The new Section 25 of the Tax Code of the Republic of Kazakhstan (RK), “Aspects of taxation of foreign companies engaged in the electronic trade in goods and provision of services in electronic form to individuals,” entered into force on 1 January 2022 (with some recent amendments).

According to the new section, a nonresident legal entity carrying out electronic trade in goods or providing services to individuals in electronic form will be required to register “conditionally” in the RK as a value-added tax (VAT) payer and to calculate and pay VAT on services whose place of supply is the RK.

The basic definitions used in Section 25 of the Tax Code are:

Services in electronic form: services provided to individuals through telecommunications networks and the Internet

Electronic trade in goods: entrepreneurial activity involving the sale of goods to individuals via an Internet platform

Internet platform: an information system on the Internet organizing electronic trade in goods

For “conditional” registration as a VAT payer, a foreign company must mail a paper confirmation letter to the Kazakhstan tax authorities with the following details:

The full name of the entity

Tax registration number (or its equivalent), if the nonresident has such a number in its country of incorporation or country of residence

Number of state registration (or its equivalent) in the nonresident’s country of incorporation or country of residence

Bank details to be used for the payment of VAT on electronic trade in goods or provision of electronic services to individuals

Postal details (official email address, address in the non-resident’s country of incorporation or country of residence)

A foreign entity must assess VAT liability when carrying out electronic trade in goods and providing services in electronic form to individuals if one of the following conditions is met:

The buyer (an individual) lives in the RK

The bank in which a bank account is opened or used by an individual buyer to pay for services, or the electronic money operator through which the buyer (an individual) pays for services, is located in the RK

The network address of the buyer (an individual) that is used for the purchase of services is registered in the RK

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

Foreign entities will not be required to issue Kazakhstan’s statutory VAT invoices for electronic trade in goods or provision of services in electronic form to individuals.

VAT will not be assessed on electronic trade in goods or the provision of services in electronic form to individuals if:

The value of goods or services is included in the customs value under the legislation of the Eurasian Economic Union (EAEU) (Kazakhstan, Armenia, Belarus, Kyrgyzstan and Russia) or the customs legislation of the RK, according to which VAT on imported goods is paid to the state budget of the RK and is not refundable

The value of such goods or services is included in the amount of taxable imports, according to which VAT on imported goods from EAEU countries is paid to the state budget of the RK and is not refundable

The value of goods sold in electronic form and electronic services provided to individuals in foreign currency must be converted into tenge (Kazakhstan’s local currency) at the market exchange rate set on the last working day preceding the date of receipt of payment for the goods or services.

A foreign entity must pay the assessed VAT no later than the 25th day of the second month following the quarter in which goods and services were sold.

The Law, as signed on 20 December 2021, contains additional amendments to the tax legislation of the RK regarding VAT obligations in Kazakhstan for nonresidents carrying out electronic trade in goods and providing services to individuals in electronic form:

Banks and organizations engaged in certain types of banking operations, as well as payment organizations, will be required to provide the authorized body with information on the total amounts of payments and money transfers to foreign entities in the calendar year and do so not later than the 15th day of the second month following the reporting year (based on information received from the tax authorities, including merchant ID data used for accepting payments and/or money transfers)

The Law also introduces the following definition in the new Section 25 of the Tax Code of the RK:

A merchant ID is a unique set of symbols identifying a foreign company as the recipient of payment and/or a money transfer using payment systems

Also, for “conditional” registration as a VAT payer, a foreign entity must mail a paper confirmation letter to the Kazakhstan tax authorities with, among other things, a list of details including merchant ID data used for the receipt of payments and/or money transfers.

Additionally, the Law states that VAT will not be assessed or paid for electronic trade in goods or provision of services in electronic form to individuals:

For the portion exceeding the value and/or weight norm determined under the customs legislation of the EAEU and/or the RK, according to which customs duties and taxes are paid in the RK in the form of a cumulative customs payment and are not refundable.

EY Kazakhstan is able to assist taxpayers at the preparatory stage as well as in analyzing a company’s activities to identify transactions that may result in the obligations outlined above.

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

Ernst & Young Kazakhstan LLP, Almaty

• Doniyorbek Zulunov | doniyorbek.zulunov@kz.ey.com
• Meiras Medeubayev | meiras.medeubayev@kz.ey.com
• Minel Ibragim | minel.ibragim@kz.ey.com