AIFC trust taxation

Introduction

The trust is one of the most widely used instruments for structuring private wealth and international investments. Thanks to the application of English law principles within the AIFC, trusts can be used for asset management, succession planning and asset protection purposes.

At the same time, the tax treatment of trusts in Kazakhstan remains one of the most debated issues. Kazakhstan's tax legislation does not contain specific provisions governing the taxation of trusts, which creates significant uncertainty for settlors, trustees and beneficiaries.

This article considers the principal tax implications of transactions involving trusts and the practical risks that may arise.

What is a trust?

As provided by the Trusts Regulations[1], a trust is a legal relationship under which:

• the settlor transfers property to the trustee;
• the trustee acquires legal title to the property;
• the beneficiaries acquire a right to receive income or a share of the trust property in accordance with the terms of the trust instrument.

A trust is not a separate legal entity.

Since the Tax Code does not contain specific rules governing the taxation of trusts, it may be possible to draw an analogy with the concept of property trust management. However, such an analogy does not always make it possible to determine the tax consequences of a particular transaction with certainty.

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[1] AIFC REGULATIONS No. 31 dated 06 August 2019 “AIFC TRUST REGULATIONS” (the “Trust Regulations”).