Kazakhstan Crypto Tax

Over the last years, Kazakhstan has shown substantial interest in the digital economy and actively integrated cryptocurrencies and block chain technologies into its financial system. Therefore, new opportunities have opened for foreign investors considering Kazakhstan as a possible jurisdiction for their cryptocurrency business. But still, as for any other country, it is extremely important to understand the local tax regulations. This paper addresses these issues.

Tax policy review

Cryptocurrencies are not considered a legal means of payment in Kazakhstan, but nevertheless actively used in commercial and investment purposes. Tax regulation of cryptocurrencies is still under development in the country, but already there are some norms on the taxation of transactions with crypto-assets.

Taxation of cryptocurrencies

1. Corporate income tax: In case an organization registered in Kazakhstan realizes transactions with cryptocurrencies, proceeds from said transactions constitute corporate income subject to corporate tax at basic rates. In 2021, this rate stands at 20%.
2. VAT: Since cryptocurrencies are neither a good nor a service, deals involving the transfer of cryptocurrencies are released from paying value-added tax.
3. Income tax for individuals: Income from cryptocurrency trading of an individual is also subjected to taxation. The rate depends on the overall income level of the taxpayer.

Regulatory features

Kazakhstani authorities actively develop a favorable regulatory climate for cryptocurrencies and blockchain. In 2020, a law which regulates crypto exchanges and defined legal framework for cryptoasset transactions was adopted.

Kazakstan is interesting in the context of the crypto industry for foreign investors not only by its strategic geographical position but also because of the active development of its regulatory framework. At the same time, potential investors will have to carefully follow local tax legislation and changes to it, so that all cryptocurrency transactions are fully consistent with the requirements of Kazakhstani law.

 Crypto mining tax in Kazakhstan

Due to the natural resources and favorable regulatory environment, Kazakstan is one of the leading players in terms of cryptocurrency production in the world. Along with the development of this industry, the taxation issues related to mining operations become particularly relevant for local as well as foreign investors. In the following article, we wanted to discuss important aspects of the taxation of cryptocurrency mining in Kazakhstan.

Regulatory framework

In 2018, the active development of regulation in respect of cryptocurrencies and mining began in Kazakstani jurisdiction. The main legal framework was articulated in legislative acts, which stated that mining is entrepreneurial activity and shall be subjected to taxation.

Taxation of cryptocurrency mining

Profit tax: Cryptocurrency mining activities conducted by companies are subject to a corporate income tax at the standard corporate income tax rate of 20% in Ireland. Profits are constituted by the difference between the revenue received from the sale of the cryptocurrency and the cost of its production, which includes depreciation of equipment and the cost of electricity. Taxation: Mining companies have the right to particular tax systems which rely on the region of existence and the size of the operation. This can take the form of tax incentives in reduced income tax rates or complete exemptions from some types of taxes.

Electricity tax: One of the main expenses of mining consists in paying for electricity. In 2021, the Government of Kazakhstan introduced an additional tax for miners on the consumption of electricity, the size of which is directly dependent on the volume of consumption and current tariffs.

Value-added tax: Since cryptocurrency mining has not been recognized as a trade, mining activities are also free from paying value-added tax.

Modern development of mining in Kazakhstan faces a lot of challenges, including infrastructure strengthening, stable and affordable energy feeding, and adjustment of the legislation to fast changes in the digital assets market.

Prospects for development

The Kazakh authorities have further pursued an enabling investment climate, especially by revisiting and simplifying the tax system in relation to cryptocurrency mining, things like possible tax holidays and creating special economic zones for miners.

With the government being very active in developing the digital economy, along with its geological position and rich natural resources, Kazakhstan still is a rather promising region for cryptocurrency mining despite some regulatory and infrastructure complications. Foreign investors and companies willing to perform business activities in this field should carefully consider local tax legislation, closely monitoring its changes in order to make operations compliant with the legal requirements.

How to pay taxes in case of buying and selling cryptocurrency in Kazakhstan?

It is possible to buy and sell cryptocurrency in digital asset exchanges of Astana International Financial Centre.

According to Articles 331 and 332 of the Tax Code, property income includes income from the sale of digital assets by individuals. When selling digital assets, regardless of the duration of the ownership period, there is a gain upon disposal. The value gain on the sale of digital assets shall be the positive difference between the sale value and the acquisition cost. Value gain is subject to individual income tax at a rate of 10%.

Every individual must pay taxes in an individual capacity. Filing of an individual income tax return is made upon form 240.00 at the end of the year, and when entering the general declaration-a declaration of income and property in form 270.00.

At the same time, in compliance with paragraph 3 of Article 35 of Entrepreneurial Code, a person not using labour on regular basis has a right not to register as an individual entrepreneur when receiving a property income. Respectively, registration as entrepreneur is not required when acquiring such income.

Corporate income tax in Kazakhstan

As an emerging economy, Kazakstan has a very good business climate to offer to the foreign investors, optimising the taxation for corporate profits. Acquaintance with the corporate tax regime of Kazakhstan will be one of the decisive factors in successful planning of business and investments.

