Features of Residents and Nonresidents taxation

Features of Residents and Nonresidents taxation. Features of Resident Residents of the Republic of Kazakhstan are individuals who reside permanently in the Republic of Kazakhstan, or whose center of vital interests is located in the Republic of Kazakhstan.

An individual shall be considered to reside permanently in the Republic of Kazakhstan for the current tax period if he spends at least 183 calendar days in any consecutive 12-month period ending in the current tax period in the Republic of Kazakhstan.

An individual shall also be considered to reside permanently in the Republic of Kazakhstan for the current tax period if the number of days spent in the Republic of Kazakhstan in the current tax period and the preceding two tax periods, determined by applying the following coefficients to each tax period, is equal to at least 183 calendar days 1 - the number of days spent in the current tax period 1 3 - the number of days spent in the tax period immediately preceding the current tax period 1 6 - the number of days spent in the tax period before the one immediately preceding the current tax period.

If an individual has lived in the Republic of Kazakhstan in the current tax period for fewer than 30 calendar days, said individual shall not be considered to reside permanently in the Republic of Kazakhstan.

In addition, an individual shall be considered a nonresident for the period following the last day spent in the Republic of Kazakhstan, unless said person becomes a resident in the year following the year in which the persons stay in the Republic of Kazakhstan ended.

An individuals center of vital interests shall be considered to be located in the Republic of Kazakhstan if the following conditions are met simultaneously 1 an individual is a citizen of the Republic of Kazakhstan or has a permit to reside in the Republic of Kazakhstan residency permit 2 an individuals family and or close relatives reside in the Republic of Kazakhstan 3 real property owned by an individual and or members of his family or held by them on some other basis is located in the Republic of Kazakhstan, and the individual has access to it at any time for use as a residence for himself and or members of his family.

Individuals who fall into the following categories and who are citizens of the Republic of Kazakhstan or who have filed an application for citizenship of the Republic of Kazakhstan or for a permit to reside permanently in the Republic of Kazakhstan without becoming a citizen of the Republic of Kazakhstan, shall be considered resident individuals, regardless of the time spent in the Republic of Kazakhstan and any other criteria provided below persons sent abroad on official business by government agencies, including employees of diplomatic and consular institutions and international organizations, as well as family members of said individuals crew members of means of transport belonging to legal entities or citizens of the Republic of Kazakhstan, which make regular international trips military and civilian personnel at military bases and those serving in military units, groups, contingents, or formations deployed outside the Republic of Kazakhstan persons working at facilities located outside the Republic of Kazakhstan which are owned by the Republic of Kazakhstan or constituent territories of the Republic of Kazakhstan including on the basis of concession contracts students and persons undergoing on-the-job and practical training outside the Republic of Kazakhstan for educational purposes or to gain practical experience, for the entire period of instruction or practical training teachers and scientific personnel located outside the Republic of Kazakhstan for the purpose of teaching, consulting, or performing scientific work, for the entire period they are teaching or performing said work. Also legal entities established in accordance with the legislation of the Republic of Kazakhstan, and or other legal entities whose effective headquarters or actual administrative offices are located in the Republic of Kazakhstan, shall also be considered residents of the Republic of Kazakhstan.

Effective headquarters or actual administrative offices shall be understood to mean the place where the principal management takes place and where strategic commercial decisions are made which are necessary for the performance of a legal entitys entrepreneurial activity. 2.2 Permanent establishment of a nonresident A permanent establishment of a nonresident in the Republic of Kazakhstan shall be defined as a place of business through which the nonresident performs all or part of its entrepreneurial activity, including activity performed through an authorized person, and specifically 1 any place of doing business related to the production, processing, assembly, packaging, delivery, or realization of goods, regardless of the duration of the activity 2 any management office, branch, division, representative office, bureau, office, agency, factory, workshop, production shop, laboratory, store, or warehouse of a nonresident, regardless of the duration of the activity 3 any place of doing business related to the extraction of natural resources, including the extraction of hydrocarbons an underground mine, a quarry, an oil and or gas well, an open-pit mine, land-based or offshore derricks and or wells, regardless of the duration of the activity 4 any place of doing business including monitoring or supervisory activity related to a pipeline, gas line, the exploration and or development of natural resources, the installation, set-up, assembly, start-up, adjustment, and or servicing of equipment, regardless of the duration of the activity 5 any other place of doing business related to the operation of slot machines including accessories, computer networks and communications channels, amusement parks, the transportation or other infrastructure, regardless of the duration of the activity.

