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Income Taxation of Individuals in Republic of Kazakhstan

 

General Provisions

Taxation in the Republic of Kazakhstan

As objects of taxation in the Republic of Kazakhstan, the term securities includes - shares, debt securities, depository receipts, shares of mutual investment funds, Islamic securities (art. 1 (1)(4) of the Tax Code of the Republic of Kazakhstan).

In securities trading, two main types of income are subject to personal income tax in the Republic of Kazakhstan:

  • Income from the growth of the price of securities being sold (for tax residents, both outside of Kazakhstan and residing in Kazakhstan; for tax non-residents - income from the sale of securities, only if the issuer of such a security is a Kazakhstan company);
  • income from dividends paid on securities (for tax residents, both Kazakhstan and foreign issuers; for tax non-residents - only for securities of Kazakhstan issuers).

Capital Gain Income

Capital gain income in the Republic of Kazakhstan is defined as the positive difference between the selling price and bid price of the securities (art. 331(1)(8) and art. 332 of The Tax Code of the Republic of Kazakhstan). If it is found impossible to provide a documented proof of the selling price of securities, gross income shall be subject to personal income tax, where gross income is the actual amount received from the sale of these securities.

Capital gain income is determined for each deal made during the tax period (calendar year). Losses from separate financial operations cannot be netted off with profit obtained from other operations within the calendar year. Losses from separate financial operations also cannot be carried over to future tax periods.

Non-residents pay individual income tax only on income received in the Republic of Kazakhstan from the capital gain income of securities whose issuers are registered in the Republic of Kazakhstan (art.331(1)(8) and art. 332 of the Tax Code of the Republic of Kazakhstan).

The tax rate is:

  • 10% for residents on positive difference between selling and bid price (art. 320(1) of Tax Code of the Republic of Kazakhstan);
  • 15% for non-residents on gross income (art. 655(1) of the Tax Code of the Republic of Kazakhstan).

Dividend Income

For tax purposes, a dividend is an income in the form of net income or a part of it payable on shares, including shares that are the underlying assets of depositary receipts (art. 1(1)(16) of the Tax Code of the Republic of Kazakhstan).

Starting from January 1, 2023, dividend income is taxed at a flat rate of 10% for both residents and non-residents of the Republic of Kazakhstan.

At the same time, for non-residents, the taxable income in the Republic of Kazakhstan is only the income in the form of dividends from a Kazakhstan issuer.

Declaration and Payment of Personal Income Tax

The broker is not a tax agent in accordance with the tax legislation of the Republic of Kazakhstan. Tax agents who carry out the calculation, withholding and payment of tax to the budget of the Republic of Kazakhstan are:

  1. issuer of securities that pays dividends,
  2. buyer of securities under a direct agreement, registered in the Republic of Kazakhstan and who made a payment to a resident and (or) non-resident.

Thus, in practice, an individual (except for the case of dividend payment by an issuer of Kazakhstan) submits on his own a declaration on personal income tax Form-240.00 no later than March 31 of the year following the year of income and pays tax no later than April 10.

An individual independently calculates tax on income received in foreign currency and also recounts it into tenge at the rate of the National Bank of the Republic of Kazakhstan on the last business day preceding the date of income (art. 356 (2) of the Tax Code of the Republic of Kazakhstan).

An individual (a tax resident of the Republic of Kazakhstan) has a right to reduce the amount of personal income tax payable in the Republic of Kazakhstan by the amount of tax paid in another jurisdiction:

  • If the withheld foreign tax rate is equal to or exceeds 10%, then in the Republic of Kazakhstan it is not necessary to pay tax on such income in the form of dividends;
  • if the rate of withheld foreign tax is less than 10%, then in the Republic of Kazakhstan it will be necessary to pay additional personal income tax in the amount of the difference between the amount of tax at the rate established by the Republic of Kazakhstan legislation and the amount of tax withheld in a foreign state.

