer pricing rules recognise the following methods for determining the arm's length price: Comparable Uncontrolled Price (CUP); Resale Price Method (RPM); Cost Plus Method; Transactional Net Margin Method (TNMM); and Profit Split Method. The most appropriate method depends on the nature of the transaction and the availability of comparable data. Bond Stone advises on method selection and works with the client's transfer pricing specialists on the economic analysis supporting the arm's length price.

Documentation requirements

Kazakhstani taxpayers conducting controlled transactions above the materiality threshold are required to maintain transfer pricing documentation demonstrating that the controlled transactions are priced at arm's length. Documentation must be available for submission to the tax authority on request. Bond Stone advises on Kazakhstani transfer pricing documentation requirements and coordinates with the multinational group's global transfer pricing policy to ensure local compliance.

Tax authority scrutiny — risk areas

The Kazakhstani tax authority actively scrutinises intercompany transactions — particularly: management fees and technical services paid to foreign parents; royalties for the use of IP owned by foreign affiliates; and intercompany loans with interest rates above or below market rates. Bond Stone advises on structuring and documenting these transactions to withstand transfer pricing challenge, and on the dispute resolution options available where the tax authority raises a transfer pricing adjustment.