Kazakhstan Personal Income Tax

Residents are taxed on their worldwide income. Nonresidents are taxed on Kazakhstan-source income only, regard­less of where it is paid. Income is deemed to be from a Kazakh­stan source if it is derived from work performed in Kazakhstan. Kazakhstan-source income also includes, but is not limited to, interest income from residents and nonresidents having a perma­nent establishment in Kazakhstan and dividends from resident legal entities.

For tax purposes, individuals are considered residents if they are present in the country for more than 183 days in any consecutive 12-month period ending in the current tax year.

Kazakhstan citizens are always considered residents of Kazakhstan if their center of vital interests is located in Kazakhstan. The center of vital interests is deemed to be located in Kazakhstan if all of the following conditions are fulfilled simultaneously:

  • The individual is a Kazakhstan citizen or has permission to live in Kazakhstan on a permanent basis.
  • The family or close relatives of the individual reside in Kazakhstan.
  • The individual or members of the family of the individual own, or otherwise have at their disposal, immovable property in Kazakhstan permanently available for residence.

Double tax treaties may provide different rules to determine tax residency.

Income subject to tax. The taxation of various types of income is described below.

Employment income. Income from employment consists of all compensation, whether received in cash or in kind (including shares), subject to minor exceptions, regardless of the place of payment of such income.

Self-employment and business income. The income of Kazakh citizens engaged in self-employment activities (individual entre­preneurs) is subject to income tax.

Tax is levied on an individual’s annual business income, which consists of gross income less expenses incurred in obtaining such income. However, to deduct expenses, individual entrepreneurs must be specially registered with the tax authorities and provide supporting documentation for such expenses. The tax rates for self-employment income are the same as those applicable to employment income as set forth in Rates, with the exception of individual entrepreneurs using a special taxation regime.

Investment income. In general, investment income is included in taxable income. The tax rates are set forth in Rates.

Certain investment is exempt from tax (see Exempt income).

Exempt income. Certain items are exempt from tax, including but not limited to, the following:

  • Business trip per diems within established norms and reim­bursement of certain business trip expenses.
  • Accommodation and meal expenses within established norms for rotators while they are at the work site.
  • The excess of the market value of shares covered by a stock option at the time of the exercise over the exercise price of the option. The exercise price of the stock option is the price fixed in the relevant document based on which the stock option is granted to an employee.
  • Medical expenses within established norms.
  • Dividends and interest on securities if, at the time of the accrual of such dividends and interest, the securities are on the official list of a stock exchange operating in Kazakhstan.
  • Dividends received from a resident legal entity if all of the fol­lowing conditions are satisfied simultaneously:

— The shares or participating interests have been held for more than three years.

— The resident legal entity is not a subsurface user for the period for which the dividends are paid.

— At the date of payment of the dividends, not more than 50%

of assets of the legal entity paying the dividends is attributable to the assets of a company that is not a subsurface user. The exemption does not apply to dividends received from a legal entity that reduces its corporate income tax by 100% if the accrual of such dividends is made in the tax period in which the corporate income tax reduction is made.

  • Interest income on deposits paid to individuals by licensed organizations in Kazakhstan.
  • Income from Kazakhstan state securities.

Taxation of stock options. Income derived from the disposal of shares acquired through the exercise of a stock option equals the positive difference between the sales price and the acquisition price. The acquisition price includes the exercise price of the option and the option premium.

Capital gains. Capital gains are subject to tax at the rates set forth in Rates. Capital gains derived from the securities that are listed on the stock exchange operating in Kazakhstan at the date of realization are exempt from tax.

Capital gains derived from the sale of securities or participating interests in legal entities or consortiums may be exempt from tax if all of the following conditions are met simultaneously:

  • At the date of disposal, the shares or participating interests have been held for more than three years.
  • The legal entity or consortium that is the issuer of the shares or participating interests sold is not a subsurface user.
  • At the date of disposal, more than 50% of the value of assets of the legal entity or consortium that is the issuer of the shares or participating interests sold is attributable to the assets of a com­pany that is not a subsurface user.