A construction site, an installation or assembly project, and the performance of planning work shall constitute a permanent establishment regardless of the duration of the work. In this context a construction site project shall be understood to mean specifically the place where work is performed to erect and or renovate real property, including the construction of buildings and structures and or the performance of installation work, the construction and or rebuilding of bridges, roads, and canals, the laying of pipelines, the installation of power engineering, industrial, and other equipment, and or the performance of other similar work. A construction site project shall cease to exist as of the day following the day on which the operating certificate for the project or the acceptance certificate for the work performed is signed and the construction has been paid for in full. A nonresident shall also create a permanent establishment in the Republic of Kazakhstan if the nonresident 1 collects insurance premiums and or provides insurance or reinsurance coverage for risks in the Republic of Kazakhstan through an authorized agent 2 provides services on the territory of the Republic of Kazakhstan continuously for more than 90 calendar days in any consecutive 12-month period ending in the given tax period, through employees or personnel hired for these purposes 3 is a participant in a simple partnership joint operating agreement created in accordance with the legislation of the Republic of Kazakhstan and operating on the territory of the Republic of Kazakhstan 4 holds exhibitions in the Republic of Kazakhstan for a fee and or at which goods are sold 5 on the basis of a contractual relationship grants a resident or nonresident the right to represent its interests in the Republic of Kazakhstan, or to act or conclude contracts agreements, accords on its behalf.

A nonresident engaged in entrepreneurial activity in the Republic of Kazakhstan through an independent intermediary a broker and or other independent agent acting on the basis of an agency, commission, or consignment agreement or another similar type of agreement, who is not authorized to sign contracts on behalf of the nonresident, shall not be considered to be creating a permanent establishment.

