GRATA Law Firm, … February 2014
REVIEW
Developments in the Tax Law of the Republic of Kazakhstan:
International Taxation
Kazakhstan ratified the Double Taxation Treaties signed with the United Arab
Emirates and the Grand Duchy of Luxembourg
Late last year, Kazakhstan ratified the Double Taxation Treaties signed with the UAE1 and Luxembourg2.
It will be recalled that Kazakhstan signed those international treaties as early as 2008. After making a
number of amendments based on the protocols, the Double Taxation Treaties were ratified by
Kazakhstan. Both documents became applicable from 1 January 2014.
It is important to note that to date, according to the Resolution of the Government of the Republic of
Kazakhstan No.1318, dated 31 December 20083, the UAE in terms of Dubai and Luxembourg are still
classified as countries with preferential taxation. The provisions of the Double Taxation Treaty signed with
the UAE covers Dubai.
Below is a brief overview of the key points of those international treaties.
Dividends, interest, royalties
The Double Taxation Treaties provide the possibility of reducing income tax rates in respect of 'passive'
income:
Dividends
PE net income
Interest
Royalties
UAE
'0'% or 5%, or 15%,
or 20%1
5%
'0'%3 or 10%
10%
Luxembourg
5% or 15%2
10%
'0'%4 or 10%
10%
Note:
1'0'% applies when dividends are paid in favour of government entities, government related entities or
government owned entities;
5% applies when a company (other than a partnership) directly owns over 10% in a company paying
dividends;
When a company owns less than 10% in a company paying dividends, then under the Kazakhstan
national tax law:
20% applies for companies registered or located in Dubai;
15% applies in any other cases;
2 5% applies when a company (other than a partnership) directly owns no less than 15% in a company
paying dividends;
15% applies in any other cases;
3 '0'% applies when interest is paid in favour of government entities, government related entities or
government owned entities;
4 '0'% applies when interest is paid in favour of government entities, government related entities or
government owned entities, or guaranteed or insured by such entities.
1
The Convention between the Government of Kazakhstan and Government of the UAE for the Avoidance of Double Taxation and
Prevention of Fiscal Evasion with Respect to Taxes on Income, dated 22 December 2008 and the Protocol to the Convention, dated
22 December 2008 which were ratified by the Law of Kazakhstan No. 134-V, dated 4 October 2013;
2 Convention between the Government of Kazakhstan and Government of the Luxembourg for the Avoidance of Double Taxation
and Prevention of Fiscal Evasion with Respect to Taxes on Income, dated 26 June 2008 and the Amendments Protocol to the
Convention, dated 3 May 2012 which were ratified by the Law of Kazakhstan No. 138-V, dated 11 November 2013;
3 The Resolution of the Government of the Republic of Kazakhstan 'On Approval of the List of the States with Preferential Taxation'
No. 1318, dated 31 December 2008.
GRATA Law Firm, … February 2014
Real Estate Alienation
Income earned by a resident of Luxembourg or the UAE from the alienation of real estate located in
Kazakhstan shall, as a general rule, be taxed in Kazakhstan.
The concept of 'real estate’ (immovable property) is interpreted in accordance with the national legislation
of the jurisdiction where the real estate in question is located. The term, as it is used in the Double
Taxation Treaties, also covers rights to develop mineral resources.
Income received from the alienation of movable property that forms part of the property of a permanent
establishment of a resident of the UAE or Luxembourg is taxed in Kazakhstan. In the case of the UAE,
the amount of tax may be reduced by 50%.
Alienation of Shares
As a general rule, the alienation of shares (participation interest) in a Kazakhstani legal entity is taxed in
the country of the investor's residence, in the UAE or Luxembourg, unless the cost of the shares is mainly
formed by the cost of real estate located in Kazakhstan.
The Double Taxation Treaty with Luxembourg also provides that the above rules do not apply to the
income earned from the alienation of shares regularly listed on the official stock exchange.
Information Exchange
The relevant state authorities of Kazakhstan as well as of the UAE and Luxembourg will share
information required for the fulfillment of the provisions of the Double Taxation Treaties.
