OECD highlights Kazakhstan’s tax reforms, plans for Pillar Two solution

11 February, 2025

The OECD has published a case study on tax and development highlighting Kazakhstan’s enhanced ability to combat tax avoidance.

The case study showcases Kazakhstan’s notable achievements, emphasizing key milestones such as:

Signed and ratified the Convention on Mutual Administrative Assistance in Tax Matters (MAAC);
Signed and ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (known as BEPS Multilateral Instrument or BEPS MLI);

Achieved significant results in transfer pricing audits, including in the period 2021-23:
- USD 211 million in additional assed tax, to which tax base adjustments of USD 264 million in four audit cases conducted under the (Tax Inspectors Without Borders (TIWB) programme contributed; and
- USD 174 million in additional collected tax;
Implemented the full transfer pricing documentation package, as recommended by BEPS Action 13, including Country-by-Country Reporting; and
Promoted regional tax cooperation, hosting (between 2019 and 2024) 35 regional events and trainings on BEPS and transfer pricing – including targeted sessions on financial transactions – involving nine countries with an average of 32 participants per event.

The case study states that Kazakhstan is committed to fighting BEPS and has outlined the following key action points:

Use of Country-by-Country Reporting Data

Kazakhstan has fully implemented country-by-country reporting; it is now important to use the information gained effectively. Staff need to be trained in the use of country-by-country reports for high-level transfer pricing and BEPS risk assessment, including through the Tax Risk Evaluation and Assessment Tool (TREAT). TREAT was specifically developed by the OECD to help in reading and analysing the data contained in country-by-country reports.

Implementation of the Two-Pillar Solution

Kazakhstan stands to gain from the implementation of the Two-Pillar Solution. Many MNEs engaged in distribution and marketing activities pay little or no CIT in Kazakhstan because of transfer pricing arrangements. The guidance on Amount B, Pillar One, offers a simplified and streamlined approach to transfer pricing for marketing and distribution activities. The guidance on Amount B was included in the Two-Pillar Solution at the specific request of developing countries and is designed with the needs of low-capacity jurisdictions in mind.

The Global Minimum Tax of Pillar Two requires large MNEs to pay an effective tax of at least 15%, irrespective of where they are operating. This is critical for Kazakhstan as it can enable the country to raise significant revenues, thereby enhancing DRM. Therefore, Kazakhstan needs to consider the implementation of the Global Anti-Base Erosion (GloBE) Rules and/or a Domestic Minimum Top-up Tax to ensure that Kazakhstan engages in tax incentive reform, creating more effective incentives to attract real investment in a post-GloBE environment.

Because of Kazakhstan’s extensive tax treaty network, the country also should consider the implementation of the Subject to Tax Rule (STTR) of Pillar Two. The STTR was developed to address the priorities of developing countries and is an integral part of achieving a consensus for developing countries. Its implementation will protect Kazakhstan’s right to tax certain intragroup payments where these are subject to a CIT below the nominal rate of 9%. Signing the Multilateral Convention to Facilitate the Implementation of the Pillar Two Subject to Tax Rule will allow Kazakhstan to swiftly implement the STTR, modifying its tax treaty network in a synchronised and efficient manner.

BEPS Action 14 – Mutual Agreement Procedure (MAP)

This requires that Inclusive Framework members have in place the rules and procedures required to ensure timely resolution of cross-border tax disputes arising from the application of their tax treaties. The peer reviews of most developing countries were deferred until the end of 2022 due to the low number of MAP cases. Because of its important tax treaty network, Kazakhstan is one of few developing countries to participate in the full peer review process under Action 14; this was done in two stages, between 201923 and 2022.24 Although Kazakhstan has faced resource constraints and policy level obstacles, the peer review process has helped the country to understand the requirements under the BEPS Action 14 minimum standard and to establish a roadmap on actions needed to bolster its tax certainty programme. Kazakhstan is scheduled to be peer-reviewed again in April 2026 to assess the efforts made to improve its MAP policies and practices.

Opportunities for Broader Tax Reform

The OECD Tax Policy Review outlines opportunities for broader tax reform in Kazakhstan. In view of climate change, Kazakhstan should start raising revenues in sectors other than oil and gas, on which the country relies heavily. Also, Kazakhstan should not focus exclusively on increasing tax rates, but should also broaden the tax base and increase tax compliance. The country should continue its engagement in international dialogue on carbon mitigation approaches, as expressed through its membership in the Inclusive Forum on Carbon Mitigation Approaches.