An independent intermediary shall be understood to mean a person operating within the context of his usual principal business, who is both legally and economically independent of the nonresident. 2.3 Nonresidents income from sources in the Republic of Kazakhstan The following types of income shall be considered nonresidents income from sources in the Republic of Kazakhstan 1 income from the realization of goods, the performance of work, or the delivery of services in the Republic of Kazakhstan 2 income earned from management, financial with the exception of services involving the insurance and or reinsurance of risks, consulting, auditing, marketing, legal with the exception of attorneys services, agency, and information services provided to residents or nonresidents doing business in the Republic of Kazakhstan through a permanent establishment, and related to said permanent establishment, regardless of where the services are actually provided 3 capital gains resulting from the realization of property located on the territory of the Republic of Kazakhstan the realization of securities issued by residents, as well as a share interest in a resident legal entity or in property located in the Republic of Kazakhstan 4 income from concession of the right of claim on a debt to residents or nonresidents in connection with doing business in the Republic of Kazakhstan through a permanent establishment 5 charges fines, penalties for failure to fulfill or improper fulfillment of obligations by residents and nonresidents, which have arisen in the course of operations by said nonresidents in the Republic of Kazakhstan, including obligations under contracts agreements, accords for the performance of work delivery of services and or under foreign trade contracts for the delivery of goods 6 income in the form of dividends received from a resident legal entity, and income from a share interest in such a legal entity 7 income in the form of interest, with the exception of interest on debt securities, received from residents nonresidents with a permanent establishment or property located in the Republic of Kazakhstan, if the debt owed by these nonresidents applies to their permanent establishment or property 8 income in the form of interest on debt securities, received from resident issuers nonresident issuers with a permanent establishment or property located in the Republic of Kazakhstan, if the debt owed by these nonresidents applies to their permanent establishment or property 9 income in the form of royalties received from residents or nonresidents in connection with doing business in the Republic of Kazakhstan through a permanent establishment 10 income from the leasing of property located in the Republic of Kazakhstan 11 income earned from real property located in the Republic of Kazakhstan 12 income in the form of insurance premiums paid under agreements for the insurance or reinsurance of risks arising in the Republic of Kazakhstan 13 income from providing transportation services for international shipments, one of the parties of which is the Republic of Kazakhstan 14 income from operations in the Republic of Kazakhstan under individual labor agreements contracts or under other agreements of a civil- legal nature 15 honoraria for managers and or other payments received by members of a top administrative body council of directors, board, or other similar body of a resident legal entity, regardless of where the actual performance of the administrative duties assigned to such persons takes place 16 supplemental payments made in connection with residing in the Republic of Kazakhstan 17 income in the form of compensation for expenditures borne by an employer to provide material and social benefits or other material advantages to nonresident individuals working in the Republic of Kazakhstan, including expenditures on meals, housing, enrollment of children at educational institutions, and expenses related to leisure activities, including vacation travel for their family members 18 pension payments effected by resident pension savings funds 19 income paid to people employed in the arts theater, film, radio and television performers, musicians, artists, and athletes from activities in the Republic of Kazakhstan, regardless of the person to whom payments are made 20 winnings paid by residents 21 income earned from providing independent personal professional services in the Republic of Kazakhstan 22 income in the form of property located in the Republic of Kazakhstan that is received free of charge, including income from such property 23 other income not covered under the preceding subitems that arises on the basis of activities performed in the Republic of Kazakhstan. 2.4 PROCEDURE FOR THE TAXATION OF INCOME EARNED BY NONRESIDENT LEGAL ENTITIES DOING BUSINESS WITHOUT CREATING A PERMANENT ESTABLISHMENT IN THE REPUBLIC OF KAZAKHSTAN Income earned by a nonresident legal entity that defined above that is not related to a permanent establishment in the Republic of Kazakhstan shall be subject to the income tax at the source of payment without any deductions, at the rates set below.

Rates for the income tax at the source of payment The income of a nonresident from sources in the Republic of Kazakhstan not related to a permanent establishment shall be subject to taxation at the source of payment at the following rates 1 dividends, income from a share interest, and interest income 15 percent 2 insurance premiums paid under agreements for the insurance of risks 10 percent 3 insurance premiums paid under agreements for the reinsurance of risks 5 percent 4 income from providing transportation services in international shipments 5 percent 5 income defined under Article 178 of Tax Code of RK, with the exception of income referred to in subitems 1 -4 of this article 20 percent The payment of income shall be defined as the mean the transfer of money in cash and or noncash form, securities, goods, property, and the performance of work or delivery of services.

The following shall not be subject to taxation at the source of payment 1 payments related to the delivery of goods onto the territory of the Republic of Kazakhstan under foreign trade transactions 2 income from providing services related to the opening and maintenance of correspondent accounts of resident banks and the performance of settlements on them 3 capital gains from the realization of securities 4 income from operations with government securities 5 payments related to an adjustment, based on quality, in the selling price of crude oil transported via the unified pipeline system outside the Republic of Kazakhstan 6 interest accumulated accrued on debt securities paid by resident buyers not issuers to nonresidents at the time of their purchase.

The taxation of a nonresidents income at the source of payment shall be effected regardless of whether said nonresident turns over this income to third parties and or to its subdivisions in other states.

The procedure for the calculation and withholding of income tax at the source of payment from interest on debt securities shall be established by the authorized government agency.

The person paying income including a nonresident doing business in the Republic of Kazakhstan through a permanent establishment is liable and responsible for the calculation and withholding of the income tax at the source of payment, and for payment of the tax to the state budget.

Such a person shall be recognized as a tax agent in accordance with item 1 of Article 10 of Tax Code. A nonresident shall be recognized as a tax agent as of the moment said person begins doing business in the Republic of Kazakhstan, if its period of operation exceeds that established for the creation of a permanent establishment.

The income tax shall be withheld at the source of payment regardless of the form and place of payment of the income. 2.4.1