Who has been exempted from VAT in Kazakhstan

©️ Depositphotos.com

Tengrinews.kz - Deputy Prime Minister - Minister of National Economy Serik Zhumangarin explained the new rates of value added tax (VAT).

Speaking during a government meeting, Zhumangarin said that increasing and differentiating the VAT rate to 16% will reduce the budget's dependence on volatile oil revenues, as well as strengthen the savings function of the National Fund and finance priority state projects.

At the same time, as the Head of the Ministry of National Economy emphasized, VAT exemption is proposed for agricultural producers.

"Currently, farms are not VAT payers. We are keeping this. Legal entities - agricultural producers pay VAT at 30% of the amount due to the budget. Now they will not pay. Thus, all products (potatoes, tomatoes, onions, cabbage, etc.) produced in Kazakhstan will be more competitive.

The rate is 10%. We are proposing a reduced rate for the healthcare sector. Who else will it apply to? This issue requires further discussion. What other types of activities - we will collect all the proposals, calculate them and decide together with experts and businesses," Zhumangarin explained.

Differentiation of only 10% is related to the complexity of administration, the Deputy Prime Minister added. First of all, for business. Secondly, for tax authorities.

"When there are many rates, accounting becomes more complicated, filing declarations becomes more complicated, and a debit balance accumulates. To avoid this, we propose: 16%, 10%, 0% and exemption. Reducing the threshold for VAT registration. Today, only 4% of enterprises pay VAT. Many companies artificially split their businesses to avoid taxation. This undermines the tax system and prevents normal VAT offsetting. Therefore, it is proposed to reduce the registration threshold from 80 million tenge to 15 million tenge.

Conditions are created under which the cost of splitting will exceed the benefits of splitting. This will create equal conditions for business and prevent evasion schemes," he continued.

In this matter, the government is guided by international experience, added Zhumangarin. He emphasized that in most countries with developed and developing economies, the VAT threshold is either significantly lower or does not exist at all.

As an example, the Head of the Ministry of National Economy cited Canada, Korea, Scandinavian countries, a number of Eastern European countries and their closest neighbors, Russia, Uzbekistan, Kyrgyzstan, where the thresholds are lower than in Kazakhstan.

"The retail tax regime will also be revised. In general, we are keeping it. At the same time, the income limit for this proposed regime remains at 600 thousand Monthly Calculation Index (MCI), which is 2.359 trillion tenge per year; restrictions on the number of employees are removed; the Payroll Fund (PFF) is deducted if the income from sales exceeds 100 million tenge per year; 100 million tenge to stimulate the whitening of wages; we are keeping the rate of 4% (with the possibility of reducing it by 50% by maslikhats); and the key condition is to reduce the types of activities and sell only in the B2C segment. The regime is called "retail". It must live up to its name. Sales only to the population," Zhumangarin added.