RoK Law No 61–V ZRK dated 26 December 2012 “Concerning introduction of amendments and additions to certain legislative acts of the RoK related to taxation issues” (hereinafter – the “Law”), with a view to clarifying and improving certain RoK tax legislation standards, introduced the following amendments to the RoK Code “On Taxes and Other Obligatory Payments to the Budget” (Tax Code) dated 10 December 2008, which. in our opinion, are significant:
Item 1 of Article 14 of the Tax code was supplemented by sub-item 8), according to which, due to cancelling item 3 of Article 276-15 of Tax code, to ensure control over the goods temporarily imported/exported from/to RoK territory from/to the territory of member states of the Customs Union, RoK taxpayers shall have an additional obligation to notify tax authorities about the facts of the mentioned temporary import/export of goods following the procedure established by the RoK Government.
Thus, the procedure and conditions for exemption of temporary import from import VAT which were effective prior to cancellation, are replaced with a notification procedure. Temporary import of goods from the member states of the Customs Union shall not be regarded as taxable import.
Article 34 of Tax code is set out in a new wording, which states that:
“Payment of tax arrears shall be carried out according to the following sequence:
1) arrears amount;
2) assessed fines;
3) penalties amount”.
Articles 47, 48, 51-1 and 52 of Tax code contain the following amendments and additions:
The extension of deadlines for payment of taxes, other obligatory payments to the budget and/or penalties, additionally charged and stated in the notice of the results of a tax audit, conditions (including the consent to an additional assessment) and the procedure for such extension.
The extension shall be granted by a tax body superior to the tax body with which a taxpayer is registered at the place of his location, on the basis of a taxpayer’s application.
The deadline for the fulfilment of liabilities may be extended to 36 calendar months. The payment is made on a monthly basis in equal instalments during the effective period of the extension resolution.
A new wording of item 2 Article 57 of Tax code was introduced, which implies the following definition of the “accruals method” concept, so as to match it with the “sale” term, as well as more correspondence with recognizing transactions and other events in the accounting records:
“Accruals method” is a method of accounting whereby the results of transactions and other events shall be recognized as they occur, including from the date when work is performed, services are provided and goods are shipped and transferred to a buyer or his agent for the purpose of realization or booking of assets, rather than from the date of receipt or payment of cash or cash equivalents”.
Item 3 of Article 59 and item 1 of Article 60 of Tax code contains changed requirements to preparation and storage of accounting documents and to tax accounting policies (TAP).
In particular, in connection with introduction of provisions concerning invoices issued electronically, concerning an information system of electronic invoices, item 3 of Article 59 of the Tax code was supplemented with a clause which excludes a requirement to present invoices on a paper carrier, if they were registered in the mentioned information system. The above clauses are put into effect from January 1, 2014.
Item 1 of Article 60 of Tax code contains an additional requirement to TAP. It prescribes to specify the maximum number of digits used for numbering invoices upon their issue.
Item 2 of Article 85 of Tax code is set out in a new wording, according to which revenue recognition should be brought in compliance with its reflection in the accounting records, with the exception of cases when the procedure for revenue recognition is established by provisions of the Tax code:
“Unless otherwise is established by the Tax code, recognition of income for CIT purposes including the date of its recognition, shall be performed in compliance with international financial reporting standards (IFRS) and requirements of RoK legislation on accounting and financial reporting.
In case where recognition of income in accordance with IFRS and requirements of the legislation of the Republic of Kazakhstan on accounting and financial reporting differs from the procedure for determination and recognition of income in accordance with Tax Code, the indicated income shall be accounted for purposes of taxation one time, following the procedure established by the Tax code.
At that, additions concerning the date of income recognition were introduced to Articles 87, 89, 90, 91, 92, 94 and 96 of the Tax code.