Attention to details of tax legislation and competent tax planning are important constituents of successful commercial activity in the Republic of Kazakhstan. A stable tax policy, together with stimulating factors and transparent regulation, provided the most favourable environment for foreign investors and allowed Kazakhstani business easily to be integrated into the world economy.

Net wealth tax in Kazakhstan

Within the context of global economic trends and practices, the net wealth tax or net wealth tax is part and parcel of the taxation system in a number of countries. In the Republic of Kazakhstan, such tax has its own peculiarities and it is not applied for corporate assets but mainly to the property of individuals.

The net wealth tax in Kazakhstan is an integral part of the country’s taxation system and bears special importance in regard to the taxation of personal property of individuals. Understanding this tax and the respective legislation will, firstly, help individuals and corporate entities to stand within the frames of the law and, secondly, handle their respective tax liabilities with efficiency. Companies, especially those with a large asset base, are advised to pay due care to tax planning and accounting in order to keep their tax burden at an optimal level.

Capital gains tax in Kazakhstan

Capital gains tax is one of the substantial components of the Kazakhstani tax system and a big concern for investment and financial planning not only for domestic but also for foreign investors. This tax is imposed on income from the alienation of assets if the proceeds exceed their original cost. Understanding its features helps to optimize tax liabilities and improve investment returns.

Capital gains tax is of crucial importance for Kazakhstan considering investment decisions and financial planning strategies. Knowledge of the legislation and opportunities for its optimization allows investors to considerably enhance the efficiency of their asset management. Proper understanding and application of tax incentives and exemptions can substantially reduce the tax burden and increase return on investments.

Social Security Tax in Kazakhstan

The social security system is financed through compulsory contributions payable by both employers and employees in Kazakstan. The contribution funds pay not only pensions but also medical insurance and social benefits. Moreover, an appropriate understanding of the structure of these taxes will help the companies to properly dispose of their financial obligations and avoid violations of tax legislation.

Contribution Structure

1. Pension contributions: On the basis of law employers and employees of Kazakhstan are obliged to pay their contributions to the Pension Fund. The rate for employers is 10% of an employee’s salary. Employees’ contribution is 10% of their salary.
2. Mandatory Social Health Insurance (MSHI): Starting from 2020, the system of mandatory social health insurance has been developed and implemented in the Republic of Kazakhstan in order to raise the quality of the provided medical services to a new level. Contributions at the expense of the employer are 2%, while employees contribute 1% of their salary.
3. Social contributions: In addition to this, the employers pay a social contribution of 3.5% from the employee’s salary, a payment for the financing of state benefits with regard to temporary disability and maternity benefits.

It is the responsibility of the employer to deduct appropriate amounts from salary every month and deposit in respective funds. Note, maximum amount of wages for which all contributions are payable is fixed but liable to be reviewed by government quite frequently. Therefore, the contribution is payable on only that portion of salary, which does not exceed limit.

Business benefits

Social security system of Kazakhstan does not provide all obligations for businesses but partly benefits too. Such contributions give a possibility to the enterprise to provide social protection for their employees, which contributes to increased loyalty and labor productivity. Moreover, social contributions can be included in the tax deduction, what could be considered as one more financial incentive for employers.

Social allowance, which also involves taxation in Kazakhstan, plays a very important role in social stability and access to health care and social services for the population. Proper understanding and observance-demand the Servlet: pay respective contributions are crucial for every company that intends to operate successfully and within the law in Kazakhstan. Proper management of these obligations allows not only staying away from possible fines and tax penalties but also builds the positive image of a company as of a reliable and responsible employer.

Value added tax (VAT) in Kazakhstan

Value-added tax-VAT-is one of the main indirect taxes in Kazakhstan, playing a great role in government revenues. Beginning from the goods and services produced or sold to the imported goods, almost everything falls under the circle of this tax. Its estimation and payment mechanism is an urgent issue for all market participants, from large corporations to small businesses.

Tax audits and liability

The tax authorities of Kazakstan actively supervise the execution of tax laws and due payment of VAT. Violations are seriously punished: high fines, administrative, and even criminal liability. That is why proper tax discipline and appropriate enterprise accounting are so important. Presently, the Kazakhstan’s VAT contributes much to finance government expenditures and subsidize social programs. Every company operating in Kazakhstan should track the developments taking place in tax legislation with the aim of compliance observance and optimization of its tax liabilities. Good VAT management not only serves to ensure compliance with the legislation but also raises the efficiency and competitiveness of the enterprise as a whole.

Dividend tax in Kazakhstan

The dividends paid by an organization to its shareholders are subject to taxation in Kazakhstan. The following part of the Tax Code has relevance for both a local and foreign investor who intends to optimize tax liabilities with the aim of securing maximum yield on capitals. A proper understanding of the terms and rates of dividend taxation allows for the proper planning and performance of financial transactions in compliance with the laws of the Republic of Kazakhstan.

Tax rates on dividends

The standard tax rate for dividends is 5% for Kazakhstani residents, which includes all types of dividends received from Kazakhstani companies. Where the paying agent knows the recipient is not a Kazakhstan resident, the tax rate is against the policy of attraction of foreign investors and prevention of tax evasion. 15%, respectively.

