Statement of anticipated individual income tax and individual income tax return

2.6.4 Statement of anticipated individual income tax and individual income tax return

 Nonresident individuals referred to in Article 191 of Tax Code of RK shall be required to file with tax authorities serving the area where they are staying a statement of the anticipated amount of individual income tax for the period they are in operation, no later than 30 business days from the date of their arrival in the Republic of Kazakhstan. The following nonresident individuals shall file an individual income tax return with tax authorities serving the area where they are staying within the deadline established under Article 172 of this Code, or in the event of the termination of their entrepreneurial activity and their departure from the Republic of Kazakhstan during the current tax period, no later than ten business days prior to their departure:

those earning income from sources in the Republic of Kazakhstan that is not subject to the income tax at the source of payment;

those engaged in entrepreneurial activity in the Republic of Kazakhstan for more than 30 calendar days or earning income from sources in the Republic of Kazakhstan in excess of 500 times the monthly index factor during the tax period.

2.7 SPECIAL PROVISIONS REGARDING INTERNATIONAL AGREEMENTS

The Tax Code of RK gives provisions of an international agreement to avoid dual taxation and prevent evasion of taxation of income or property (capital) to which the Republic of Kazakhstan is a party (referred to hereinafter as an international agreement for the purposes of Articles 193–204 of Tax Code of RK) shall apply to persons who are residents of one or both of the states that have concluded such an agreement. This statement does not extend to a resident of a state with which an international agreement has been concluded if this resident uses the provisions of the international agreement in the interests of another person who is not a resident of a state with which an international agreement has been concluded. The administration of international agreements shall be carried out following the procedure established by the authorized government agency in accordance with the provisions of Articles 193–204 of Tax Code.

 If the provisions of an international agreement regarding the determination of taxable income of a nonresident legal entity from doing business in the Republic of Kazakhstan through a permanent establishment allow for the deduction of management and general administrative expenses incurred for the purpose of earning said taxable income both in the Republic of Kazakhstan and outside its borders, one of the following methods shall be used to determine these expenses:

1) The proportional distribution of expenses method;

2) The direct deduction of expenses method.

A nonresident legal entity may choose for itself one of these methods for the deduction of management and general administrative expenses. The method chosen for the deduction of management and general administrative expenses charged to a permanent establishment (including the procedure for calculation of the index factor used in the proportional distribution of expenses method) shall be applied annually and may be changed only with the approval of a tax authority.

2.7.1 Proportional distribution of expenses method

When the proportional distribution of expenses method is used, the amount of management and general administrative expenses referred to in Article 195 of Tax Code of RK that are charged to a permanent establishment as a deduction shall be determined as the product of these expenses and the index factor. The index factor shall be calculated by one of the following methods:

1) the ratio of gross annual income earned by a nonresident legal entity from doing business in the Republic of Kazakhstan through a permanent establishment during the tax period to the total gross annual income of the nonresident legal entity as a whole for the same tax period;

2) the average of the following three indicators:

the ratio of gross annual income earned by a nonresident legal entity from doing business in the Republic of Kazakhstan through a permanent establishment during the tax period to the total gross annual income of the nonresident legal entity as a whole for the same tax period;

the ratio of the value of fixed assets recorded in the financial statement of the permanent establishment in the Republic of Kazakhstan as of the end of the tax period, to the total value of the fixed assets of the nonresident legal entity as a whole in the same tax period;

the ratio of the wages fund for personnel employed at the permanent establishment in the Republic of Kazakhstan as of the end of the tax period to the wages fund for personnel of the nonresident legal entity as a whole in the same tax period.

A nonresident legal entity can determine independently which of the aforementioned methods for calculation of the index factor will be used.

The amount of management and general administrative expenses arrived at through these calculations shall be taken as a deduction charged to the permanent establishment only if supporting documents are available. Supporting documents shall include:

1) a copy of the financial statements of the nonresident legal entity in which the following is indicated, depending on the index factor chosen by the nonresident legal entity:

the total amount of gross annual income as a whole;

the total amount of the wages fund as a whole;

the original and residual value of fixed assets as a whole;

the total amount of expenses, with an item-by-item breakdown, including a breakdown of the total amount of management and general administrative expenses;

2) a copy of an audit opinion based on an audit of the nonresident legal entity’s financial statements (if an audit of the legal entity’s financial statements has been performed).

A statement of the aforementioned expenses that are taken, as a deduction charged to a permanent establishment in the Republic of Kazakhstan shall be attached to the corporate income tax return filed with the appropriate tax authority of the Republic of Kazakhstan. In the event that the amount of management and general administrative expenses subject to proportional distribution is not indicated in the financial statements, these expenses shall not be taken as deductions charged to a permanent establishment.