Item 16-1 of Article 100 and sub-item 3) of item 3 of Article 231 of Tax code are set out in a new wording, in respect of cost deduction for CIT assessment purposes and the absence of taxable turnover on value-added tax (VAT) with respect to items transferred free of charge for advertising purposes, in particular:
the value of a unit of goods transferred free of charge for advertising purposes (incl. donations) has been increased from 2 times monthly reference index (MRI) to 5 times MRI:
– subject to deduction in a tax period in which the goods were transferred – item 16-1 of Article 100 of Tax code;
– not deemed as a sales turnover – sub-item 3) of item 3 of Article 231 of Tax code.
Article 102 of Tax code is set out in a new wording
In particular, it specifies expenses regarded as representation expenses which are subject to deduction. The list of items not regarded as representation expenses has been extended and included:
– expenses for accommodation of invited persons;
– issuing visas for such persons;
– expenses not regarded as expenses for provision of transport to persons, participating in representation events;
– expenses for travel by railway, marine and air transport of persons participating in representation events.
The list of documents confirming representation expenses has been determined.
The procedure for determining the maximum limit for deducting representation expenses has been specified.
Item 1 of Article 103 of Tax code is set out in a new wording
In particular, the paragraph specifies the procedure for determining the amount of interests subject to deduction, depending on the interest recognition and payment:
“The interest amount shall be equal to an interest recognized in accordance with this paragraph, which was paid:
1) in the reporting tax period within the limits of amount of interests recognized as expenses within the reporting tax period and (or) tax periods preceding to the reporting tax period;
2) in tax periods preceding to the reporting tax period within the limits of amount of interests recognized as expenses within the reporting tax period”.
Significant amendments were introduced to the Tax code on issues related to taxation of subsurface users, namely:
Item 1 of Article 12 of Tax code was supplemented by sub-paragraph 17-1), specifying definition of the term “subsurface use contract”:
Definition of the “subsurface use contract” was introduced in accordance with the Law on Subsurface and Subsurface Use, specifying that for Tax code purposes, the subsurface use contract shall also mean other types of subsurface use rights granted in accordance with RoK legislation (Article 35 of the Law on Subsurface and Subsurface Use).
Items were excluded which are related to fulfilment of liabilities on the Tax on Production of Useful Minerals (TPUM) when extracting underground waters on the basis of permits for their extraction for own needs.
Item 3 of Article 46 of Tax code is set out in a new wording, whereby the limitation period for the assessment or review by tax authorities of CIT assessed and calculated by taxpayers performing operations in accordance with subsurface use contracts, in respect of deductions of expenses for liquidation of consequences of deposits development and related adjustment of aggregate annual income in accordance with Articles 94 and 107 of the Tax code is established the same as for the assessment and review of the amount of Excess profits tax (EPT) – within the effective period of the contract and 5 years after expiry of the contract.
Article 46 of Tax code was supplemented by paragraphs 6-1 and 10, in respect of limitation periods on expenses for training of persons who are not employees of a subsurface user and in the event of a tax audit on transfer pricing, namely:
1) as per paragraph 6-1, a taxpayer, tax authority shall have the right to review the amount of CIT on training of non-employees in connection with a review of taxable income adjustment performed in accordance with sub-item 3) of item 1 of Article 133 of Tax code, – within the period of an individual’s training and 5 years after completion of training;
2) as per paragraph 10, the limitation period in the event of a tax audit on transfer pricing issues shall be suspended – if any inquiries were sent – for the period necessary for sending inquiries and receiving documents and/or information thereon. The total limitation period in this case should not exceed 7 years.
Sub-item 3) of item 1 of Article 133 of Tax code was supplemented by the following clauses:
It specifies cases when taxable income is not reduced in respect of costs of training a natural person who is not in employment relations with the taxpayer provided that an agreement is concluded with the individual on his obligation to work out with the taxpayer for a period not less than three years. Such cases, in addition to non-fulfilment of obligations to conclude such agreement, as well as failure to work with the taxpayer for 3 years, also include costs of a subsurface user for the training of Kazakhstan employees under the subsurface use contracts , which are subject to deduction according to Article 112 of the Tax code.
