On 25 December 2017 the new Tax code was adopted, which introduces a lot of innovations and significantly expands issues related to individuals taxation which is quite logical in the context of the country’s preparing to the universal declaration of population to be introduced from 1 January 2020. Also, RK Law #121-VI ZRK “On enactment of RK Code “On Taxes and Other Obligatory Payments to the Budget (Tax Code)” was signed on the same date.
The new Kazakhstan’s Tax Code introduces concepts that are related to strengthening the government’s tax control over the property and property interests of citizens outside the country.
In addition to other cases, according to sub-paragraph 4) of paragraph 1 of Article 363 of RK Tax code, PIT declaration shall be submitted by the following resident taxpayers:
4) individuals who received income from sources outside the RK; … 12) citizens of the RK, oralmans and persons who have a residence permit in the RK, who have the following property on the right of ownership as of 31 December of the reporting tax period:
…interest in the authorized capital of a legal entity registered outside the RK.
The annual income of an individual shall comprise the total profit of controlled foreign companies (CFC) or permanent establishments of CFC determined in accordance with Article 340 of the RK Tax Code (sub-paragraph 18) of Article 321 of the RK Tax Code).
What is recognized as CFC in the RK Tax Code: CFC shall be recognized to mean a person who simultaneously meets the following conditions (paragraph 1 of Article 294 of the RK Tax Code):
1) such person is one of the following:
non-resident legal entity;
other foreign form of entrepreneurial activity without creating a legal entity (hereinafter – other organisation form);
2) such person meets one of the following conditions:
25 or more percent participation interest (voting shares) in the entity directly or indirectly, or constructively belong to a legal entity or an individual who is a resident of the RK;
the person is connected with the resident by means of control (in case the resident has direct or indirect, or constructive control over the person);
3) such person meets one of the following conditions:
the effective income tax rate of a non-resident legal entity or other form of organization determined in accordance with sub-paragraph 2) of paragraph 4 of Article 294 of the RK Tax Code is less than 10 percent;
a non-resident legal entity or other form of organization are registered or a constituent document (the document of establishment) whereof is registered, or a participant entrusted with keeping records of income and expenses or managing assets for that other form of organization is registered in a state with preferential taxation.
For the purposes of CFC definition, the concept of “control” is defined in accordance with sub-paragraph 3) of paragraph 4 of Article 294 of the RK Tax Code: control means control defined in accordance with International Financial Reporting Standards (IFRS) or other internationally accepted financial reporting standards adopted by stock exchanges to admit securities to trading.

According to paragraph 3 of Article 294 of the RK Tax Code, a state with preferential taxation is a foreign state or territory that meets one of the following conditions:
1) income tax rate established in such country or territory is less than 10 percent;
2) such country or territory has laws concerning confidentiality of financial information or laws that allow to observe secrecy in respect of the beneficial owners of property, income or actual owners, participants, founders, shareholders of a legal entity (company).
At the same time, the above provisions of sub-paragraph 2) of the first part of paragraph 3 of Article 294 of the RK Tax Code shall not be applied in relation to a foreign state or territory with which the RK has an international treaty providing for exchange of information between the competent tax authorities, except for a foreign state or territory that do not ensure the exchange of information with an authorized body for tax purposes.
The list of countries with preferential taxation determined in accordance with paragraph 3 of Article 294 of the RK Tax Code is approved by the authorized body.
Also, according to paragraph 4 of Article 294 of the Tax code, there are so-called ‘other concepts’ which are used for the purposes of Chapter 30 (Taxation of CFC profits) and Chapter 32 (Procedure for the calculation and deadlines for the payment of CIT ) of the RK Tax code, including the following:
controlled person is a person that meets one of the following conditions:
the person is connected with the resident by means of control (in case the resident has direct or indirect, or constructive control over the person);
person in which the resident’s participation interest comprises, directly or indirectly, or constructively, more than 50 percent;
person is linked to the resident as a close relative (with regard to a resident individual) and other concepts;
In accordance with paragraph 1 of Article 340 of the RK Tax Code, the total profit of the CFC or permanent establishments of the CFC, calculated taking into account the provisions of Article 340 and Article 297 of the RK Tax Code, shall be included in the annual income of a resident individual and shall be subject to PIT in the RK.
That total profit of CFC or permanent establishments of CFC shall be included in the PIT declaration.
According to paragraph 2 of Article 340 of the RK Tax Code, there are also conditions for tax exemption in the RK of the financial profit of the CFC or financial profit of a permanent establishment of a controlled foreign company (for example, if the financial profit of the CFC permanent establishment was subject to profit tax in the state of registration of the CFC that created the permanent establishment, at the effective rate of 10 percent or more, and other conditions). In the meantime, the resident individual must have supporting documents specified in paragraph 2 of Article 296 of RK Tax code.
Also, according to paragraph 3 of Article 340 of the RK Tax Code, a resident individual has the right to reduce the financial profit before taxation of the CFC or financial profit before taxation of the CFC permanent establishment by certain amounts (for example, taxable income of the CFC from entrepreneurial activities performed in Kazakhstan through a branch, representative office, permanent establishment levied by CIT in the RK at a rate of 10 percent or more and other types of income).
In the meantime, the resident individual must have supporting documents specified in paragraph 10 of Article 297 of RK Tax code.
A resident individual is obliged to submit a statement of participation (control) in the CFC following the procedure established by Article 298 of the RK Tax code.
According to paragraph 1 of Article 298 of the RK Tax Code, a resident must submit a statement of participation (control) in the CFC not later than sixty business days following the date of:
1) acquisition, directly or indirectly, or constructively, of 25 and more of participation interest or control of the CFC whether direct, indirect or constructive;
2) establishment (creation) of the CFC;
3) change of participation interests or control in the CFC;
4) cancelling 25 or more percent of participation or control in the CFC;
5) discontinuing (liquidation) of the CFC.
At the same time, a resident who owns directly or indirectly, or constructively, participatory interests or who has direct, indirect, or constructive control in the CFC which were acquired before 1 January 2018, is required to submit a statement of participation (control) in the CFC no later than 31 December 2018.
In subsequent tax periods, the statement of participation (control) in the CFC should be submitted not later than 31 March of the year following the reporting tax period.
The statement of participation (control) in the CFC should be submitted to the tax authority according to the form established by the authorized body