On 1 September 2023, President Tokaev addressed the nation and announced a number of important tax policy considerations. To achieve its economic goals, including modernization and diversification of the economy, Kazakhstan should adjust its tax policy and this is one of the reasons why a new Tax Code is being drafted. It is expected to come into force as of 2024 and tax considerations in the Presidential address should be evaluated within this context, i.e. it might be reflected in the new Tax Code in a few months already.

Here is a summary of expected developments which are based on the Presidential address and also on statements by other governmental agencies:

Tax reporting and administration

Tax reporting will be simplified. 30% of existing tax reporting forms will be cancelled and 20% of taxes abolished. This will likely affect smaller taxes and fees where collection costs exceed revenues.

At the same time, 20% of tax incentives will be terminated as well.

Refunds of VAT, delays of which refunds resulted in many complaints, will be simplified.

Tax administration is going to switch to a service model with the main purpose of facilitation and prevention of tax offenses rather than investigation of existing tax violations. Tax administration and risk categorization of taxpayers is expected to improve under the new tax code, providing more certainty.

Part of tax revenues will go to regional budgets and regions will be entitled to introduce more local tax incentives to increase their budgetary self-governance and independence.

Corporate taxation

Significant incentives will be granted to the manufacturing industry, including 3 years’ tax holidays.

At the same time, different sectors of the economy will be subject to different tax rates. In particular, it is expected that mining, banking and the oil and gas sector will be subject to 26% CIT.

Considering the efforts of the Government to bring back home large domestic groups, which historically kept holding companies abroad, it would be reasonable to expect the introduction of a participation exemption regime, though there were no public statements on this matter yet.

Individual taxation

The long-term flat individual income tax is going to transform into a progressive tax on non-employment, passive items of income (dividends, interest etc.).

At the same time, the scope for a simplified tax (4% on the gross proceeds of small entrepreneurs) will be expanded. Therefore active and employment income will remain taxed at moderate rates and the increase will concern mainly passive income.

VAT

VAT was not particularly addressed, although from reports by other government agencies it may be expected that the rate will increase from the current 12% to 16%.

And, as mentioned above, VAT refunds are going to be simplified and streamlined.

Summary

The address indicates reforms to decentralize fiscal policy, simplify taxes, improve tax administration through digitization, and attract foreign investment in key sectors. Foreign businesses may need to monitor changes to regional incentives, tax reporting, VAT refunds, the minimum wage, and new priority sectors.

Considering that final tax rates and details are not yet known though many of these changes will enter into effect in a few months already, it is very advisable to follow the developments closely.