It provides for reduction of taxable income to 50% of actually incurred expenses for the performance of work, which were recognized as scientific research, scientific-technical and(or) experimental design according to a conclusion of an authorized body in the sphere of science. The list of works is approved by the RoK Government.
Item 1 of Article 111 of Tax code is set out in a new wording, item 2 of this Article was supplemented by adding sub-item 3), namely:
It introduces a number of clarifying adjustments put into effect from 1 January 2009, except for the last adjustment stated below:
items included/not included in expenses for the fixed assets (FA) and intangible assets (IA), referred to deductions as expenses for geological study, preliminary operations to production and other deductions of subsurface users;
– concerning including expenses (except for FA and IA expenses) to a separate group as per Article 111 of Tax code within the standard limits for referring such expenses to deductions on CIT;
– concerning determining the production date after commercial discovery for contracts on combined exploration and extraction, on which mineral reserves are recorded in the balance sheet and confirmed by the State Committee on Reserves of the RoK, – which also includes reserves requiring additional geological study and geological-economical revaluation;
– concerning the procedure for deduction of expenses for dry (non-productive) wells;
– concerning reduction of expenses accrued as per Article 111 of Tax code by the amount of income from the sale of the complete subsurface use right or a part thereof.
From January 1, 2009, Article 111-1 was introduced to the Tax code, in respect of deduction of expenses for preliminary operations to production of uranium
In particular, expenses for preparation of operational blocks (polygons) for the production of uranium by drillhole in-situ leaching method actually incurred by a subsurface user during the period from the start of production after commercial discovery, shall form a separate group of depreciable assets. The list of such expenses shall be stipulated by a subsurface use contract.
The Article sets the procedure for the calculation of depreciation charges on such expenses and forming a value balance of this separate group of expenses including year 2009.
Sub-item 1-1) of item 2 of Article 116 of Tax code, concerning determining fixed assets (FA) and assets not regarded as fixed, from January 1, 2009 was set out in a new wording, namely:
Sub-item 1-1) was divided in two parts, in order to avoid inaccurate interpretations. Biological assets and investments to real estate on which depreciation is not charged due to such assets’ being recorded at fair value in accordance with IFRS and requirements of legislation on accounting and financial reporting have been excluded from Fixed Assets.
Due to introduction of Article 111-1 to the Tax code, concerning capitalization of expenses for preliminary operations to production of uranium, item 2 of Article 116 was supplemented by sub-item 14).
Article 94 of the Tax code was set out in a new wording (from January 1, 2009)
It states that income from the excess of assessments to the fund for liquidation of consequences of deposits development over the amount of actual expenses for liquidation of consequences of deposits development shall be determined for the entire effective period of the subsurface use contract in the CIT declaration for the tax period in which the contract ceased to be effective.
Income determined using this method shall be reduced by the amount of adjustment of the aggregate annual income (AAI), made by a subsurface user during the effective period of the subsurface use contract in accordance with Article 107 of Tax code in connection with a misuse of the liquidation fund by a subsurface user.
Articles 133, 137, 156, 193 and 200-1 of the Tax code introduced amendments in respect of reducing tax liabilities on taxable items related to subsurface users
The limit of subsurface users’ assets among assets of a legal entity, whose shares are being sold or assets of a consortium were reduced to 50% and less (formerly less than 50%) for the application of:
- reduction of taxable income by the amount of income from capital gain on the sale of shares, interests in a legal entity or consortium (hereinafter – “sale of shares and interests”), reduced by the losses resulting from the sale of shares and interests – sub-item 6) of item 2 of Article 133 of Tax code;
- compensation of losses from the sale of shares and interests at the expense of income from capital gain upon their sale – item 3 of Article 137 of Tax code;
- exclusion of income in the form of dividends and capital gain resulting from selling shares and interests from individuals’ income subject to taxation – sub-items 7) and 15) of item 1 of Article 156 of Tax code;
- exemption from taxes of non-residents’ income, including income of individuals in the form of dividends and capital gain resulting from selling shares and interests – sub-items 3) and 7) of item 5 of Article 193, sub-items 4) and 8) item 1 of Article 200-1 of Tax code.
