VAT, GST and Sales Tax in Kazakhstan

Summary

Name of the tax Value-added tax (VAT)
Local name Nalog na dobavlennuyu stoimost (NDS) Kosylgan kun salygy (KKS)
Date introduced 24-Dec-91
European Union (EU) Member State No
Administered by Ministry of Finance (http://www.minfin.gov.kz) State Revenue Committee of the Ministry of Finance (http://kgd.gov.kz)
VAT rates
Standard 12%
Other Zero-rated and exempt
VAT number format Number of certificate of registration for VAT (series with five digits and number of VAT registration certificate with seven digits)
VAT return periods
General period Quarterly
Imports of goods from Belarus, Kyrgyzstan, Armenia and Russian Federation Monthly
Thresholds
Registration Annual turnover of 30,000 times the minimum calculated index (MCI), approximately USD200,205 for 2017
Recovery of VAT by non-established businesses No

Scope of the tax

VAT applies to the following transactions:

  • Supplies of goods, work and services in Kazakhstan
  • Imports of goods

For VAT purposes, taxable turnover is the total of practically all types of supplies (for example, sales, exchanges or gifts) of goods, work and services. Goods include practically all forms of prop­erty or property rights. Taxable supplies of services are any sup­plies of work or services that are made for consideration or made free of charge or anything that is performed for consideration and is not a supply of goods.

Goods and services are subject to VAT if, under the place of sup­ply rules, they are deemed to be supplied in Kazakhstan.

The place of supply of goods is deemed to be the following:

  • Goods sent by the supplier, the recipient or a third party: the place where the transportation of the goods begins
  • For all other cases: the place where the goods are handed over to the purchaser

The place of supply of work and services is determined based on the nature of the executed transactions. Work and services con­nected with immovable property (for example, buildings and installations) are deemed to be supplied in Kazakhstan if such property is located in Kazakhstan. The place of supply of certain services that are provided outside Kazakhstan is deemed to be in Kazakhstan. Such services include, but are not limited to, the following:

  • The transfer of rights to use items of intellectual property
  • Consulting
  • Audit
  • Advertising and marketing services
  • Staff provision
  • The leasing of movable property (other than means of transport)
  • Agency services connected with the purchase of goods, work and services
  • Consent to limit or terminate entrepreneurial activities for con­sideration
  • Communication services
  • Radio and television services
  • Rent of freight wagons and containers

Who is liable

Taxpayers are legal entities and nonresident legal entities that are registered for VAT purposes as well as importers of goods into Kazakhstan.

Registration procedures. VAT registration, a process separate from tax registration, is either compulsory or voluntary.

Resident legal entities, branches or representative offices of non­residents legal entities and private entrepreneurs must register for VAT if turnover during the calendar year exceeds 30,000 times the MCI. The threshold is approximately USD200,205 for 2017. The MCI is established by the state budget law for each year. For 2017, the MCI is KZT2,269 (approximately USD6.67). The deadline for VAT registration is within 10 business days after the end of the month in which the turnover threshold is exceeded.

Legal entities that are not subject to compulsory VAT registration have the right to submit an application for VAT registration to the tax authority at their location in person.

Whether the applicant is required to register or is registering voluntarily, several rules are the same:

  • The head of an entity applying for VAT registration must pos­sess an identification number in Kazakhstan.
  • The tax authority shall within five working days of the submis­sion of an application for VAT registration register the taxpayer by issuing a certificate of VAT registration or reject the appli­cant by issuing such a decision.
  • The legal entities shall become VAT payers from the first day of the month following the month in which they submitted an application for VAT registration.

Late-registration penalty. The penalty for late registration is up to 30% of turnover for the period of non-registration.

Group registration. Not applicable.

Non-established businesses. Not applicable.

Tax representatives. Not applicable.

Reverse charge. If a nonresident that is not registered for VAT purposes in Kazakhstan renders services for which the place of supply is Kazakhstan to a Kazakhstan purchaser and if the pur­chaser is a VAT payer, the purchaser must self-assess and pay VAT through a reverse-charge mechanism. A Kazakhstan pur­chaser of the services is allowed to offset the amount of the reverse-charge VAT paid, subject to the general offset procedure.

Digital economy. No special rules apply.

Deregistration. A VAT payer may submit an application for VAT deregistration to the local tax authorities if the following condi­tions are simultaneously met:

  • The taxable turnover for the calendar year preceding the year in which the tax application is submitted did not exceed approxi­mately USD200,205.
  • The taxable turnover for the period from the beginning of the current calendar year in which the tax application is submitted did not exceed approximately USD200,205.

The following documents should be submitted along with an application submitted for VAT deregistration:

  • The original certificate of VAT registration (Because of the introduction of the electronic VAT registration certificate on 1 April 2016, submission of the original VAT registration cer­tificate in paper format is not now required.)
  • A liquidation VAT declaration

Tax authorities should deregister a taxpayer within five working days from the date of submission of a tax application. The date of VAT deregistration shall be the date of submission of the tax application to the tax authority.

