1) placed in conditional bank deposits;
2) paid to nonresidents who have the right to apply the provisions of international agreements;
3) transferred to the state budget.
2.7.4 Procedure for the application of an international agreement with respect to taxation of income from providing transportation services in international shipping
Income from providing transportation services in international shipping in which the Republic of Kazakhstan is one of the parties, earned by a nonresident legal entity that has the right to apply the provisions of an international agreement, shall be exempt from taxation without the filing of a request for application of the provisions of the international agreement, on the basis of a document confirming residency, if the legal entity has a permanent establishment in the Republic of Kazakhstan that is related to this activity. In this case the nonresident legal entity shall be required to maintain a separate record of income earned from providing transportation services in international shipping (which is not subject to taxation pursuant to an international agreement) and from providing transportation services on the territory of the Republic of Kazakhstan (subject to taxation), and also to reflect said income in a corporate income tax return. The total amount of taxable income indicated in a corporate income tax return shall be reduced by the amount of taxable income that is exempt from taxation pursuant to an international agreement, calculated on the basis of the separate accounting records. In the event of the unlawful application of the provisions of an international agreement, which results in nonpayment, or incomplete payment of tax to the state budget, the taxpayer shall bear liability in accordance with legislative acts of the Republic of Kazakhstan.
Income earned by a nonresident legal entity that has the right to apply the provisions of an international agreement, from the operation of means of transport in international shipping in which the Republic of Kazakhstan is one of the parties, without the creation of a permanent establishment in the Republic of Kazakhstan, shall be exempt from taxation in accordance with the procedure established under Article 198 of Tax Code.
2.7.5 Procedure for the application of an international agreement with regard to the taxation of dividends, interest, and royalties
At the time that income is paid to a nonresident in the form of dividends, interest, or royalties, a tax agent shall have the right to apply the provisions of the respective international agreement without the filing by the nonresident of a request for application of the provisions of an international agreement, on the basis of a document confirming residency, if the nonresident in question is the final recipient of the income and has the right to apply the provisions of an international agreement. A tax agent shall be required to indicate in the statement of income tax collected at the source of payment which is filed with a tax authority the amount of income paid (accrued) and taxes withheld in accordance with the provisions of international agreements, the income tax rates, and the names of the international agreements. In the event of the unlawful application of the provisions of an international agreement which results in nonpayment or incomplete payment of tax to the state budget, the tax agent shall bear liability in accordance with legislative acts of the Republic of Kazakhstan.
2.7.6 Procedure for the application of an international agreement with regard to the taxation of net income from doing business through a permanent establishment
A nonresident shall have the right to apply the provisions of an international agreement with regard to the taxation of net income from doing business in the Republic of Kazakhstan through a permanent establishment without filing a request for application of the provisions of an international agreement, on the basis of a document confirming residency, if the nonresident in question is the final recipient of the net income and has the right to apply the provisions of the respective international agreement. A nonresident legal entity shall be required to indicate in a corporate income tax return the tax rate, the amount of tax on net income, and the name of the international agreement on the basis of which the respective tax rate was applied. In the event of the unlawful application of the provisions of an international agreement which results in nonpayment or incomplete payment of tax to the state budget, the taxpayer shall bear liability in accordance with legislative acts of the Republic of Kazakhstan.
2.7.7 Procedure for the application of an international agreement with regard to the taxation of other income from sources in the Republic of Kazakhstan
A nonresident earning income from sources in the Republic of Kazakhstan, with the exception of those referred to in Articles 198–201 of Tax Code, shall have the right to file a request to apply the provisions of an international agreement, following the form established by the authorized government agency, with the tax authority where the tax agent is registered, prior to the payment of the income. A tax authority shall review the request, and if the information indicated in the request is valid, it shall certify the request as filed.In the event of the unlawful application of the provisions of an international agreement, the tax authority shall deny the request and inform the nonresident of its reasons for doing so. In the event that a nonresident does not agree with a tax authority’s negative decision, the nonresident shall have the right to file a request with the authorized government agency (with the involvement of the competent authority of the nonresident’s country of residence, if necessary), asking that the matter be reviewed again to determine the proper application of the provisions of the international agreement.