Items 8 – 10 of Article 310 of Tax code introduced amendments in respect of the principles for keeping separate tax records on subsurface use contracts, namely:
From January 1, 2009
1) clarified provisions related to separate tax accounting of exchange differences when performing contractual operations. Prescribed separate tax accounting of exchange differences between contracts and non-contractual activities by direct cause-effect relation. Only if there is no possibility to apply such a procedure for accounting of exchange differences, the allocation of a total (balanced) exchange difference result shall be applied using the methods established by item 9 of Article 310 of Tax code;
2) in respect of the methods for keeping separate tax records by the ratio of direct income, direct expenses it was clarified that such ratio is determined in relation to the total amount of direct income, direct expenses;
3) it was determined that income from contractual activity from the sale of produced petroleum and/or mineral raw materials shall be determined according to the principles of Article 86 of Tax code, but not less than actual production cost as per IFRS principles;
4) it was specified that AAI on non-contractual activity when produced petroleum and mineral raw materials are transferred for processing and/or using for own production needs shall be determined as an amount equal to a positive difference between actually received income from the sale of products obtained as a result of such subsequent processing, and the amount of income included in AAI on contractual activity of subsurface users calculated on the basis of the actual production cost as per IFRS principles, increased by 20 percent.
Article 312, item 5 of Article 314 and Article 315 of Tax code.
From January 1, 2014:
1) prescribed payment of a subscription bonus when contractual territory is expanded. Payment shall be made within thirty calendar days from the date when amendments on such expansion have been introduced to the subsurface use contract, following the procedure established by the legislation;
2) established the procedure for determining the amount of subscription bonus upon expansion of the contractual territory when in the expanded contractual territory:
а) mineral reserves have been approved;
а) mineral reserves have not been approved.
Article 319 of Tax code is set out in a new wording:
Clarified the procedure for determining items liable to commercial discovery bonus (CDB) depending on the date of signing subsurface use contracts (up to 2009 and from January 1, 2009) and the types of contracts:
1) for production contracts concluded after January 1, 2009 on the basis of exploration contracts the taxable item shall be determined upon each commercial discovery:
а) within the framework of an exploration contract;
b) in the event of additional exploration, as a positive difference between the amount of approved reserves and the previous amount of approved reserves on which CDB has been paid;
2) for production contracts signed after January 1, 2009 for which reserves are recorded in the state balance sheet and were confirmed by a conclusion of the RoK State Committee on Reserves as at the date of the contract signature, the taxable item shall be determined upon each commercial discovery:
a) in the event of additional exploration, as a positive difference between the amount of approved reserves and the amount of the said reserves on the signature date of the contract;
b) in the event of additional exploration, as a positive difference between the amount of approved reserves and the previous amount of approved reserves on which CDB has been paid;
3) for production contracts signed before January 1, 2009 for which reserves are recorded in the state balance sheet and were confirmed by a conclusion of the RoK State Committee on Reserves as at the date of the contract signature, the taxable item shall be determined upon each commercial discovery:
a) in the event of additional exploration, as a positive difference between the amount of approved reserves and the amount of the said reserves as at January 1, 2009;
б) in the event of additional exploration, as a positive difference between the amount of approved reserves and the previous amount of approved reserves on which CDB has been paid;
4) for the contracts on combined exploration and production, the taxable item shall be determined upon each commercial discovery announced by a subsurface user on the contractual territory, including discovery in the course of additional exploration of deposits, as a positive difference between the physical volume of approved mineral reserves and the previous approved physical volume of mineral reserves on which CDB has been paid.
