Kazakhstan

Generally, Kazakhstan-sourced income of non-residents is subject to WHT at the rates shown in the table below.

WHT on certain types of activities

Income of non-residents from provision of services in Kazakhstan is subject to WHT at 20%, including certain types of services (management, financial, consulting, engineering, marketing, auditing, and legal) that are deemed as Kazakhstan-sourced income disregarding the place of their actual performance.

WHT on dividends

Effective from 1 January 2023, income of a non-resident in the form of dividends shall be taxable at the reduced rate of 10% if the following conditions are simultaneously met:

• dividends are not paid to the entities registered in the ‘black-listed’ jurisdictions
• the holding period of shares or participation interest is greater than three years (this should include the holding period by a previous holder if such shares/participation interest were received as a result of reorganisation of a previous holder)
• the entity paying the dividends is not a subsurface user, and
• 50% or more of the value of the entity paying the dividends is not derived from property of a subsurface user.

Herewith, dividend income of a non-resident paid by a subsurface user should qualify for 10% WHT (provided all the above conditions are met) if such subsurface user is engaged in further processing activities, under specific conditions.

It should be noted that the reduced 10% WHT rate applies only to dividends paid from net income that was previously subject to CIT, which is determined as the difference between the amount of taxable income and the amount of CIT calculated. 

Income previously subject to CIT is determined for each tax period for which dividends are distributed.

WHT on capital gains

A non-resident legal entity is exempt from WHT on capital gains if the following are met simultaneously:

• capital gains are not paid to the entities registered in the ‘black-listed’ jurisdictions
• the holding period of shares or participation interest is greater than three years (this should include the holding period by a previous holder if such shares/participation interest were received as a result of reorganisation of a previous holder)
• the entity from which the shares/participation interest are disposed is not a subsurface user, and
• 50% or more of the value of the entity from which the shares/participation interest are disposed is not derived from property of a subsurface user.

Herewith, capital gains of a non-resident that directly or indirectly disposes of shares/participation interest of a Kazakhstan subsurface user should qualify for WHT exemption (provided all above conditions are met) if such subsurface user is engaged in further processing activities, under specific conditions.

Benefits paid by a company to a shareholder, founder, participant, or related party, falling under the definition of constructive dividends, are taxed at a rate of 15%.

The rate of WHT may be reduced/non-resident's income may be exempted under an applicable DTT, provided that the following conditions are met simultaneously:

• Existence of bilateral DTT ratified by both parties.
• The non-resident does not create a PE in Kazakhstan.
• The non-resident timely provides to a Kazakhstan tax agent the qualifying tax residency certificate (the Tax Code provides for additional document requirement in case the non-resident provides services in Kazakhstan). According to amendments to the Tax Code, duly formalised tax residency certificates can be provided in e-format provided all signatories and stamps are available on the corresponding website from 1 January 2019.
• The non-resident is a beneficial owner of passive income (i.e. dividends, interest, or royalty) paid by a Kazakhstan tax agent.
• In case of active income paid by the tax agent to a related non-resident, one of the following conditions is met:
  • If the DTT between Kazakhstan and the relevant state of the non-resident is not affected by the MLI (see below), the non-resident is a beneficial owner of such income.
  • If the DTT between Kazakhstan and the relevant state is affected by the MLI, the non-resident's income is subject to inclusion into the non-resident's taxable base with no exemption/adjustment of taxable income or refund of tax paid from such income, and the relevant nominal tax rate in the state of the non-resident is not less than 15%.

Starting from 1 October 2020, the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI) entered into force in Kazakhstan. This means that MLI provisions should affect covered DTTs, on which both contracting states deserved to extend the MLI. Kazakhstan expressed intention to extend some of the MLI provisions to all its DTTs conducted with the MLI member states. Certain DTTs are affected by MLI provisions from 1 January 2021.

One of the main MLI provision that may impact application of treaty relief to a non-resident's income is the principal purpose test, which denies treaty benefit if, notwithstanding any provisions of the DTT, it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of the DTT.

Effective from 1 January 2023, if dividend, interest, and (or) royalties are paid to a related party who is a resident of a country with which the DTT has been amended by the MLI, the tax agent has the right to apply the DTT provisions if income is included in the taxable income of a non-resident recipient and is subject to tax at the nominal tax rate not less than 15%.

A list of bilateral DTTs concluded and ratified by Kazakhstan is shown below:

WHT rates between Kazakhstan and treaty countries as of 1 January 2020

Notes

1. 5% if the beneficial owner is a company owning, directly (or indirectly in case of Canada and the United Kingdom), at least 10% of the voting power of the company paying the dividends.
2. 5% (10% in the cases of Moldova and Serbia) if the beneficial owner is a company that directly holds at least 25% of the capital of the paying company.
3. 10% if the beneficial owner is a company directly or indirectly holding at least 20% of the capital of the paying company.
4. 5% if the beneficial owner is a company (other than a partnership) that owns not less than 10% of the capital of paying company.
5. 5% if the recipient is a company (other than a partnership) that directly owns not less than 20% of the capital of paying company.
6. 10% if the actual owner is a legal entity that owns not less than 30% of the authorised capital of the legal entity paying the dividends.
7. 10% if the beneficial owner is a company that directly holds at least 30% of the capital of the company paying the dividends.
8. 0% if dividends are paid in consideration of an investment of at least USD 50 million in the paying company.
9. 0% if the company receiving the dividends directly or indirectly holds at least 50% of the capital of the paying company and has made an investment in the company paying the dividends of at least USD 1 million, which investment is guaranteed in full or insured in full by the government of the first contracting state, the central bank of that state, or any agency or instrumentality (including a financial institution) owned or controlled by that government, and has been approved by the government of the other contracting state.
10. 5% (or 12.5% in case of Pakistan) if the beneficial owner is a company that directly owns (or indirectly in case of the Netherlands and Pakistan) at least 10% of the capital of paying company.
11. 5% if the beneficial owner is a company directly or indirectly owning, for the period of six months ending on the date on which entitlement to the dividends is determined, at least 10% of the voting power of the company paying the dividends.
12. 5% if the beneficial owner is a company (other than a partnership) that directly owns not less than 15% of the capital of the paying company.
13. 5% if the beneficial owner is a company that directly owns at least 70% of the voting power of the paying company.
14. 0% if the beneficial owner is the government of the other contracting state or any governmental institution or any economic unit established by governmental or similar bodies; 5% if the beneficial owner is a company that directly holds at least 5% of the capital of the company paying the dividends; additionally, 5% if the beneficial owner of dividends is an individual person.
15. 0% if the beneficial owner is the government of the other contracting state or any governmental institution or any economic unit established by governmental or similar bodies.
16. 0% applies to the credit sale of industrial, commercial, or scientific equipment, and the credit sale of merchandise by one enterprise to another enterprise.