Changes in the Tax Code of Republic Kazakhstan

Dear Partners,

Further to our last offline event (26 August 2022), we would like to kindly remind you about amendments to Article 264 of the Tax Code in accordance with the Law on changes to the Tax Code signed by the President as of 11 July 2022 (hereinafter – the Law of changes), which stipulates an abolishment of the possibility to deduct for CIT purposes expenses for intangible services received by a taxpayer from a non-resident related party, including the following:

·???????management, advisory, consulting, auditing, design, legal, accounting, lawyer, advertising, marketing, franchising, financial (excluding interest expenses), engineering, agency;

·???????royalties;

·???????a transfer of rights to use objects of intellectual property.

Instead of the possibility to deduct such expenses, according to the changes to Tax Code, taxpayers will have a right to reduce a taxable income for CIT purposes on the above-mentioned services but in limits of 3% of a taxpayer's taxable income. Thus, the expenses of taxpayers connected with intangible services received from a non-resident related party will be treated as an adjustment to taxable income.

Also, the Law of changes contains the matters of tax exemption in Kazakhstan in relation to dividend payments, which, among other things, touched upon the provisions of Articles 645 and 654 of the Tax Code. As such, it excludes from 2023 year a right for a full exemption of dividends, which, according to the current provisions of tax legislation, are exempted from withholding tax. Instead of such a benefit, the Law of changes provides for additions to Article 646 of the Tax Code, according to which the mentioned dividends will become taxable in Kazakhstan at 10% withholding tax rate, subject to certain conditions provided for by the Tax Code are met.

In connection with the planned changes, we kindly recommend analyzing your existing agreements with non-resident related parties for the purpose of possible optimization and further tax planning.

Our team is always at your disposal, in case of questions, or if assistance is needed both in resolving this specific task and in other tax matters.

Mariya Nazarova(Kucherenko)

Kirill Afanasyev

Didar Kuatov

Artur Bartel