In respect of international taxation, the following amendments have been introduced to the Tax code:
Sub-item 5) of item 1 of Article 191 of Tax code was removed, which prescribed to create a permanent establishment (PE) of non-residents in case they are doing business in RoK territory, regardless of the period of doing such business: “5) any place where equipment is installed, assembled, adjusted and commissioned. At that, PE shall be created in the event of performing at least one of the types of activity listed in this sub-item , with subsequent servicing of such equipment;”.
Starting from January 1, 2013 the following shall not be considered as income from RoK sources:
- income from the provision of services provided to a structural unit of the RoK resident located outside RoK borders, in respect of opening and maintenance of bank accounts, transfer, cash transactions, organization of exchange transactions with foreign currency, collection of payment documents – new wording of sub-item 3) of item 1 of Article 192 of Tax code;
- actual expenses for the rent of apartments within RoK borders, incurred for members of an administrative body (Board of Directors or other body) in connection with their fulfilment of administrative duties assigned to them – the new wording of sub-item 2) item 2 of Article 192 of Tax code.
Sub-item 6) of item 6 of Article 198 and Article 208 of the Tax code are set out in a new wording:
In particular, it clarifies that a non-resident legal entity (the Non-resident) shall not be entitled to recognize as PE deductions its managerial and general administrative expenses (MGAE), which are not related to his activities in RoK performed through PE.
However, the new wording of Article 208 of the Tax code, in accordance with provisions of Double Tax Treaties, allows to deduct MGAE incurred by the Non-resident within or outside RoK using one of the selected methods (proportional distribution of expenses or direct allocation of expenses).
It clarifies that MGAE incurred by the Non-resident’s PE in RoK shall be referred to deductions in accordance with Articles 100 – 111, 111-1, 112 – 122 of Tax code and shall not be included in distributable MGAE of the Non-resident, if the method of proportional distribution of MGAE is used.
The Item clarifies issues related to information that is to be reflected in the Non-resident’s financial statements in respect of MGAE and their breakdown.
In respect of VAT, the following amendments were introduced to the Tax code:
Article 230 of the Tax code was supplemented by a new item 1-1, regarding determining taxable turnover of a foreign subdivision of a resident legal entity:
“1-1. Sales turnover of goods, work, services of a structural unit of a resident legal entity registered as a permanent establishment in the territory of a foreign country for which RoK is not recognized as a place of sale, shall not be considered as a sales turnover of a legal entity – VAT payer in the RoK”.
Sub-item 2 of item 3 and item 3-1 of Article 237 of the Tax code concerning the date of commission of a sales turnover of goods upon export in the export customs procedure and upon import in the re-import customs procedure were set out in a new wording:
It clarifies issues related to determining the date of committing the sales turnover when goods are exported under the export customs procedure (sub-item 2) of item 3) and when goods are imported under the reimport customs procedure, which were previously exported under the export customs procedure (sub-item 2) of item 3-1), in accordance with provisions of the current RoK Code “On Customs Business in RoK”:
– such date, in the event of export under the export customs procedure using the periodic or temporary declaration of goods, shall be the date when customs authorities registered the complete declaration for the goods (it removes uncertainties re. determining the date of customs declaration of the complete declaration and the date of issuing the declaration).
Article 238 of the Tax code was extended by adding item 2-1), in respect of the size of taxable turnover of work performed, services provided free of charge
“2-1) Unless otherwise established by Article 238 of the Tax code, the size of taxable turnover of work performed, services provided free of charge shall be determined on the basis of the value of goods, work, services used for the performance of such work, services, which were acquired with VAT taken as offset.
At that, FA value to be included in the taxable turnover, if FA were granted for use at no charge, shall be determined according to the formula: VFA=(VATacq/ULP)*(Ta)/(VAT%), where:
VFA – value of Fixed assets included in the turnover when FA are transferred for use at no charge;
VAT acq – VAT taken as offset on acquisition of Fixed assets;
ULP – useful life period of FA in accordance with IFRS and RoK legislation on accounting and financial reporting, in calendar months;
Тa – actual number of months of use falling on the reporting tax period;
VAT % – VAT rate on the date when FA were transferred for use.”.
