Kazakhstan has postponed to 1 January 2021, the introduction of new Article 426-1 of the Tax Code “Features of the Fulfillment of VAT Liabilities by Non-residents Providing Services in Electronic Form to Individuals” proposed by the State Revenue Committee of the Republic of Kazakhstan. The provision was originally to go into effect on 1 January 2020.

According to the proposed changes, a nonresident legal entity, when providing services to individuals in electronic form, will be required to register as a value-added tax (VAT) payer and calculate VAT based on turnover of services rendered if the place of supply of such services is Kazakhstan (regardless of whether they have established a registered presence).

Electronic services (e-services) subject to VAT would include:

Software distributed via the Internet

Advertising services via the Internet

Services involving the posting of an offer to acquire (sell) goods (works or services) or property rights on the Internet

Search for and (or) provision of information about potential customers

Technical, organizational, informational or other services to enable transactions between sellers and buyers via the Internet

Provision and (or) maintenance of a commercial or personal presence on the Internet

Information storage and processing on the Internet

Provision of domain names and hosting services

Information system and site administration on the Internet

Internet site statistics services

Sales of e-books, graphics, or music via the Internet

The place of supply of e-services would be deemed to be Kazakhstan if:

The buyer (an individual) lives in Kazakhstan.

The buyer pays for e-services using an account with a bank based in Kazakhstan or through an electronic money operator based in Kazakhstan.

The buyer uses an IP address registered in Kazakhstan when purchasing e-services.

The buyer uses a telephone number with the international country code assigned to Kazakhstan to purchase or pay for e-services.

Foreign entities would be required to calculate VAT at the rate of 12% of the value of e-services, submit VAT returns and pay VAT to the state budget each calendar quarter.

Foreign entities would not be required to issue Kazakhstan’s statutory VAT-invoices for e-services rendered to individuals.

VAT on goods (works or services) purchased by a foreign entity for the provision of electronic services would not be off-settable.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Kazakhstan LLP, Almaty

Doniyorbek Zulunov | doniyorbek.zulunov@kz.ey.com

Roman Yurtayev | roman.yurtayev@kz.ey.com

Danna Balafanova | danna.balafanova@kz.ey.com

Alma Akhmetova | alma.akhmetova@kz.ey.com

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