Peculiarities of taxation for foreign investors

Foreign investors should note that Kazakhstan has concluded double tax treaties with many countries. These may provide for reduced tax rates on dividends or even their complete exemption, depending on the terms of the bilateral treaty. It is recommended that investors consult with tax advisors to accurately understand the tax implications of this system with regard to their country of residence.

Tax administration and withholding

The companies paying dividends are obliged to withhold tax on dividends at the time of their payment and transfer the withheld amounts to the budget. It simplifies the process of tax collection and minimizes the risks of taxes for the shareholders.

Tax planning, strategies to minimize tax burden

Tax planning is one of the most crucial steps in handling the returns on the investments. Optimising tax liabilities would entail reinvestment of dividends, leveraging the preference treatment, and holding the structure of ownership for the assets with the least amount of tax implications.

If dividends are paid out, there is a great deal of peculiarities while performing the taxation within Kazakhstan, to be considered by local and foreign investors. Taking into account current tax legislation and using opportunities provided by international double tax treaties will allow for optimisation of tax payments in order to increase net investment returns. Regular consultation with tax specialists and legal entities ensures compliance with all requirements and minimizes tax risks.

Personal income tax in Kazakhstan

In Kazakhstan, personal income tax is a structural part of the tax system, which is called upon to carry out such a function as taxing citizens’ and residents’ income. The meaning of this tax is not only great for a taxpayer himself but also for the state budget since directly from here economic behaviour and income distribution depend. Knowledge of the principles of its assessment and payment helps persons subject to taxation plan their finances correctly and comply with the legal requirements accordingly.

Personal income tax rates

Kazakhstan applies progressive income taxation to individuals, with the tax rate increasing in relation to the amount of the receptions. Following are the rates applicable for the year 2021:

• Up to 3 million tenge per year – at a rate of 10;
• Over 3 million tenge – 15%;

These rates apply to all types of income, including wages, business income, interest, dividends and others.

Tax deductions and exemptions

Kazakhstan legislation provides for a number of tax deductions that individuals may utilise to reduce their taxable income. Among them:

• Standard tax deductions for yourself and dependants;
• Social deductions, like education, medical treatment, home purchase, and pension contributions.
• Professional deductions concerning business activities.

Particulars for the non-resident

In Kazakhstan, non-residents pay personal income tax only concerning earnings received within the country. For non-residents, the rate of taxation is 20%, whereas the rates are different in the case of residents.

Payment and administration of the taxes

In Kazakhstan, the personal income tax is withheld from employees by their employer. Employers are obliged under the law to pay withholding tax into the state treasury on a monthly basis. It also imposes a requirement on persons whose sources of income are not liable to withholding locally to file a tax return and pay personal income tax independently.

Personal income tax is the significant and leading role in the tax system of Kazakhstan, providing revenues for the state budget and regulating people’s incomes. The proper understanding and obedience of tax legislation by individuals allow the avoidance of offences and optimisation of tax liabilities. Competent tax planning and utilization of deductions and exemptions provided by law contribute to the improvement of taxpayers’ financial position and contribute to their economic prosperity.

How to pay taxes on crypto in Kazakhstan in 2024 year?

Cryptocurrencies continue to remain in the focus of Kazakhstan tax authorities, reflecting the global trend towards tighter control over financial flows in this rapidly growing area. In 2024, attention should be turned to several important aspects of tax legislation by taxpayers who conduct transactions with cryptocurrencies in order not to incur potential penalties and ensure the legality of financial transactions. This article overviews the main principles of taxation of cryptocurrencies of Kazakhstan and gives recommendations on how one can pay taxes in 2024.

What Is Taxable Income from Cryptocurrencies?

Cryptocurrency trading: Profits from buying and selling are included in ordinary income, which is taxed according to whether you are an individual or a legal entity.

Mining: Revenue from mining any cryptocurrency is similarly taxable and needs to be reported based on your tax status.

Conversions and exchanges: Revenue received from converting cryptocurrencies into fiat money or other cryptocurrencies is considered ordinary personal income tax or income tax rates, based on the status of the taxpayer.

How to Pay My Taxes?

For Individuals

Individuals are to declare revenues received from cryptocurrencies as part of their general yearly income. Tax is payable against the percent set for their tax class. Transactions are to be supported with all documents to prove the amount of the declaration, should audits arise.

Legal Entities

Accounting purposes require that all the companies dealing in the transactions of cryptocurrency recognize all their income and expenses relating to such activities. Profit tax, at the rate of 20%, shall be payable based on the net profit of the company. Full reflection of all the cryptocurrency transactions should be provided in the financial statements.

Tax benefits and features

Therefore, Kazakhstan’s authorities incentivize investment in the digital economy, like those in cryptocurrency transactions, either in the form of investment deductions or even income tax incentives that can be used to reduce the overall tax burden.

Taxation of cryptocurrencies in Kazakhstan in 2024 is the main focus of attention for all participants of the digital market. Observance of tax laws and payment of taxes on income received from cryptocurrency provide legality and financial stability for your activities. It is recommended that you consult with a tax expert and/or lawyer to understand precisely your tax obligations and optimize your tax burden.