In Article 241 of Tax code, item 4 is set out in a new wording, item 6 was extended by adding sub-item 4), namely:
– according to item 4 of Article 241 – the payment deadline for VAT for non-residents shall be changed from “not later than the 15-th of the second month following the reporting tax period” to “not later than the 25-th of the second month following the reporting tax period”.
– item 6 of Article 241 was extended by adding sub-item 4), which provides for non-application of Article 241 of Tax code and absence of non-resident VAT liabilities, in cases when the value of goods, work, services stated in item 1 of Article 241 of Tax code was included in the size of taxable import determined in accordance with Article 276-8 of Tax code, whereby VAT on goods imported from member states of the Customs union was paid to RoK budget and is not subject to refund under Chapter 37-1 of the Tax code.
In Article 248 of Tax code amendments were made in sub-item 10) and the new sub-item 23) was introduced:
The list of work and services associated with carriages which are deemed to be international in accordance with Articles 244 and 276-12 of Tax code, sales turnovers of which are exempted from VAT, was extended by adding services of wagon (container) operators.
For the purposes of VAT section, services of wagon (container) operators shall mean the following services provided by them in complex, for the purposes of organizing carriage of shipments and provided by a wagon (container) operator indicated in the shipment document as a participant of the transportation process:
1) preparing a plan for granting wagons (containers) for usage and its coordination between the participants of transportation process;
2) granting wagons (containers) for usage;
3) scheduling by means of centralized operative control and remote management of the actual traffic of loaded and empty wagons (containers).
The list of turnovers exempted from VAT was extended by turnovers related to sale of scrap and waste of ferrous and non-ferrous metals.
Sub-items 1) and 2) of item 1 of Article 249 of Tax code are set out in a new wording (concerning turnovers related to residential premises both exempted and not exempted from VAT):
Sub-items 1) and 2) of item 1 clarified the accommodation services which, should they imply the use of sold or leased residential buildings (part of a building) will result in non-application of VAT exemption in relation to such sale or lease turnovers.
An exclusion was introduced for VAT exemption of turnovers related to sale or lease of a part of a residential building comprised of non-residential premises only. Corresponding amendments were introduced to Article 256 of the Tax code (item 3-3), to Article 257 of Tax code (item 1-1).
Clarifying adjustments were introduced to Article 256 of the Tax code:
- paragraph one of item 1 is set out in a new wording, sub-item 1) of item 1 of Article 256 of Tax code was removed, in this regard, the right to offset VAT by a recipient of goods, work, services – VAT payer was excluded from the offset conditions and shall be regulated by sub-item 1) of item 1 of Article 228 of Tax code;
- the wording of sub-item 2) item 1 of Article 256 of Tax code was clarified, in order to avoid any misinterpretation that VAT is taken as offset on goods, work, services sold in RoK territory or that a supplier issues an invoice or another document upon such sale;
- separated conditions for taking VAT as offset when importing goods from the states that are not members of the Customs Union and member states of the Customs Union;
- the document confirming the right to offset VAT on carriage services using air transport shall be a boarding pass or a document confirming the fact of travel on air transport, issued by a carrier – sub-item 8) item 2 of Article 256 of Tax code;
- item 3-3 was introduced which stipulates the procedure for determining the amount of VAT taken as offset for construction companies in the event of selling a part of a residential building consisting of non-residential premises.
The following amendments were introduced to Article 257 of Tax code in respect of VAT not subject to offset
The taxpayer shall not be entitled to offset VAT on goods, work, services indicated in an invoice, which were paid for by cash including VAT, regardless of the payment intervals, in the amount exceeding 1,000 times MRI established by the law on the Republican budget and effective on the date of issuing the invoice. VAT amount on such invoices shall be included in the cost of purchased goods, work, services.
