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LAW OF THE REPUBLIC OF KAZAKHSTAN

of July 5, 2008 No. 67-IV ZRK

About transfer pricing

(as amended on 02-04-2019)

This Law governs the public relations arising in case of transfer pricing for the purpose of prevention of losses of state revenue in the international business transactions and transactions connected with the international business transactions.

Article 1. Legislation of the Republic of Kazakhstan on transfer pricing

1. The legislation of the Republic of Kazakhstan on transfer pricing is based on the Constitution of the Republic of Kazakhstan, consists of this Law and other regulatory legal acts.

2. If the international treaty ratified by the Republic of Kazakhstan establishes other rules, than those which contain in this Law are applied rules of the international treaty.

Article 2. The basic concepts used in this Law

In this Law the following basic concepts are used:

1) the price from information sources - the price received from officially acknowledged sources of information, data on stock exchange quotations from authorized bodies, and also from other sources of information;

2) price range - number of values of market prices limited minimum and maximum to values of the market prices determined as a result of application of one of methods of determination of market prices or sources of information according to the procedure, established by this Law;

2-1) control - the control determined according to the International Financial Reporting Standards or other internationally acknowledged standards of creation of the financial reporting accepted by stock exchanges for the admission of securities to the biddings.

The concept "control" is used for the purposes of the reporting under transfer pricing;

3) the quoted period - the pricing period, but no more than thirty one calendar consecutive day for which quotations of the prices at the exchange are published established in the contract for sales of goods (works, services) during which in accordance with the terms of the transaction the parties of the transaction determine arithmetic-mean value of arithmetic-mean daily quotations of the prices of the corresponding exchange goods (works, services), and also not exchange goods, the prices for which are tied to quotations on exchange goods;

3-1) quoted day - day in which there is the published quotation on goods (work, service) in officially acknowledged sources of information;

4) identical goods (works, services) - goods (works, services), the main signs, having identical characteristic of them: physical characteristics, quality and reputation in the market, country of source and the producer;

5) the corresponding market identical (and in case of their absence - homogeneous) goods (works, services) - the market of appointment (delivery) of goods (work, service) in which market price, or the market based on which in the market of appointment (delivery) of goods (work, service) market price is objectively created and determined is created;

6) homogeneous goods (works, services) - goods (works, services) which, without being identical, have similar characteristics and consist of similar components that allows them to perform the same functions and to be interchangeable;

7) differential - the amount of adjustment applied to reduction in comparable economic conditions of transaction price or the price from information source;

8) the state with the preferential taxation - the foreign state determined according to the tax legislation of the Republic of Kazakhstan;

9) commission (agency) fee - the service fee of the trade broker, trader or agent on purchase and sale of goods, performance of work, rendering service paid in the form of the amount or percent from the amount of the committed transaction, provided by the free standing agreement between the participant of the transaction and the trade broker, the trader or the agent;

10) the transaction made in the territory of the Republic of Kazakhstan, which is directly interconnected with the international business transaction, the transaction on purchase and sale of goods, performance of works, rendering services which in subsequent were subject of the international business transaction;

10-1) financial year - the period for which the annual consolidated financial statements of the international group are constituted;

10-2) adverse social and economic effects - set of the social and economic effects interfering realization of national interests or creating it danger, and also threatening sustainable development of national economy;

11) economic case of the applied price - the documents and information confirming justification of use of transaction price and provided in authorized bodies;

12) the principle of "outstretched arm" - the principle applied to determination of market price taking into account price range, on the basis of comparison of conditions of transactions between the interconnected parties with conditions of transactions between the independent parties performing the transaction at the market price determined according to the procedure, established by this Law;

13) margin - the amount received by the trade broker, the trader or the agent as a result of carrying out transactions on purchase and sale of goods, to performance of works, rendering services;

14) the margin range - number of values limited minimum and maximum to the values of market margin determined according to the principle of "outstretched arm" in comparable economic conditions;

15) transaction price - the goods price (works, services) applied by participants of transactions during transaction, regulated by this Law;

16) the participant of the transaction - the physical person or legal entity which concluded the bargain regulated by this Law;

17) the reporting under monitoring of transactions - data on transactions, including transactions using the transfer prices, made during the accounting period, the transactions represented by the participant in bodies of state revenues annually according to the procedure and form approved by authorized body;

18) market price - the goods price (works, services) which developed in case of interaction of the demand and supply in the market identical (and in case of their absence - homogeneous) goods (works, services) in the comparable economic conditions determined according to the principle of "outstretched arm";

19) the range of profitability rates - number of values of profitability rates limited minimum and maximum to the values of profitability rates determined according to the principle of "outstretched arm" in comparable economic conditions;

20) profitability rate - the relation of accounting profit on the main activities got from sales of goods (work, service), to production costs and realization of these goods (work, service);

21) privileges on taxes - release (reduction) from the tax liabilities on separate categories of taxpayers, availability of investment tax preferences according to the contract on investments or implementation of activities in the territory of special economic zones;

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