The tax authorities will deregister the VAT payer without notifi­cation if, for example:

  • The VAT declaration is not submitted within six months after the due date established by the Tax Code.
  • The VAT payer is declared by court to be a fraudulent business.
  • The zero VAT declaration for two consecutive periods did not reflect information on output and input turnovers of the VAT payer.
  • The taxable turnover did not exceed the minimum threshold of KZT68,070 for the calendar year in which the application for obligatory VAT registration was submitted.

The reregistration of the legal entity is recognized to be invalid based on the effective Court’s decision.

VAT rates

The term “taxable supplies” refers to supplies of goods, work and services that are liable to a rate of VAT, including the zero rate.

The following are the VAT rates in Kazakhstan:

  • Standard rate: 12%
  • Zero rate (0%)

The standard rate of VAT applies to all supplies of goods, work and services except for supplies taxable at the zero rate and those exempt from VAT.

For imports of goods by individuals under the simplified proce­dure, VAT may be paid as part of the aggregate customs payment, the amount of which is determined in accordance with the cus­toms law of Kazakhstan.

Examples of goods and services taxable at 0%

  • Export sales of goods
  • International transportation services
  • Sale of oil and lubricants by airports when fueling aircrafts of a foreign air carrier performing international flights
  • Sale of goods to the territory of Special Economic Zones

Exempt supplies. The term “exempt supplies” refers to supplies of goods, work and services not liable to tax and that do not give rise to a right to input tax deduction.

Examples of exempt supplies of goods and services

  • Turnover associated with land and residential buildings
  • Specified financial services
  • Transfers of assets under financial leasing
  • Services rendered by noncommercial organizations
  • Services in the areas of culture, science and education
  • Goods and services related to medical and veterinary activities
  • Import of certain assets (a list is issued by the government)
  • Goods imported by individuals not for entrepreneurial purposes
  • Import of goods from the territory of the Eurasian Economic Union member country within the same legal entity (e.g., intra­entity transaction)

Option to tax for exempt supplies. Not applicable.

Time of supply

The time of supply is the date that a sale of goods, work or ser­vices is completed, which is the date on which the goods are shipped (transferred), work is performed or services are ren­dered. The date of the performance of work or the rendering of services is the date of signing of an act of acceptance for work performed or services rendered.

For goods that are not shipped, the date of completion of a sale is the date on which ownership of the goods is transferred to the purchaser.

Recovery of VAT by taxpayers

The VAT liability of a taxpayer equals output VAT (VAT charged by a taxpayer) less input VAT (VAT paid by a taxpayer to its sup­pliers) in a reporting period.

VAT paid on services and goods purchased by a VAT payer (input VAT) including reverse-charge VAT paid and VAT paid at cus­toms is generally available for offset (credit) in determining a taxpayer’s VAT liability to the budget. However, offset is not available for VAT incurred for the purpose of making supplies that are either exempt or deemed to be supplied outside Kazakhstan.

The excess of input VAT over output VAT may generally be car­ried forward for offset against future VAT liabilities.

Non-recoverable input VAT. Input VAT is not allowed for offset in several instances.

Examples of items for which input tax is nondeductible

  • Receipt of goods, work and services not related to taxable turn­over
  • Receipt of passenger cars that are purchased as fixed assets
  • VAT invoice does not meet the set requirements of the Tax Code
  • Goods and services purchased in cash for the amount exceeding 1,000 MCI (inclusive of VAT) irrespective of the frequency of the payment
  • Goods, works and services that are transferred free of charge
  • Purchase of goods, work and services from suppliers recog­nized by courts as false enterprises, except for transactions recognized by courts as valid
  • Purchase of goods, work and services that are recognized by courts as executed by private business entities without an actual intent to carry out entrepreneurial activities

Examples of items for which input tax is deductible
(if related to a taxable business use)

  • Capital assets
  • Intangible and biological assets
  • Investments in immovable property

Refunds. In practice, obtaining refunds requires significant effort. However, the rules prescribe a procedure for refunds under cer­tain conditions.

Under the Tax Code of the Republic of Kazakhstan, the following amounts are refundable to a taxpayer from the budget:

  • Until 1 January 2017, the amount by which input VAT exceeds the amount of tax assessed not related to zero-rated turnover, up to the amount of reverse-charge VAT
  • Effective from 1 January 2017, the entire amount of input VAT that exceeds the amount of tax assessed that is not related to zero-rated turnover
  • VAT paid to suppliers of goods, work and services that were acquired using a grant
  • VAT paid by diplomatic and equivalent representations accred­ited in Kazakhstan and by persons who are members of the diplomatic, administrative and technical staff of these represen­tations, including members of their families who reside with them, to suppliers of goods, work and services acquired in Kazakhstan
  • The amount of any cash overpayment of VAT to the budget

For zero-rated supplies, excess VAT must be refunded if both of the following conditions are satisfied:

  • The VAT payer sells zero-rated goods, work and services on a continuous basis.
  • Zero-rated sales account for at least 70% of the total taxable sales of the payer for the tax period in which the zero-rated sales occurred and for which a refund of excess VAT is claimed in a VAT return.

Excess VAT must be refunded to a taxpayer on the basis of a refund claim made in the VAT return for a tax period.

