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

of August 1, 2005 No. NK-UMN-5-16/7223

The Tax Committee of the Ministry of Finance of the Republic of Kazakhstan, having considered your letter, reports the following.

According to article 206 of the Tax Code objects of VAT liability are leviable turnover and leviable import.

At the same time, by article 213 of the Tax Code it is determined that leviable import are the goods imported or imported on the territory of the Republic of Kazakhstan (except for exempted from the VAT according to article 234 of the Tax Code), which are subject to declaring according to the customs legislation of the Republic of Kazakhstan.

Follows from the provided information that the Nurinvest leasing company performs import to the territory of the Republic of Kazakhstan of the portable satellite reporting station (further - the Station).

Thus, in view of that the imported Station is not subject to release from the VAT according to article 234 of the Tax Code, therefore, this import is leviable import.

According to the subitem 3) of Item 1 of article 235 of the Tax Code, in case of determination of tax amount, subject to budget payment, the receiver of goods (works, services) has the right to offsetting of VAT amounts, subject to payment for the received goods, including fixed assets, works and services if they are used or will be used for the purpose of leviable turnover, and also in case of commodity import - the VAT is paid to the budget.

According to Item 1 of article 228 of the Tax Code if other is not provided by this Article, the cession of property in financial leasing is exempted from the VAT regarding the amount of remuneration which is subject to obtaining by the lessor in case of observance of the following conditions:

1) such transfer conforms to requirements, stipulated in Clause 74 Tax codes,

2) the leasing recipient acquires property as fixed asset.

At the same time the cession of property in financial leasing, according to Item 2 of article 228 of the Tax Code, is exempted from the VAT in case of observance of conditions, stipulated in Item 1 this Article, and one of below the listed conditions:

1) if import of the transferred property is exempted from payment of the VAT according to the subitem 12) of Item 1 of article 234 of the Tax Code;

2) if the transferred property is acquired excluding VAT according to the subitem 17) of article 225 of the Tax Code.

In view of that transfer of the Station to financial leasing does not correspond to the conditions specified in Item 2 of article 228 of the Tax Code, therefore, transfer of this property to financial leasing is exempted from the VAT only regarding the amount of remuneration which is subject to obtaining by the Nurinvest company in case of observance of conditions, stipulated in Item 1 article 228 of the Tax Code. At the same time, transfer of the Station is subject to VAT liability in generally established procedure.

Thus, considering that the Nurinvest company makes payment of the VAT in the budget for import, and also that the specified Station will be used for the purpose of leviable turnover, therefore, the Nurinvest company has the right to offsetting of VAT amounts.

At the same time, by the subitem 2) of Item 2 of article 235 of the Tax Code it is determined that VAT amount, the Tax code carried in offsetting according to Item 1 of Article 235, the tax amount specified in the cargo customs declaration which is drawn up according to the customs legislation of the Republic of Kazakhstan, and paid in accordance with the established procedure to the budget of the Republic of Kazakhstan, and not subject to return in accordance with the terms of customs regime is.

Vice-chairman of the Tax Committee of the Ministry of Finance of the Republic of Kazakhstan

A. Horunzhy

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