The First Vice-Minister of National Economy, Ruslan Dalenov, submitted the draft of the new tax code to the finance and budget committee of the lower house of the Kazakh parliament (the Mazhilis) on September 21, 2017 for consideration. It was approved by the Prime Minister, Bakytzhan Sagintayev, on September 12, 2017. This proposed new tax code is planned to encourage the growth of SMEs and strengthen the financial sector of the country. It is proposed that all the amendments will be introduced under a single law, which subject to approval by Parliament. It is expected to apply from 2018. Some main aspects of this draft tax code are summarized below:
Treatment for tax disputes and audits
According to the new code, all uncertainties and inaccuracies will be interpreted for taxpayers. This principle will permit treating tax disputes fairly. It is also proposed not to apply fines and penalties if the taxpayer acted according to the explanation of the tax authority, and on which the position subsequently changed. Additionally, the business will be given enough time to study legislative changes. The amendments are proposed to be accepted no later than July 1.
Small-business Enterprises and agribusinesses
Regarding the regimes for Small-business Enterprises (SMEs) and agribusinesses, it was reported that the existing special tax regimes are being maintained, and a new alternative is offered – the fixed deduction regime. This new alternative mode of fixed deductions will be introduced for smaller businesses that will permit a deduction equal to 30% of earnings without confirmation, with additional deductions allowed if adequate expense records are maintained. This is beneficial for those who have high turnover, but low profit. Taxpayers are given the right to choose a regime. For the regime under the “simplified declaration”, the requirement for the income amount will be same for individuals as for legal entities. In the patent, the rate is reduced from 2% to 1%. This is done to reduce the tax burden in relation with the introduction of compulsory social health insurance and mandatory pension contributions from employers. For the agricultural sector, incentive measures are also proposed. Payers of the EAS will not be VAT payers, regardless of turnover. Since 2020, in this regime, the tax will be determined from the turnover of 0.5%.
Financial sector
To improve the financial sector, incentive measures are also proposed. Due to the mandatory transition from IAS 39 to 9, there is a positive difference in the recalculation of provisions, since the new standard is aimed at creating additional provisions for non-performing loans. In order to stabilize the financial market, it is proposed to attribute the positive difference to deductions.
Subsoil use
Investment in geological exploration will be encouraged. It is proposed to abolish the excess profit tax for the mining industry with the transfer of the load to the rental tax on coal exports.
VAT
VAT benefits are provided for the automotive industry and special economic zones under a special investment contract (SIC). The import of raw materials, as well as the turnover of sales of goods produced in the SIC will be exempted from VAT. Also, the transfer of property in financial leasing is exempt from VAT if the transferred property is acquired without VAT and is included in the list of goods for SIC. The draft Code proposes three-vector administration , maintaining a minimum threshold for VAT registration, the introduction of a VAT control account, reducing the limitation period for small and medium-sized businesses from 3 to 5 years, and other changes.
Social Security Contributions
In order to maintain the financial burden on business, it is proposed to reduce the social tax rate from 11% to 9.5% by reducing the rate of contributions to the state social insurance fund.
