Specifics of application of Double Taxation Treaties in Kazakhstan

1) Which principal Double Tax Treaties (DTTs) are currently in force in Kazakhstan?

There are 55 Double Taxation Treaties currently in force in Kazakhstan, concluded with foreign states.

2) What types of income are covered by Double Taxation Treaties?

Double Taxation Treaties regulate the following types of income:

• income from property;
• business income;
• passive income (dividends, interest, royalties);
• income of individuals (salaries, pensions, etc.);
• as well as other types of income.

3) How is tax residency determined for DTT purposes in Kazakhstan?

For the purposes of Double Taxation Treaties, the tax residency status of a legal entity is determined based on either:

• the place of incorporation; or
• the place of effective management.

The tax residency status of an individual is determined based on their place of residence, habitual abode, and citizenship. In cases where, under these criteria, an individual is considered a resident of both contracting states, they shall be deemed a resident of the state in which they have their centre of vital interests (such as a permanent home, family, or principal place of employment).

4) How to properly prove tax residency status to apply treaty benefits?

The tax residency status for the purposes of applying treaty benefits under a Double Taxation Treaty shall be confirmed by a duly issued tax residency certificate in one of the following forms:

• An original certificate issued and certified by the competent authority of the foreign state in which the income recipient is a tax resident.

The signature and seal of the competent authority must be legalized or apostilled. Legalization is not required if the residency certificate is published on the official website of the competent authority, or if the document legalizing the signature and seal is published on the official websites of the relevant authorities of the foreign state.

• A notarized copy of the original certificate meeting the above requirements.

The signature and seal of the foreign notary must be legalized, or the document legalizing the signature and seal must be published on the official websites of the relevant authorities of the foreign state.

• A printed copy of an electronic certificate published on the official website of the competent authority of the foreign state.

5) How to determine which Double Taxation Treaty applies to a specific transaction? 

The applicability of a specific Double Taxation Treaty is determined based on the tax residency of the parties to the transaction or, where relevant, the location of the underlying property (or capital).

6) Do the provisions of the DTT take precedence over domestic tax law?

Yes, under national legislation, in the event of any conflict between the provisions of international treaties (including Double Taxation Treaties) and the provisions of domestic legislation, the provisions of international treaties shall prevail.

7) What tax obligations does a resident have when receiving income from abroad under a DTT?

The tax obligations of a Kazakh tax resident in respect of income derived from foreign sources are governed by the tax legislation of Kazakhstan. However, the provisions of an applicable Double Taxation Treaty may apply to such income at the time of its payment to the Kazakh tax resident by the foreign jurisdiction.

8) How are tax rates on dividends, interest, and royalties applied under a DTT?

Double Taxation Treaties generally establish reduced withholding tax rates on income in the form of dividends, interest, and royalties (e.g., 5% or 10%), which apply instead of the standard rate of 15% set by the Tax Code of Kazakhstan.

Application of the reduced rate requires compliance with the conditions set out in the relevant treaty, including the provision of a duly issued tax residency certificate of the income recipient and, where applicable, confirmation of the beneficial ownership of the income.

9) What are the mechanisms for eliminating double taxation?

The primary mechanisms for the elimination of double taxation provided under double taxation treaties are as follows:

• the exemption method, under which income received by a tax resident in a foreign state and subject to taxation in that state is fully excluded from the taxable base in the state of residence. As a result, such income is not subject to taxation in Kazakhstan;
• the credit method, under which income received by a resident of Kazakhstan from a foreign source is included in the taxable base in Kazakhstan, and the amount of tax paid in the foreign state is credited against the tax payable in Kazakhstan. However, the credit may not exceed the amount of tax that would be payable in Kazakhstan on the relevant type of income.

10) What is the dispute resolution process and Mutual Agreement Procedure (MAP) under a DTT?

Certain Double Taxation Treaties concluded by Kazakhstan with foreign states contain an arbitration clause. Pursuant to such a clause, where the competent authorities are unable to reach a mutual agreement, the case may, subject to the consent of both competent authorities and the taxpayer, be referred to arbitration. The decision rendered by the arbitration panel shall be binding on both contracting states.

At the same time, the majority of Kazakhstan’s Double Taxation Treaties do not contain arbitration provisions and provide solely for the resolution of disputes through the Mutual Agreement Procedure (MAP).

To initiate the procedure, the taxpayer must submit an application to the Kazakh tax authority, including a justification of their position and supporting documentation confirming the nature and amount of income, taxes paid, contractual arrangements, and ownership structure. The application is reviewed within 45 calendar days, following which the competent authority issues a decision either to initiate the procedure or to reject the application.

If the application is accepted, the Kazakh competent authority submits a request to the competent authority of the foreign state. Any decision reached under the MAP is binding on the tax authorities of Kazakhstan.

Authors: Assel Ilyassova, Makhabbat Mukhidinkyzy