Kazakhstan retains its key investment advantages, such as its geographical location, market access, vast natural resources, and human capital. To attract foreign investments, the country has created a favorable investment climate: a simplified tax regime is in place, national legislation is being improved, and the package of investment preferences is expanding. Investors implementing projects in priority sectors of the economy are guaranteed stability in tax legislation. Currently, a new Tax Code is being developed.

In his speech at the extended Government meeting on February 7, 2024, President Kassym-Jomart Tokayev noted: “The new Tax Code should ensure a reasonable balance between creating comfortable conditions for investors and maintaining the necessary level of budget revenues. Even the most advanced tax policy will be ineffective without proper administration.”

Having worked for over 20 years in the Kazakhstani consulting services market, OLYMPEX ADVISERS faces various practical situations. Sometimes foreign investors, taking advantage of the privileges, act dishonestly. However, cases of wrongful and aggressive administration by tax authorities regarding international transactions have also increased. Ambiguities in legislation and administration generate disputes.

An example is the tax dispute over the taxation of corporate income tax on dividends paid to non-residents before 2021. OLYMPEX ADVISERS' experts successfully represented and defended the taxpayer's interests in Kazakhstan's tax authorities in appealing decisions resulting from desk audits. Reasoned arguments were presented, international and law enforcement practices were studied, and legislative inconsistencies were identified.

The essence of the dispute was the legality of the taxpayer's actions when applying national legislation. The taxpayer exempted the non-resident's income in the form of dividends from taxation, complying with all conditions of the Tax Code. However, the tax authority assessed additional corporate income tax, citing the absence of the concept of "net income" in the Tax Code for dividend taxation purposes. The tax authority argued that the exemption should be based on tax accounting data, not accounting data.

This new concept, introduced on January 1, 2021, effectively changed the taxable object and canceled previously provided benefits. The wrongful retrospective application of changes to dividends for 2018-2019 created ambiguity in interpreting the norm. The issues concerned the definition of net income (based on tax or accounting data), the methodology for its determination, and supporting documents.

OLYMPEX ADVISERS conducted extensive work discussing the dispute at the National Chamber of Entrepreneurs "Atameken" and the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan. The experts' arguments and justifications were heard by the tax authority, and the total amount of the contested tax was completely canceled. OLYMPEX ADVISERS, as a private consulting organization, adheres to the main principle of respecting the state's interests and supporting investor trust.

Authors: Ainagul Akisheva (Director of the International Taxation and Securities Group) [email protected]

Dana Omarova (Head of Tax Consulting Practice) [email protected]