Kazakhstan and United States Income Tax Treaty

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Kazakhstan has concluded 43 double taxation treaties with different countries around the globe and one of them is the United States. Kazakhstan and the United Stated singed an income tax treaty and protocol on October 24, 1994. The parties initialed the proposed convention and protocol during the first half of 1993. Although similar to the U.S. - Russia income tax treaty, the new Kazakh accord contains some distinguishing features.

Creditable taxes
The new agreement applies to the Kazakh on profits and income provided by the laws “On Taxation of Enterprises, Associations and Organizations” and “On the Income Tax on Citizens of the Kazakh SSR, Foreign Citizens and Stateless Persons.” Treaty article 23, Relief From Double Taxation, states that these Kazakh taxes will be considered income taxes. The proposed protocol, in amending article 23, also addresses the concerns of U.S. taxpayers worried about Kazakh taxes being creditable taxes for foreign tax credit purposes, by stating that certain deductions are allowed. Kazakhstan confirms that in computing the taxes on profits and income under its current law, certain entities are permitted deductions for “actual wages paid and for interest expense, whether or not paid to a bank and without regard to the terms of the debt.” To qualify for the deduction, an entity must be resident in Kazakhstan, a joint venture that is U.S. - resident or wholly owned by U.S. residents, or a permanent establishment.
According to the protocol, the deduction cannot exceed limits imposed under Kazakh tax law, so long as that limitation is “not less than an arm’s length rate taking into account a reasonable risk premium.”

The issue of the credibility of Kazakhstan’s profits tax-at least as of March 1993- ...

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...ted; thus each individual must file his/her own return;
• Employment income for residents and nonresidents -flat rate 10%. All the other income for residents is taxed at 10% and for nonresidents 20%;
• Basis – Resident individuals are taxed on worldwide income, while nonresidents are taxed only on Kazakh-source income;
• Tax year – Calendar year;
• Filing and payment – Individual income tax on employment income is subject to withholding, payment and reporting by the employer. Payment is due by 25th of the month following the month the income was paid. Income and tax should be reported on a quarterly basis by the 15th of the second month following the reporting quarter.
• In certain cases, when individuals receive income not taxed at source, a tax return must be filed by 31 March of the year following the reporting year, with the payment of final tax due by 10 April.

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