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of November 20, 2003 No. NK-UM-08-2-17/9232

Concerning the taxation of the income of the nonresidents performing activities in the Republic of Kazakhstan through permanent organization

The nonresident company (resident of the Russian Federation) signed the contract with the resident company for performance of works. For the purpose of execution of conditions on the contract in RK and tax payments and other obligatory payments in the budget in the territory of RK by the nonresident company created branch.

According to Art. 7 of the Convention between the Government of RK and the Government of the Russian Federation on avoidance of double taxation and prevention of tax avoidance on the income and the capital (further - the Convention) if the company of the Contracting State performs or performed business activity in other Contracting State through the permanent organization located there, then its profit can be assessed with tax in other State, but only in that part which belongs:

1) to such permanent organization;

2) sale in this other State of goods or products which match goods or products which are on sale through permanent organization;

3) other business activity performed in this other State which in character matches the business activity performed through such permanent organization.

At the same time, according to Art. 5 of the Convention, the term "permanent organization (representation)" means the permanent place of activities through which the company of one Contracting State fully or partially performs business activity in other Contracting State.

Follows from the above that payer of the corporate income tax according to income gained from implementation of activities in RK will be the nonresident company performing activities in the territory of RK through branch.

By article 206 of the Tax Code it is determined that object of VAT liability is leviable turnover.

According to Art. 212 of the Tax code leviable turnover is the turnover on sales of goods (works, services) made by the payer of the VAT, except for turnover:

1) exempted from the VAT according to the Tax code;

2) the place of realization of which is not RK.

According to Art. 207 of the Tax code payers of the VAT are persons who got up on VAT accounting in RK according to Art. 208 of the Tax code, except for public institutions.

According to subitem 3) item 1 Corrected statements of the taxpayer on VAT accounting, issues of the certificate on registration on the VATes and removals from VAT accounting of the payer on the VAT approved by the order of the Minister of state revenues of RK of 15.12.2001 N 1736, to registration on the VAT according to the requirements established in Art. 208 of the Tax code are subject including the nonresidents performing activities in RK through permanent organization.

Considering the above, in this case payer of the VAT on the works which are carried out in the territory of RK will be the nonresident company performing activities in the territory of RK through branch.

At the same time the statement of invoices and signing of acts of the performed works can be performed by the nonresident company or branch.

At the same time it is necessary to consider that in the invoice which is written out by the nonresident company according to the requirements established by item 3 of Art. 242 of the Tax code it is necessary to specify RNN, certificate number about registration on the VAT of branch and VAT rate in the amount of 16%.

According to item 1 of Art. 65 of the Tax code taxpayers determine the taxation objects and objects connected with the taxation by method of charges according to which irrespective of payment time the income and expenses are considered from the moment of performance of works, provision of services, shipment of goods for the purpose of their realization and receipt of property.

Based on stated receipt of advance payment by the nonresident company on performance of works is not recognized the income until performance of works.

Thus, from the advance received by the nonresident company on performance of works, the corporate income tax is not paid.

According to item 3 of Art. 216 of the Tax code date of making of leviable turnover on implementation of works, services comes in case the first performs one of following conditions:

1) for works, services it is written out the invoice including VAT;

2) works are performed, services are rendered.

Under the terms of the contract the resident company acts as the prime contractor (customer), and the nonresident company - the contractor.

According to Art. 630 of the Civil code the customer shall in terms and according to the procedure, provided by the works agreement, with participation of the contractor to inspect and accept result of the performed work, and in case of detection of the departures from the agreement worsening work or other shortcomings of work immediately to declare it to the contractor.

Follows from stated that works will be considered executed only when the customer accepts their result and will sign the act of acceptance of the performed works.

Thus, at the contractor date of making of turnover on implementation of works to the customer comes at the moment when the customer accepts the performed works and will sign the act on their acceptance provided that by the contractor it is not written out on the performed works the invoice including VAT earlier.



Chairman of MF RK Oil Company N. Usenov

Disclaimer! This text was translated by AI translator and is not a valid juridical document. No warranty. No claim. More info

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