LETTER OF THE TAX COMMITTEE OF THE MINISTRY OF FINANCE OF THE REPUBLIC OF KAZAKHSTAN

of June 18, 2010 No. HK-21-28/7262

The Tax Committee of the Ministry of Finance of the Republic of Kazakhstan (further - MF RK Oil Company), having considered your letter of 09.06.2010 No. 281-06/10, reports that the letter of MF RK Oil Company of 24.05.2010 No. HK-13-18/5914, which is earlier sent to your address, responds.

In addition we report the following.

According to Item 1 of article 241 of the Code of the Republic of Kazakhstan «About taxes and other obligatory payments in the budget» of 10.12.08. (Tax code) of work, the services provided by the nonresident who is not the payer of the VAT in the Republic of Kazakhstan and not performing activities through branch, representation are turnover of the taxpayer of the Republic of Kazakhstan getting job, services if the place of their realization is the Republic of Kazakhstan, and are subject to VAT liability according to the Tax code.

By Item 2 of article 241 of the Tax Code it is determined that for the purposes of this Article, the turnover size in case of acquisition of works, services from the nonresident who is not the payer of the VAT in the Republic of Kazakhstan and not performing activities through branch, representation is determined proceeding from the cost of the acquired works, services, including taxes, except the VAT.

Thus, in the reviewed example if from the cost of the services realized by the nonresident in the amount of 10000, of the transaction approved by the parties and specified in invoice, the corporate income tax at source of payment is paid to the budget of the Republic of Kazakhstan at the expense of own means of the receiver of works, services, without deduction from the cost which is subject to transfer to the nonresident, then the size of leviable turnover at the receiver of works, services is determined from the amount 10000.

If the agreement is constituted in such a way that the amount of the corporate income tax at source of payment increases the cost of the works performed by the nonresident, services, the size of leviable turnover at the receiver of works, services is determined proceeding from the cost of the performed works, services taking into account the corporate income tax at payment source.

In addition we report that according to the subitem 6) of Item 1 of article 20 of the Tax Code bodies of Tax Service shall provide to the taxpayer (tax agent) information on the operating taxes and other obligatory payments in the budget.

Such explanations and comments do not belong to regulatory legal acts, are not obligatory for execution.

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