According to the Letter of the Tax Committee of the Ministry of Finance of the Republic of Kazakhstan No. НК-13-55-4256 dated 7 June 2013 (hereinafter – the Letter), the norms of the Convention “On legal assistance and legal relations in civil, family and criminal cases,” concluded by the member-countries of the Convention in the Kishinev city on 7 October 2002 and ratified by the Law of the Republic of Kazakhstan No. 531 dated 10 March 2004 (hereinafter – the Kishinev Convention), shall not be applied to the tax relations, since they are only applicable within the legal assistance in civil, family and criminal cases.
Thus, according to the Letter, application of the residence certificates for the tax purposes by the residents of the member-countries of the Kishinev Convention is considered to be illegal without the mandatory diplomatic and consular legalization following the procedure established by the Laws of the Republic of Kazakhstan.
Taking into account the point of view of the tax authorities, as set out in the Letter, if taxpayers of Kazakhstan in payment of income to non-residents, who are the residents of the member-countries of the Kishinev Convention, apply provisions of international treaties for the avoidance of double taxation in the form of a reduced tax rate or total exemption from tax on income on the basis of certificates of residence, without diplomatic or consular legalization with consideration of the norms of the Kishinev Convention, this action will lead to a risk of additional corporate income tax withheld at source on the income of non-residents of the Republic of Kazakhstan, with the accrual of fine and application of administrative penalties.
The tax risks arisen due to the above mentioned Letter can be avoided by the diplomatic or consular legalization of the residence certificates according to the tax periods, in which the reduction in the tax rate or exemption from the tax has been applied.
In our opinion, to reduce the risks, one may prepare the body of evidence regarding the legal application of the Kishinev Convention, including consideration of the previous clarifications by the tax authorities and the point of view of the competent bodies of the related member-countries of the Kishinev Convention.
Currently, taking into account the clarifications given by Competent bodies of the member-countries of the Kishinev Convention member-countries, in particular, by the Federal Tax Service of the Russian Federation, the specialists of MinTax Group make an in depth study of formal legal requirements. These requirements are to be met to confirm the residency of the taxpayers who are the residents of the Kishinev Convention member-countries.
If the above stated risks arise, the specialists of MinTax Group will be pleased to discuss the existing situation connected with this issue and provide you with the necessary hands-on assistance in taking measures for their minimization.
The Kishinev Convention member-countries: the Republic of Azerbaijan, the Republic of Armenia, the Republic of Belarus, Georgia, the Republic of Kazakhstan, the Republic of Moldova, Russian Federation, the Republic of Tajikistan, Turkmenistan, the Republic of Uzbekistan, Kyrgyz Republic, Ukraine.
