Corporate Tax: Kazakhstan 2016

Overview of corporate tax work

Type of work

In our view, corporate tax practice in Kazakhstan has not significantly changed in the last year. Tax lawyers were mostly involved in disputes regarding the appeal of additionally accrued taxes on the basis of audit results and less involved in tax consultancy and structuring.

As a rule, on the basis of audit results, the tax authorities charge additional amounts of corporate tax by reduction of expenses due to various reasons that were deducted by the taxpayer.

The Kazakh business sector still has another unresolved issue related to transactions with 'sham companies'.

Legally, a 'sham company' is defined as a legal entity established without the intention of performing entrepreneurial activity for criminal purposes and recognised as such by a court decision. If a taxpayer purchased goods or services from the company which was later recognised as a sham by the court, then upon adoption of the decision, the taxpayer will be obliged to exclude expenses related to such transaction from deductions and additionally pay CIT and VAT to the budget. Herewith, conscientious taxpayers are in fact deprived of the right to prove that the transaction actually took place and the goods were supplied, or services rendered.

In these circumstances, conscientious taxpayers would in fact pay taxes on transactions with the company recognised later as a sham twice: firstly for themselves; and secondly for the sham company thereafter.

Key developments affecting tax law and practice

Purely domestic changes

According to the policy on the integration of the tax and customs systems, the tax and customs authorities of Kazakhstan were joined in the unified State Revenue Body in 2014.1 The second step of this policy implementation is the joining of the Tax and Customs Codes (the "Unified Code"). At present, the unified main fiscal law of the country has been drafted and its adoption is expected in 2018.

The main purpose of joining the tax and customs systems is the development of the fiscal administration. In this regard, the Unified Code will provide for a single mechanism for the administration of taxes and customs payments, unification of tax and customs procedures and optimisation of administration business processes.

The main changes to the tax system of Kazakhstan have been introduced by the Unified Code:

  1. Replacement of VAT by the Sales Tax

    The complexity of the VAT administration as well as the administration of VAT...

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