Deductions. The minimum monthly salary (MMS), which amounts to KZT22,859 per month for 2016, for an employee who is tax resident, is deductible from an employee’s monthly salary.

Other deductions include, but are not limited to, the following:

  • Obligatory pension fund contributions
  • Voluntary pension fund contributions made by the individual for his or her own benefit under the Kazakhstan legislation on pension coverage
  • Insurance premiums for the individual’s own benefit under accumulative insurance agreements

If the amount of the MMS exceeds the amount of the employee’s monthly taxable income, reduced by the amount of obligatory pen­sion contributions, the excess can be carried over to subsequent months within the calendar year to reduce the employee’s taxable income.

If an individual’s workplace changes during the tax period, the above does not apply to the individual’s new workplace. As a result, the employee may not use the excess amount referred to in the preceding paragraph to offset income earned at his or her new workplace.

Rates. The following withholding tax rates apply to resident and nonresident individuals for various types of income.

Type of income                                                              Rate (%)

Employment income of residents and

nonresidentstaxed by the local employer                                     10

 

Income of advocates and private notaries                                    10

 

Capital gains, interest and winnings of residents                        10

 

Dividends received by residents

(paid offshore and locally)                                                                 5
Capital gains, dividends, interest and royalties

paid to nonresidents by Kazakhstan legal entities                       15
Income (other than employment income taxed

by the local employer) of nonresidents registered in

a country with preferential taxation                                             20
Any other Kazakhstan-source income paid to

nonresidents that is not received

from a tax agent (local legal entity)                                              20

 

Income received in foreign currency is converted into tenge at the exchange rate on the date the income is received.

Relief for losses. Losses from entrepreneurial activities may be carried forward for up to 10 years to offset taxable income. Losses may not be carried back.

Other taxes

Property tax. Individuals are subject to property tax at rates rang­ing from 0.05% to 2% of the residual value of the property owned by them.

Vehicle tax. Individuals are subject to vehicle tax on vehicles owned by them, up to a maximum annual tax of KZT424,200 plus KZT7 for each cubic centimeter of engine power exceeding 5,000 cubic centimeters.

Social security

Social tax. A social tax is payable by employers. This tax is an additional direct tax imposed on employers that is not earmarked for the social benefit of employees.

The tax base for social tax equals the employer’s expenses related to employees’ income.

Exemptions from social tax include, but are not limited to, the following:

  • Compensation resulting from the liquidation of an organization or termination of the employer’s activities, or personnel reductions
  • Compensation paid by an employer to employees for unused vacation
  • Obligatory pension fund contributions

Employers must pay social tax at a flat rate of 11% of gross income, less the obligatory pension fund contributions for Kazakhstan citizens. The minimum tax base for social tax per employee is the MMS.

Monthly social tax liability is reduced by the monthly amount of obligatory social insurance contributions (see Obligatory social insurance contributions).

For individual entrepreneurs (excluding entrepreneurs working under special tax regimes), private notaries and advocates (attor­neys), the rate of social tax for themselves is two times the minimum calculated index (MCI), which amounts to KZT2,121 for 2016, and is one MCI for each employee, if any.

Pension fund contributions. Obligatory pension fund contribu­tions of 10% of the gross salaries of employees (local citizens and foreigners with a residence permit) must be withheld and remitted to pension funds by the employer on a monthly basis. For 2016, income received in excess of KZT1,714,425 per month is not subject to obligatory pension fund contributions. Obligatory pension fund contributions are deductible for personal income tax and social tax purposes.

Under the Kazakhstan Law on Pension Coverage, employers must also make at their own expense professional pension fund contributions at a rate of 5% of the gross salaries of employees of certain professions in 17 industry sectors, including, but not lim­ited to, mining, oil and gas, pharmacy and consumer good manu­facturing.

Obligatory social insurance contributions. Employers must make social insurance contributions at a rate of 5% on income paid to employees (local citizens and foreigners with a residence per­mit). The contributions are capped at KZT11,429,5 per month for 2016. The minimum tax base for obligatory social insurance contributions per employee is the MMS.