2.7.8 General requirements for the filing of a request to apply the provisions of an international agreement
A request to apply the provisions of an international agreement, following the form established by the authorized government agency, shall be accepted by a tax authority provided that the following requirements are met:
1) the application is accompanied by:
copies of contracts (agreements, accords) for the performance of work (delivery of services) or for other purposes;
copies of charter documents;
a breakdown of income from providing transportation services in international shipping and on the territory of the Republic of Kazakhstan;
a certificate of work performed when the nonresident performs various types of work, an operational use certificate when construction work is performed, and an invoice or payment document confirming the receipt of income for services provided;
2) the tax agent submits accounting records confirming the amount of income accrued and/or paid and the taxes withheld;
3) there is confirmation of the applicant’s residency by a competent or authorized body of the applicant’s state, with which the Republic of Kazakhstan has concluded an international agreement (on the request form itself or in the form of an attached document confirming residency). For the purposes of this article and Articles 198–202 of this Code, a nonresident that has the right to apply the provisions of the respective international agreement, in the event of a change in its registration data in the country of residence, shall be required to present a document confirming residency that indicates the changes in these data, following the procedure established by said articles;
4) diplomatic or consular authorities provide legal validation of the signature and official seal of the agency that certified the residency of the nonresident (a document confirming residency), following the procedure established by the legislation of the Republic of Kazakhstan or an international agreement to which the Republic of Kazakhstan is a party.
Certificate of taxes withheld and paid in the Republic of Kazakhstan
Nonresident can request from tax authority a certificate indicating the amount of income earned from sources in the Republic of Kazakhstan and the taxes withheld and tax authority shall provide it.
Kazakhstan creates not worst Tax system among CIS counties for Foreign Direct Investment. Country realized many term and conditions to attract investors and make simply legislation. Within county work many foreign companies and foreigners in different industries. Domestic enterprises make the business with nonresidents enterprises or with their branches and their representatives, which located in territory of Kazakhstan within framework of external trade agreements.
Foreigners earn here money by using our natural resources, or by providing services to our company. And it is important how much they will pay tax to Kazakhstan budget. By level of collection of tax depend the level of social support that may do by government. The following special tax privileges are available for the effective realization of investment projects in the priority sectors:
§ state grants;
§ exemption from land and property tax for a period up to 5 years after the conclusion of the contract;
§ exemption from income tax for a period of up to 5 years from the moment of receiving the taxable supply, but for not more than 8 years from the conclusion of the contract;
§ full or partial exemption from customs duty assessments for importation of equipment and raw materials needed to fulfill the investment project.
In 1997 there were developed direct foreign investments in the amount of $1830.8 mln., with regard to repayment of credit according to the schedule there were developed $1176.8 mln.
The main direct investors in 1997 were non-residents from the states of far abroad, among which the first place on developing direct foreign investments belongs to Japan with investments in $ 381.5 mln, then - USA ($ 207.4 mln.) and Great Britain ($ 241.4 mln.).
Level of Taxation usually depends on status of company or persons. It is very important is a company/ person resident or not, does nonresident perform entrepreneurship through permanent establishment or not. Resident entities are taxable on their worldwide income received or accrued within a reporting period (calendar year) at the 30% basic tax rate (The amount of taxable income is determined by subtracting deductible expenses and deductions on fixed assets from gross income). Income of nonresident entities derived from carrying on business in Kazakhstan through a permanent establishment is subject to taxation under the same rules as income of Kazakhstan residents. Nonresident entities are subject to taxation on income received from Kazakhstan sources. Incomes from Kazakhstan sources, except income in the form of dividend (15%), remunerations (the interest) (15%), insurance payments (10%), telecommunication or transport services in international network or transportation between RK and the other state (5%), taxed on corresponding to rate, are taxed by tax beside the source of the payment at rate 20 percents. As we can see nonresidents pay at less tax rates as residents. So nonresident taxation have important meaning to Kazakhstan. It means that if government will not clearly realize this problem, government may find miss a big amount of money in budget, that may needed for other thing; defense, education, social security etc. In the cases then foreigners or local company/ person decide use Nonresident taxation legislation to reduce its tax burden. Government should clearly determine the conception of Residency and Nonresidential, to avoid abuse in determination of residency. Clearly determine taxed incomes of nonresidents through permanent establishment. Determine list of the taxable incomes of nonresidents.