Excess VAT confirmed by a tax audit must be refunded within 180 calendar days.

Partial exemption. Not applicable.

Preregistration costs. Not applicable.

Recovery of VAT by non-established businesses Non-established businesses cannot recover input VAT paid.

Invoicing

VAT invoices. In general, the VAT invoice is a compulsory docu­ment for all VAT payers. No input VAT is allowed without an appropriate VAT invoice.

Generally, the VAT invoice should be issued in a hard-copy for­mat within seven calendar days from the date of a taxable turn­over.

The amount of taxable turnover can be adjusted if the cost of goods, work or services changes in certain circumstances, includ­ing the following:

  • The goods are returned in whole or in part.
  • The conditions of a transaction change.
  • The price or amount of compensation for goods, work or ser­vices sold is changed.

Adjustments to the amount of taxable turnover can be made if both of the following conditions are satisfied:

  • Accounting documentation is available.
  • A corrected VAT invoice is issued or receipt of cash register is available in specified cases.

The cost of goods, work and services and the amount of VAT must be stated in the VAT invoice in the national currency of Kazakhstan, except for goods, work and services sold under foreign-trade contracts and in other circumstances provided for by law.

Credit notes. A credit note is an additional VAT invoice issued by a supplier of goods, work and services in some circumstances, such as in the following cases:

  • Return of goods
  • Where the value of sold goods, work or services change in either direction

The adjustment of the amount of taxable turnover shall take place in the tax period in which such adjustment took place.

Proof of exports. To confirm the applicability of zero-rated VAT for turnover, the supplier must collect supporting documents that are stipulated in the tax law of Kazakhstan.

Foreign-currency invoices. Values in VAT invoices should be indi­cated in the national currency (tenge). In certain cases, it is allowed to indicate the values in foreign currency.

Electronic invoices. Since 1 July 2014, taxpayers have had the right to issue electronic invoices only for VAT purposes on a voluntary basis.

However, from 1 January 2017, the following entities are obliged to issue electronic VAT invoices:

  • Authorized economic operators (AEOs)
  • Businesses that supply or export goods indicated in the customs list of goods for which the applied import duties are lower than the corresponding Eurasian Economic Union (EAEU) common import duties

Effective 1 January 2017, customs agents, customs representa­tives, customs carriers, owners of bonded warehouses, and own­ers of customs warehouses are obliged to issue electronic VAT invoices for the supply of goods and services.

Effective 1 January 2018, large taxpayers subject to monitoring at the realization of goods, works or services are obliged to issue electronic VAT invoices.

From 1 January 2019, all VAT payers will be obliged to issue electronic invoices.

Issuance of an electronic VAT invoice is only possible by using the official online system of the tax authorities, which is specifi­cally designated for receiving and processing of electronic VAT invoices. Electronic VAT invoices have an established format and should be signed by means of electronic signature. Generally, electronic invoices should be issued within 15 calendar days from the date of a taxable turnover.

VAT returns and payments

VAT returns. VAT payers must file a VAT return with the tax authorities for each tax period by the 15th day of the second month following the reporting tax period (quarter) and the respective liability must be paid to the budget by the 25th day of the second month following the reporting tax period.

A VAT return for the import of goods into Kazakhstan from other Eurasian Economic Union member countries (Armenia, Belarus, Kyrgyzstan and the Russian Federation) must be filed with the tax authorities and the respective liability paid to the budget by the 20th day of the month following the tax period (month).

VAT on imported goods must be paid within the deadlines speci­fied by the customs law of Kazakhstan for the payment of cus­toms payments.

Special schemes. Not applicable.

Electronic filing and archiving. There is a special online system designated for electronic filing (http://cabinet.salyk.kz). All tax­payers can file tax returns and some tax applications via this online system provided they have obtained a special electronic key (electronic signature). All tax returns are kept and archived within this online system and have their own status (draft, filed, received).

Annual returns. Not applicable.

Penalties

The following administrative fines can be assessed with respect to VAT:

  • Failure to file a tax return: penalty up to 70 MCI (approxi­mately USD470 in 2017)
  • Understatement of tax payments: penalty up to 50% of the underpaid tax
  • Issue of fictitious invoice: penalty up to 200% of the input VAT included in the invoice
  • Nonpayment of tax for export and import of goods, work and services in the Eurasian Economic Union: penalty up to 50% of the underpaid tax, but not less than 250 MCI (approximately USD1,670 in 2017)
  • Issue of a VAT invoice in hard copy instead of e-VAT invoice and issue of e-VAT invoice not in accordance with the regula­tions: penalty up to 50% from the amount of VAT indicated in the hard copy of the invoice, but not less than 40 MCI (approx­imately USD270 in 2017).

The annual interest rate charged on late payments is equal to 2.5 times the official refinancing rate established by the National Bank of the Republic of Kazakhstan. Effective September 2016, the official refinancing rate is 5.5%, so the late payment interest rate is 13.75% per annum.

Additional assessments made by the state revenue authorities as a result of a tax audit may serve as grounds for initiation of criminal proceedings and imposition of criminal liability on the management of the taxpayer.