In Article 258 of Tax Code:
The wording of item 4 was clarified with a view to determining the size of adjustment of VAT taken as offset:
1) in respect of inventories, with the exception of items indicated in item 4-1 of Article 258 of Tax code, – in the amount equal to VAT size determined by applying the VAT rate effective on the date of adjustment to the book value of inventories on that date;
2) in respect of purchased FA, IA and biological assets, investments to real estate, unfinished construction items – equal to VAT size determined by applying the VAT rate effective on the date of purchasing the mentioned assets to their book value on the date of adjustment without taking into account any revaluation and impairment.
Article 258 of Tax code was extended by adding item 4-1, which established the procedure for determining the size of VAT adjustment in respect of constructed (created) FA, IA, investments to real estate.
The new item 4-2 of Article 258 of Tax code determines the size of VAT offset adjustment in cases of goods return, changes in transactions’ terms, price changes and in other cases specified in item 2 of Article 239 of Tax code.
A number of clarifying adjustments was introduced to Articles 263 and 264 of the Tax code:
- in connection with introduction of electronic invoices from January 1, 2014 they contain some clauses concerning the procedure for issuing electronic invoices, date of their issue – items 1-1 and 1-2, sub-item 2) item 5, items 7, 8, 9, 13 and 14. All these adjustments are also enacted from January 1, 2014;
- on mandatory requisites which must be indicated in invoices (non-fulfilment results in VAT being eliminated from offset): address of the supplier and buyer – it is prescribed to specify their place of location (legal address); it is prescribed to indicate not only the number but also the series of the certificate of a supplier-VAT payer; the procedure for indicating information in invoices if the supplier or recipient is a legal entity or a structural unit of a legal entity;
- in respect of signing the invoice by an employee duly authorized by the taxpayer’s order;
- in respect of the chief accountant’s signature on the invoice being replaced with the phrase “not available”, if, under the RoK law on accounting and financial reporting and the accounting policy, the accounts are maintained by the director or individual entrepreneur;
- issues related to the invoice currency are specified – the amount shall be indicated in the national currency, additionally (in the event of a foreign trade transaction or in other cases established by RoK law) the amount may be indicated in foreign currency;
- in the event of services related to carriage of passengers by air transport, the service recipient has the right to address to the supplier and the supplier is obliged to present the recipient with a proof of the trip:
– in the form of a document confirming the fact of transit;
– or an invoice, also item 16-1 prescribes the procedure for issuing such an invoice.
A number of clarifying amendments was introduced in respect of specific features related to issuing invoices by freight forwarders – Article 264 of Tax code.
In Article 270 and sub-item 1) of item 2 of Article 274 of Tax code:
Starting from January 1, 2014 some clauses will be enacted which were introduced to Article 270 of Tax code in respect of invoices registers.
The amendment to sub-item 1) item 2 of Article 274 of Tax code states that a simplified refund procedure shall be applied to VAT excess in the amount not exceeding 70 percent of the amount of VAT excess formed in the reporting tax period.
Some clarifications were introduced to Article 276-6 of Tax code starting from January 1, 2013:
1) the date of crossing the state border of RoK may be determined not only on the basis of an original coupon on passing the state control, but also a copy of the coupon on passing the state control, issued by territorial subdivisions of the Frontier Service of the RoK National Security Committee.
2) for the goods dispatched to RoK from the Russian Federation and/or Republic of Belarus in international postings, the date of crossing the RoK state border shall be determined according to the date of a postage stamp affixed in RoK territory in accordance with RoK legislation on postage service.
Starting from January 1, 2013 Article 276-8 of Tax code established the following:
1) the single principle for determining the size of taxable import (STI) for the goods imported from member states of the Customs Union – based on the value of purchased goods;
2) the value of purchased goods is determined according to a transaction price to be paid for the goods under the terms of the agreement (contract). If, under the terms of a contract (agreement) the transaction price comprises the value of purchased goods and other expenses, then other expenses shall be excluded from STI if they are indicated separately;
3) STI adjustment shall be made only according to the procedure established by RoK Government and/or under the legislation on transfer pricing. The taxpayer has the right to perform the adjustment independently based on the above requirements.