Clear and stable taxes let to improve investment climate in Republic, also it lead to development of entrepreneurship in Kazakhstan, because now many domestic companies receive, commonly, services from foreign companies in applying new technologies, training of staff, reclamation of new types of services, expanding markets for goods and services.
Conclusion
Since independence the legal system of the country has undergone considerable reforms. The new constitution and a number of new constitutional laws on state system and governmental bodies of Kazakhstan have been passed. Amendments were introduced to the Civil, Criminal and Tax Codes, trade and investment regulations and other legal acts regulating the major aspects of the country life.
Taxes – is basic sources of incomes of the state so the dominant motivation for taxation in any counties is to finance public administration and the public provision of economic and social service. Second motivations are the redistribution of income and correction of market imperfections. But also tax creates distortions in the economy that reduce the real income of taxpayers by more than amount of revenue that is transferred to the government. This occurs when taxpayers either modify their behavior in an attempt to reduce their tax burdens or spend resources in evading taxes. Taxes are used for economic influence of the state on public manufacture, its structure, and on condition of scientific and technical progress. By tax government may discourage domestic production and foreign investments. So government should balanced between public provision of economic and social service, and level of taxation. The appropriate level of taxation depends on a country’s desired role for the state, the efficiency and equity of its public spending, and the efficiency and equity of its tax structure and administration. The Government of Kazakhstan is clearly aware of this and continues to make steady progress in developing its tax system to fit the realities of modern business in the global economy.
Consideration of Nonresident taxation is important because this tax may use as a loophole for avoiding or decreasing tax burden of taxpayers. Level of tax payments is critical to the economic development of Kazakhstan as sovereign state.
So it can decrease level of tax collection and level of social expenditures. Lead to social instability in society.
Appendix A
Sources: Statistics Agency of RK, 2001
Sources: Statistics Agency of RK, 2001
Appendix B
Sources: Statistics Agency of RK, 2001
The tax revenue in the consolidated budget has shown a rising trend in the last two years. The performance of domestic taxes (particularly VAT and Excises) has been improving.
|
|
Income Tax from Legal Entaties |
Income Tax from Physical Persons |
VAT |
Excises |
Land Tax |
Ownership Tax |
Social Tax |
Property Tax |
|
1999 |
54759 |
35329 |
89030 |
18956 |
4644 |
24537 |
70463 |
15210 |
|
2000 |
163529 |
51016 |
115132 |
19285 |
5506 |
26693 |
9907 |
14763 |
Sources: Statistics Agency of RK, 2001
THE LIST of USED SOURCES
1. Law of Republic of Kazakhstan from January 1, 2002 " Law on Taxes and other obligatory Payments to the Budget "
2. " Law on Taxes and other obligatory Payments to the Budget " Chapter 7 “Features of Taxation on Nonresidents Income” (with changes from January 1, 2002)
3. Bulletin of Accountant, “Tax Code about Taxation of Operation with Nonresidents of RK " (Print house “BIKO” Almaty, 2001) / 1 – 35/
4. Hodorovich, Mihail Ivanovich 1997, Taxation of Individuals /p25 – 40/
5. Lessons of Tax Reform, World Bank Publication /15 – 25/
6. National Statistics Agency of Republic of Kazakhstan, Short Statistics annual edition of Republic of Kazakhstan (Almaty, 2001) /130 – 135/
7. Kazakhstan Public Expenditure Review, June 27, 2000 (Document of the World Bank)
p /12- 15/
8. Macroeconomics, Timothy Tregarthen 1996 /p328 –340/
