The State Revenue Committee clarifies the procedure for taxation of income of foreign companies derived from the provision of services outside the Republic of Kazakhstan.

According to the Tax Code, a non-resident is obliged to pay tax in Kazakhstan if it derives income from sources in the Republic of Kazakhstan.

The list of such income is defined by Article 644 of the Tax Code.

Income from sources in Kazakhstan includes:

•   works and services performed in the territory of the Republic of Kazakhstan (subparagraph 2) paragraph 1 of Article 644);
•     management, financial, consulting, engineering, marketing, audit and legal services provided by a non-resident outside Kazakhstan (subparagraph 3) paragraph 1 of Article 644).

If the activities of the non-resident do not result in the formation of a permanent establishment in the Republic of Kazakhstan, such income:

•      is subject to corporate income tax withheld at source (CIT at source),
•      without deductions,
•     at the rate of 20%.

The tax is withheld by the customer company in Kazakhstan acting as a tax agent.

Pursuant to subparagraph 11) paragraph 9 of Article 645 of the Tax Code, income from works and services performed entirely outside Kazakhstan is not subject to taxation, except for the income specified in subparagraphs 3), 4) and 5) of paragraph 1 of Article 644 of the Tax Code.

That is:

✔ if a non-resident provides services only abroad;

✔ and such services do not fall under the special categories specified in the Tax Code;

→ such income is not subject to taxation in Kazakhstan.

What does this mean for business?

•      Foreign companies operating in Kazakhstan or providing services to Kazakhstani customers must consider where the services are actually performed.
•       If the services are performed in Kazakhstan, the customer withholds tax at source.
•      If the services are provided entirely outside Kazakhstan and the income from such services does not relate to the special types of income specified in subparagraphs 3), 4) and 5) of paragraph 1 of Article 644 of the Tax Code, the tax is not applied.
•      These rules ensure clarity, prevent double taxation and promote fair business practices.

Source : https://www.gov.kz/memleket/entities/kgd-akmola/press/news/details/1122637?lang=kk