KAZAKHSTAN Law and Practice Contributed by: Assel Ilyassova, Lyazzat Zhilkibagarova and Makhabbat Mukhidinkyzy, GRATA International
2.6 Definition of Permanent Establishment In Kazakhstan, a permanent establishment (PE) is defined broadly under the Tax Code and may arise through a fixed place of business, the provision of services or performance of works through personnel, a dependent agent, or participation in joint activities. The domestic definition is generally broader than the PE definitions in Kazakhstan’s tax treaties, particu - larly in relation to service-based activities. In addition, where a non-resident has a registered PE in Kazakh - stan, Kazakhstan-source income may generally be treated as attributable to that PE unless the non-resi - dent proves otherwise to the tax authorities, reflecting a broad domestic “force of attraction” approach. Kazakhstan’s treaty PE provisions are generally based on the OECD Model Tax Convention, although many treaties also include UN Model features, especially in relation to service PE clauses and construction- related activities. 3. Taxation of Cross-Border Income 3.1 Income From Immovable Property The tax treatment of income from immovable property differs depending on whether the seller is a resident or a non-resident. For resident legal entities, proceeds from the disposal of immovable property are generally taken into account under the Tax Code rules govern - ing fixed assets, with the resulting amount forming part of taxable business income subject to corporate income tax at 20%. For non-residents, gains derived from the disposal of immovable property situated in Kazakhstan are generally treated as Kazakhstan- source capital gain income and taxed in Kazakhstan, through withholding income tax at source at 15%, subject to any applicable double tax treaty. 3.2 Business Profits For non-resident legal entities operating in Kazakhstan through a PE, taxable business income is generally determined as gross annual income less deductible business expenses and other statutory adjustments. Such income is generally subject to corporate income tax at 20%, and the net income of the PE is also sub - ject to branch profits tax at 15%. For non-residents that do not operate through a PE, the taxable base
income tax is generally imposed at the standard rate of 10% for most categories of individual income. To mitigate double taxation of foreign-source income, Kazakhstan provides relief through a foreign tax credit mechanism, subject to the conditions and limitations set out in the Tax Code. 2.4 Taxation of Non-Resident Individuals Individuals who are not tax resident in Kazakhstan are generally taxed only on Kazakhstan-source income. Such income is typically taxed by withholding at source through a Kazakh tax agent, although in certain cases the non-resident individual may be required to report and pay the tax directly. Kazakhstan-source income of non-resident individu - als includes employment income, directors’ fees, income from independent personal services, art - ists’ and sportspersons’ income, dividends, interest, royalties, capital gains from Kazakhstan immovable property and shares or participation interests, rental and other property-related income, pension and insur - ance-related payments, material benefits, and other income treated as Kazakhstan-source under the Tax Code. 2.5 Tax Residence of Legal Entities A legal entity is generally recognised as a tax resident of Kazakhstan if it is either incorporated under the laws of Kazakhstan or incorporated under the laws of a foreign state but has its place of effective manage - ment in Kazakhstan. The place of effective management is generally under - stood as the place where the actual governing body (such as the board of directors or a similar body) meets and where key management, control and stra - tegic business decisions are made. In addition, the Astana International Financial Centre (AIFC) legal framework allows foreign legal entities to redomicile to the AIFC in Kazakhstan. Following such continuation, these entities are generally treated as Kazakhstan tax residents, subject to the requirements of the Tax Code.
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