Article 276-15 of Tax code in respect of turnovers and imports exempted from VAT in the Customs Union:
From January 1, 2013:
1) introduced the exemption of goods imported within the framework of warranty service stipulated by the contract (agreement);
2) cancelled the collection of VAT in the event of temporary import of goods from the territory of member states of the Customs Union to RoK, accordingly, there is no need to comply with requirements previously applied for VAT exemption of temporary imports.
In the meantime, sub-item 8) of item 1 of Article 14 of Tax code was extended by adding an obligation of taxpayers carrying out temporary imports of goods from the member states of the Customs Union, to notify tax authorities about the mentioned temporary import/export of goods, according to the procedure set by RoK Government.
Article 276-23 of Tax code in respect of the procedure for the adjustment of VAT paid upon import of goods
Starting from January 1, 2013:
1) introduced clarification amendments concerning the procedure for presentation and reflection of information on goods in the indirect taxes declaration and application in case of a complete or partial refund before expiry of the deadline for submission of the declaration and application;
2) simplified the procedure for confirming the goods return due to improper quality and/or incompleteness. Instead of three documents to be presented by January 1, 2013 it introduces the document agreed between the exporter taxpayer and importer taxpayer, which contains information concerning the volume of imported goods subject to return due to improper quality and (or) incompleteness.
Article 387 of Tax code, in respect of adjusting the basic rates of Land Tax
Expanded the list of taxpayers whose land parcels are subject to adjustment of basic tax rates, as follows:
– a zero coefficient shall be applied to corresponding land tax rates when calculating the Land tax on land parcels used for implementation of an investment strategic project provided for by the list approved by RoK Government.
– 0.1 coefficient shall be applied to corresponding Land tax rates by techno parks when calculating the Land tax on land parcels allocated for the performance of the main activity provided for by the RoK legislative act concerning the state support of the industrial-innovation activities
Article 433 of Tax code, in respect of conditions for applying the simplified declaration
Changed the maximum income under the special tax regime on the basis of a simplified declaration:
1) for individual entrepreneurs – 1,400 times the minimum wage for six months
2) for legal entities – 2,800 times the minimum wage for six months.
The new Article 37-1 was introduced, establishing the simplified procedure for liquidation of legal entities.
Liquidation of certain categories of legal entities may be performed according to a simplified procedure without carrying out a documentary tax audit. In order that this procedure could be applied, the taxpayer should not be a VAT payer or legal entity agricultural producer, nor should it be reorganized or be a legal successor of a reorganized legal entity, nor should be included in the schedule of tax audits for the current year.
If these conditions are met, on the basis of a tax application and liquidation tax reporting of a taxpayer, tax authorities shall send inquiries to respective state bodies and banks asking to provide information on transactions performed by a taxpayer for the period not exceeding the limitation period.
On receipt of answers, on the basis of an in-house control, tax authorities shall prepare a report, and, if the taxpayer has no tax arrears, on the basis of a liquidation balance sheet and banks’ certificate, shall send information on absence (presence) of tax arrears, debt on mandatory pension charges and social assessments in respect of the liquidated legal entity to a state body responsible for state registration and liquidation of legal entities. Based on this information, the Justice Department shall remove the taxpayer from the State Register of Legal Entities.
Special mechanisms are introduced for compulsory liquidation of inactive taxpayers that lost connection with tax authorities and do not submit tax reporting.
The Law also introduced amendments to a number of legislative acts, in particular, to: RoK Civil Code, RoK Code on Administrative Offences, RoK Budget Code, RoK Code “On Customs Business in RoK”, Law “On Accounting and Financial Reporting”, Law “On Pension Provisioning in RoK”, Law “On Insurance Activity” , Law “On Mandatory Social Insurance”, Law “On National Registers of Identification Numbers”, Law “On State Purchases”, etc.