Residency Certificates Legalisation for the Member-States of the Chisinau and
Minsk Conventions
On 8 January 2014, the Tax Committee of the Ministry of Finance of Kazakhstan issued a letter clarifying
that provisions of the Chisinau 4 and Minsk 5 Conventions are not applicable to tax relationships.
Therefore, according to the Tax Committee, the tax residence of entities from the member-states of the
Chisinau (Minsk) Convention shall be subject to the general procedure for confirmation, namely
submitting the legalised or apostilled certificate of residence.
In order to facilitate the procedure for issuing certificates of residence, the Tax Committee proposed to
the following member-states of the Hague Convention 6 to sign a memorandum, according to which
residency will be confirmed on the basis of original certificates or notarised copies thereof without the
need to apostille.
Today, in order to facilitate and simplify the procedure for issuing certificates of residence:
•
Belarus and the Russian Federation in support of the inapplicability of the Chisinau (Minsk)
Convention to tax relationships are intending to sign the protocols to the relevant double taxation
treaties signed with Kazakhstan on the mutual acceptance of certificates of residence without
apostillisation;
•
Armenia, Kyrgyz Republic, and Ukraine also supported the inapplicability of the Chisinau
(Minsk) Convention to tax relationships and intend to sign memorandums of understanding on the
application of the double taxation treaties;
•
Azerbaijan and Uzbekistan believe that the Chisinau (Minsk) Convention is applicable to tax
relationships. In this regard, the Tax Committee intends to continue negotiations with these
countries on the legalisation (apostillisation) of certificates of residence;
•
Georgia has not yet provided its response to the Tax Committee proposal.
4
Convention for the Legal Assistance and Legal Relationships on Civil, Family and Criminal Cases, dated 7 October 2002, ratified
by the Law of Kazakhstan No. 531-II, dated 10 March 2004 (effective from 27 April 2004).
5 Convention for the Legal Assistance and Legal Relationships on Civil, Family and Criminal Cases, dated 22 January 1993, ratified
by the Resolution of the Supreme Court of Kazakhstan No. 2055-XII, dated 31 March 1993 (effective from 19 May 1994).
6 Convention abolishing the requirements to legalise foreign official documents, dated 5 October 1961, ratified by the Law of
Kazakhstan No. 11-II, dated 30 December 1999 (effective from 30 January 2001).
GRATA Law Firm, … February 2014
Thus, until a final approval of the procedure for the application of the international treaties is given, there
are risks that previous certificates of residence will be regarded as failed in terms of legalisation or
apostillisation and thus inconsistent with the requirements of Articles 219.4 and 219.5 of the Tax Code of
the Republic of Kazakhstan, and, accordingly, there is a risk that the Kazakhstani tax authorities will
misapply the double taxation treaties.
About GRATA Law Firm
GRATA Law Firm is the largest independent Kazakhstani law firm, and one of the leading law firms in
Central Asia and the Caspian Region. GRATA has provided a wide range of legal services in these
regions for over 20 years.
Since its inception in 1991 the Firm has developed a very experienced Tax Practice. In 2005, the
structure of the firm was fully established, featuring a specific department dealing with Tax Law. Unlike
many consulting companies, GRATA’s tax team consists mainly of lawyers and auditors, who have
experience working with the tax authorities. This distinct perspective enables us to provide our clients
with correct and practical advice.
Services
•
Representation and Protection of Client's Interests in Tax Disputes;
•
VAT Refund from the Budget;
•
Support in Tax Audits;
•
Taxation of Subsoil Users;
•
International Taxation;
•
Finance Taxation (securities, financial instruments, loan agreements);
•
Corporate Taxation and Tax Planning;
•
Individual Taxation;
•
Tax Support and Structuring in M&A Transactions;
•
Due Diligence of Tax Accounting (Tax Audit);
•
Tax Administration;
For additional information, please visit www.gratanet.com, or contact:
Assel Ilyassova
Partner
Head of Tax Department
[RM]
Partner
+7 (727) 2445-777
+7 (701) 763-07-14
ailyassova@gratanet.com
…