According to the provisions of Art. 359, 303 of the Tax Code of the Republic of Kazakhstan, in order to obtain the right to credit the withheld foreign tax, the taxpayer must obtain a certificate on the amounts of income received from sources in a foreign state and taxes paid, issued and (or) certified by the tax authority of a foreign state. Please note that it may be difficult to provide documents issued by a non-tax authority of a foreign state.

 

* A resident of the Republic of Kazakhstan is an individual (art. 189(1) of the Tax Code of the Republic of Kazakhstan) permanently residing in the Republic of Kazakhstan for more than 183 days in any consecutive 12-month period ending in the current tax year, or a person whose center of vital interests is in the Republic of Kazakhstan (the center of vital interests is determined in accordance with art. 189(3) of the Tax Code of the Republic of Kazakhstan).

 

Taxation in Hong Kong

Stamp Duty

Hong Kong law provides for the levying of stamp duty on buy-sell deals of Hong Kong issuers securities, as well as securities of issuers from other jurisdictions with a primary listing on the Hong Kong Stock Exchange.

The broker is a tax agent for such transactions with the right to assign this function to an authorized agent, which may be a third party organization.

The stamp duty rate is 0.1%* for each side of the deal (both buyer and seller), rounded up to 1 HKD. Payment of the fee is made within 30 calendar days from the date of the deal's conclusion. In the case of non-payment of stamp duty within one month, a penalty is charged in the amount of two times the amount of unpaid tax: from one to two months - four times, more than two months - ten times.

The amount of stamp duty on a deal is calculated as the product of the number of securities that are the subject of the deal and the price, which is determined as the highest of the following prices: the deal price on the ITS or the closing price of the auction on the Hong Kong Stock Exchange on the date of the transaction on the ITS.

If the price is determined in a currency other than the Hong Kong dollar (HKD), then the calculation of the Hong Kong Transaction Tax base involves first recalculating the price into Hong Kong dollar (HKD) using the officially established exchange rate on the date of conclusion of the Agreement. The applicable exchange rates are subject to disclosure on the Hong Kong Stock Exchange website.

There is an exemption from the payment of stamp duty for repo deals with securities of Hong Kong issuers, subject to prior registration of the master agreement on repurchase agreements (repo) with the Hong Kong tax authorities. The cost of such registration, collected by the Hong Kong tax authority, is 540 HKD per agreement.

 

*The rate is applicable since November 17, 2023, the tax rate 0.13% was applied till November 16, 2023

 

Dividend Income

Hong Kong law does not provide for withholding tax in Hong Kong on income from dividends on securities of Hong Kong issuers. For issuers from other jurisdictions, including certain territories of the People's Republic of China, with a primary listing on the Hong Kong Stock Exchange, the withholding tax rate may be different (for example, in mainland China, the rate is 10%).

 

Taxation in US

Dividend Income

US law establishes a standard withholding tax rate of 30% on dividends paid on most US securities.

For residents of the Republic of Kazakhstan, the tax rate may be reduced to 15% in accordance with the provisions of the DTA between the Republic of Kazakhstan and the United States, subject to certain conditions.

A 30% rate is applied by default if the investor (ultimate beneficiary) does not disclose tax residency information in the prescribed form (does not provide a signed Form W-8BEN for individuals).

Declaration of income in the form of dividends and payment of tax in the Republic of Kazakhstan are described above in the Taxation in the Republic of Kazakhstan section.

The reduced rate under DTA does not apply to all types of income. For example, a flat 30% tax rate applies to dividend income from securities of Real Estate Investment Trust (REIT) companies.

 

Taxation of Dividends from Other Jurisdictions

When dividends are paid from jurisdictions other than those listed above, local withholding tax rates on dividends established in such jurisdictions are applied. However, an individual has a right (a resident of the Republic of Kazakhstan) to apply reduced rates on the basis of the relevant DTA, subject to a number of conditions, as well as restrictions established by the Tax Code of the Republic of Kazakhstan (including the list of territories classified as states with preferential taxation).