This article addresses issues that often come from taxpayers in relation to the right of a resident legal entity of the RoK[1] which has structural divisions in various regions of the RoK.

Based on the normal practice of activities of legal entities-residents of the RoK having structural units (branches) in various regions of the RoK (hereinafter – the “Head Company”), situations may frequently occur when regional state revenue bodies recommend that a structural unit (branch) be re-registered in the region different from the one in which the Parent company was registered, referring to the fact that income of the Parent company is generated in the region recommended by them, where the structural unit is located.

Below we will consider legal regulations governing the above issues in relation to the fulfillment of tax obligations by the Head company which has structural units (branches) in various regions of the RoK in respect of CIT[2].

According to sub-paragraph 26) of Article 1 of the Tax Code[3], a structural unit of a legal entity (Head company) is understood to mean a branch or representative office.

In accordance with paragraph 5 of Article 74 of the Tax Code, the maintenance of taxpayer registration records shall comprise a taxpayer registration, making amendments and (or) additions to taxpayer registration data, and removal of a taxpayer from a corresponding registration account.

According to sub-paragraph 4) of paragraph 7 of Article 74 of the Tax Code, for tax purposes, the location of a resident legal entity, its structural unit, structural unit of a non-resident legal entity shall be the location of its permanently operating body entered in the National Register of Business Identification Numbers (BIN).

According to paragraph 1 of Article 222 of the Tax Code, CIT payers are resident legal entities of the RoK, with the exception of public institutions and public educational institutions of secondary education, as well as non-resident legal entities operating in the RoK through a permanent establishment or earning income from sources in the RoK.

In the meantime, in accordance with paragraph 1 of Article 306 of the Tax Code, taxpayers shall pay CIT assessed in accordance with Article 302 of the Tax Code, at their location.

In accordance with sub-paragraph 2) of paragraph 1 of Article 82 of the Tax Code, resident legal entities (Head company), with the exception of structural units of resident legal entities shall be subject to mandatory VAT[4] registration.

At that, in accordance with sub-paragraphs 1) and 2) of Article 425 of the Tax Code, VAT shall be payable to the budget at the location of the taxpayer within the following deadlines:

• not later than the 25th day of the second month following the reporting tax period – the amount of VAT payable to the budget for each tax period, as well as VAT assessed for a non-resident, with the exception of VAT specified in sub-paragraphs 2) and 3) of the first part of Article 82 of the Tax Code;
• within deadlines determined by the customs legislation of the RoK – the amount of VAT on imported goods;

Thus, considering that payment of CIT and VAT must be effected by the taxpayer (Head company) at its location, there will be no tax risks related to CIT and VAT in connection with their being assessed and paid by the Head company at the place of its registration, e.g. in Almaty.

The Tax Code does not contain any requirement for mandatory registration as an independent taxpayer for CIT and VAT in respect of branches that are structural units of a resident legal entity.

Therefore, regardless of which branch and in which region generates income to be included in the aggregate annual income of the Head company, there is no obligation to register the location of the branch as the location of the resident legal entity.

Thus, CIT and VAT must be assessed and paid in the aggregate for the operations of the resident legal entity of the RoK which is a payer of CIT and VAT, at the place where the Head company is registered.

This material is subject to copyright. Reprinting and other use is prohibited by the copyright holder. This material expresses the author’s opinion and is a recommendation. This material is based on regulatory acts in force at the time of publication.

[1] Republic of Kazakhstan.

[2] Corporate Income Tax.

[3] Code of the Republic of Kazakhstan No 120-VI dated 25 December 2017 “On Taxes and Other Obligatory Payments to the  Budget (Tax Code)”

[4] Value Added Tax.