Individual entrepreneurs are also subject to obligatory social insurance contributions. The rate of the obligatory social insur­ance contributions for individual entrepreneurs is also 5%. This rate is applied to the cumulative income, and must not be less than 5% of the MMS and must not exceed the sum of social tax calculated for the reporting period.

Under the Eurasian Economic Union Agreement of 29 May 2014 between Armenia, Belarus, Kazakhstan, Kyrgyzstan and the Russian Federation, from 1 January 2015 (12 August 2015 for Kyrgyzstan), for individuals who are citizens of the members of the Eurasian Economic Union and working under employment contracts, employers must make at their own expense social insurance contributions in the amount of 5% of the gross salaries of the employees, regardless of whether the employee has a resi­dence permit in Kazakhstan.

Obligatory social medical insurance contributions

Employers. Employers must make at their own expense employer contributions to the Fund of Social Medical Insurance on a monthly basis in the amount of the following:

  • From 1 January 2017: 2% of income paid by the employer to its employees
  • From 1 January 2018: 3% of income paid by the employer to its employees
  • From 1 January 2019: 4% of income paid by the employer to its employees
  • From 1 January 2020: 5% of income paid by the employer to its employees

Employees. Employees must make at their own expense employ­ee contributions to the Fund of Social Medical Insurance on a monthly basis in the amount of the following:

  • From 1 January 2019: 1% of the accrued income of employees (subject to exemptions)
  • From 1 January 2020: 2% of the accrued income of employees (subject to exemptions)

Individuals receiving fees under civil contracts are also subject to the contributions.

Tax filing and payment procedures

The tax year in Kazakhstan is the calendar year.

A tax agent is responsible for withholding and remitting income tax from payments made to resident and nonresident individuals.

Under the withholding mechanism, a tax agent withholds actual personal income tax on a monthly basis no later than the date on which the income is paid and remits the tax to the Kazakhstan state budget not later than 25 calendar days after the end of the month in which income was paid. The tax agent must file a per­sonal income tax and social tax report, which includes pension fund contributions, professional pension fund contributions and social insurance contributions, on a quarterly basis by the 15th of the second month following the reporting quarter.

If a tax agent is not available in Kazakhstan, resident and non­resident individuals are responsible for the calculation of personal income tax liabilities and filing a Kazakhstan tax return. The filing deadline for a Kazakhstan tax return is 31 March of the year following the reporting year, and the income tax liability, if any, must be settled within 10 calendar days after the filing dead­line.

Kazakhstan tax returns must be filed by the following tax resi­dent individuals:

  • Individual entrepreneurs
  • Individuals who receive property income
  • Individuals who receive income not taxed at the source of pay­ment in Kazakhstan, including income outside Kazakhstan
  • Individuals having funds in foreign bank accounts outside Kazakhstan

Individuals who are tax nonresidents of Kazakhstan are not required to file a Kazakhstan tax return if their Kazakhstan-source income is subject to withholding in Kazakhstan.

The law provides for late payment interest for the late payment or non-payment of tax due on taxable income.

Double tax relief and tax treaties

Under the Tax Code, income tax paid outside Kazakhstan by tax residents may be credited against the income tax payable in Kazakhstan on the same income, but may not exceed the amount of Kazakhstan tax accrued. To apply for a foreign tax credit, a document confirming income received and income tax paid or withheld must be enclosed with the Kazakhstan tax return. The document must be issued or verified by the foreign tax bodies.

An individual receiving Kazakhstan-source income who meets the conditions of a double tax treaty may apply a treaty exemption if the individual provides a properly apostilled tax residency certificate issued by the competent tax authority.

Kazakhstan has entered into double tax treaties with the follow­ing countries.

Armenia                          Italy                              Singapore

Austria                            Japan                            Slovak

Azerbaijan                       Korea (South)              Republic

Belarus                            Kyrgyzstan                   Spain

Belgium                           Latvia                           Sweden

Bulgaria                           Lithuania                      Switzerland

Canada                            Luxembourg                Tajikistan

China                               Macedonia                   Turkey

Czech Republic               Malaysia                      Turkmenistan

Estonia                            Moldova                      Ukraine

Finland                            Mongolia                     United Arab

France                             Netherlands                  Emirates

Georgia                           Norway                        United Kingdom

Germany                         Pakistan                       United States

Hungary                          Poland                          Uzbekistan

India                                Romania                       Vietnam

Iran                                  Russian Federation

Visas

Kazakhstan authorities issue the following categories of visas:

  • Non-immigration visas
  • Immigration visas
  • Exit visas

Non-immigration visas include the following:

  • Diplomatic
  • Official
  • Investor
  • Business
  • Private
  • Tourist
  • Missionary
  • Transit

Immigration visas include the following:

  • Permanent residence
  • Family reunion
  • Educational
  • Implementation of labor activity
  • Humanitarian motives

Non-immigration and immigration visas may be issued for a single, double-, triple- or multiple-entry and exit, depending on the type of visa. Exit visas may be issued only as a single visa.

In Kazakhstan, visas are issued by the Department of Consular Service of the Ministry of Foreign Affairs and abroad by the Kazakhstan consular establishments (for example, the Consular Department of an Embassy of Kazakhstan). The Ministry of Internal Affairs in Kazakhstan may issue certain types of visas, such as visas for education and medical treatment.

Business and work visas are issued based on a letter of invitation issued by a local Kazakhstan company or a branch or representa­tive office of a foreign company, which must be submitted to the Department of Consular Service of the Ministry of Foreign Affairs. To apply for a work visa, a work permit must be obtained in advance and submitted together with a set of other subordinate documents. The fee for issuing a visa ranges between USD1 to USD600, depending on the country of residence of the invited party and the type of visa sought. A visa should be issued within five business days.

An individual may obtain a single diplomatic, private, official or business visa or a single- or double-tourist visa without a letter of invitation by submitting a written application to the Department of Consular Service of the Ministry of Foreign Affairs or to the Kazakhstan consular establishment in the respective country if he or she is a citizen of one of the following countries.

Australia                     Iceland                              Oman

Austria                       Israel                                 Poland

Belgium                      Italy                                   Portugal

Brazil                          Japan                                 Qatar

Bulgaria                      Jordan                               Romania

Canada                       Korea (South)                   Saudi Arabia

Croatia                        Latvia                                Singapore

Cyprus                       Liechtenstein                     Slovak Republic

Czech Republic          Lithuania                           Slovenia

Denmark                    Luxembourg                     Spain

Estonia                       Malaysia                           Sweden

Finland                       Malta                                 Switzerland

France                        Monaco                             United Arab

Germany                    Netherlands                       Emirates

Greece                        New Zealand                     United Kingdom

Hungary                     Norway                             United States

Kazakhstan has a visa-free regime with certain countries based on international treaties (for example, Belarus and the Russian Federation). Also, for the period from 16 July 2015 until 31 December 2017, Kazakhstan had a pilot unilateral visa-free regime with the following countries.

Australia                     Japan                                 Sweden

Belgium                      Malaysia                           Switzerland

Finland                       Monaco                             United Arab

France                        Norway                             Emirates

Germany                    Netherlands                       United Kingdom

Hungary                     Singapore                          United States

Italy                            Spain

Under this visa-free regime, citizens of the above countries may enter and transfer in Kazakhstan without a visa for a period not exceeding 15 calendar days from the date of crossing Kazakhstan’s border. If a foreign individual needs to stay in Kazakhstan for a longer period, he or she should apply for a business or an investor visa. The investor visa is issued to certain categories of business immigration applicants and provides certain privileges (for example, registration with the local migration authorities is not required).

Work permits

Types of work permits. The following are the two types of permits allowing foreign individuals to work in Kazakhstan:

  • A work permit for attraction of foreign labor force (the Work Permit).
  • A permit issued to a foreign individual who independently arrived in Kazakhstan to work as an employee in a particular specialty (the Permit for Employment). The government approves the list of such specialties, which is limited (currently includes 33 specialties only). The specialties on the list include, among others, system architect, marine pipeline construction engineer, flight-safety specialist and software-design engineer.

The employer obtains the Work Permit through submission of the documents to the local authorities (Akimats). The Work Permit is issued within the established quota.

Kazakhstan has joined the World Trade Organization (WTO). As a result, a new option of intracompany transfer is now available to attract foreign labor force. An intracompany transfer is a tem­porary transfer of a foreign individual who has the position of head, manager or specialist in a legal entity established in a mem­ber country of the WTO other than Kazakhstan to the entity’s Kazakhstan branches, subsidiaries or representative offices. The local authorities issue the Work Permit under intracorporate transfer for the transfer period, but for no more than 36 months with a right of a one-time extension of 1 year (12 months). The Work Permits under intracorporate transfer are issued out of the quota for foreign labor force and apply to certain established economic sectors.

In addition, the above conditions should also apply to transfers of employees from a foreign company from a non-WTO jurisdiction to its affiliated entity in Kazakhstan.

The local authorities issue the Permit for Employment is issued for a period of up to three years within the established quota. The Permit for Employment may be extended but no more than two times for an overall period of five years. Foreign employees who obtained a Permit for Employment must notify the local authori­ties within 10 business days on a change of an employer and conclusion of a new employment agreement.

Work Permit quota. The Work Permits are issued in accordance with the quota established by the government of Kazakhstan. The quota for attraction of foreign labor force is established annually as a percentage of the economically active population of Kazakhstan.

Effective from 1 January 2017, the quota for attraction of foreign labor force will be determined based on types of economic activ­ity, countries of the origin of foreign employees and attraction of labor migrants.

State duty. Effective from 1 January 2017, an employer with foreign employees will be charged a state duty for the issuance or extension of work permits. The Kazakhstan government will determine the rates.

Work permit exemptions. Certain categories of individuals are not required to obtain work permits. These include, among others, the following:

  • Citizens of member states of the Eurasian Economic Union who are working under local employment agreements.
  • Foreign employees of companies participating in the imple­mentation of projects included in the list of the Industrialization Map of Kazakhstan for 2015-2019.
  • The heads and general managers of entities that have entered into investment agreements of more than USD50 million with the government of Kazakhstan.
  • The heads and general managers of Kazakhstan legal entities engaged in investment activities in prioritized activity catego­ries that have entered into contracts with an authorized invest­ment body.
  • Foreign individuals and stateless persons working as heads, specialists (holding a university degree) and/or qualified work­ers according to a list of professions and corresponding to the exact number specified in an investment contract, for the fol­lowing:

— Kazakh legal entities that signed investment contracts for implementing priority investment projects

— Companies contracted by the above legal entities (or their contractors) to serve as general contractors, contractors, subcontractors or service providers in architecture, urban planning, and construction activities.

This exemption is effective until one year after the investment project is put into operation.

  • Crew members of sea and river vessels, aircraft and rail and automobile transport.
  • Individuals arriving in Kazakhstan on a business trip, for a cumulative period not exceeding 120 calendar days per calen­dar year.

In addition to the legislative requirements, the practical approach of the government authorities to each relevant legal matter should be taken into account.

Residence permits

Kazakhstan issues residence permits. No quota system is in effect for immigration into Kazakhstan under residency permits.

Family and personal considerations

Family members. The spouse of a holder of a Kazakhstan work permit does not automatically receive the same type of work per­mit. If he or she wishes to undertake employment, a work permit application must be filed independently.

Driver’s permits. Foreign nationals may drive legally in Kazakhstan with their international driver’s licenses. Home-country driver’s licenses are valid in Kazakhstan if they comply with 1968 Vienna Convention on road traffic. However, an official Russian and Kazakh translation of the foreign driver’s license by a confirmed translator is required; therefore, it is advisable to have an interna­tional driver’s license.

Kazakhstan has driver’s license reciprocity with some of the Commonwealth of Independent States (CIS) countries, including, but not limited to, Belarus, Kyrgyzstan, the Russian Federation, Ukraine and Uzbekistan.

A foreign individual may obtain a Kazakhstan driver’s license after taking a two-month to six-month theoretical and practical training course and passing written, practical and medical exam­inations.