of November 13, 2006 No. NK-UM-2-17/10768
The Ministry of Finance of the Republic of Kazakhstan, having considered your letter on the tax matter on value added of banking loan activities, reports the following.
Since 01.01.2006 some provisions of the law of the Republic of Kazakhstan of 23.12.2005 "About modification and amendments in some legal acts of the Republic of Kazakhstan concerning licensing and the consolidated supervision" are enacted (dalee-Zakon). So, according to the subitem 11) of item 4 of article 1 of the Law Item 2 of article 227 of the Tax Code is stated in other edition.
According to the subitem 1) of Item 2 of article 227 of the Tax Code in the edition operating since 01.01.2006 the banking loan activities performed based on the license of authorized state body on regulation and supervision of the financial market and the financial organizations or National Bank of the Republic of Kazakhstan by the banks and the organizations performing separate types of banking activities and also the operations performed by other legal entities without license within the powers established by legal acts of the Republic of Kazakhstan belong to the financial services exempted from the VAT.
According to the subitem 8) Item 1 of article 30 of the Law of the Republic of Kazakhstan of 31.08.1995 "About banks and banking activity in the Republic of Kazakhstan" (further - the Law on banks) taking into account changes and additions made by the Law, banking loan activities represent provision by bank, mortgage organization, the broker and (or) dealer with the right of account management of clients as the nominee holder and the legal entity, the single shareholder (participant) of which is the state, the credits in cash on the terms of the paid nature, urgency and recoverability.
At the same time by Item 3 of article 10 of the Tax Code it is determined that concepts civil and other industries of the legislation of the Republic of Kazakhstan, used in the Tax code, are applied in that value in what they are used in these industries of the legislation if other is not provided by the Tax code.
Thus, the concept "banking loan activities" used in the Tax code is applied in the value determined by the subitem 8) of Item 1 of article 30 of the Law on banks.
According to explanations of National Bank the paid nature or onerousness of the loan agreement is expressed that the borrower pays the creditor payment for provision of subject of loan. And the term "payment" or "payments" is included more, than the term "percent" which was earlier used in the legislation.
Loan origination fees, the commissions for establishment and reestablishment of limits of credit lines, the commissions for not development of credit line belong to loan transactions.
Therefore, considering the above-named provisions, tax exemption on value added on loan origination fee, the commissions for establishment and reestablishment of limits of credit lines, to the commission for not development of credit line is provided only on banking loan activities.
Thus, in case of rendering of services on provision of loan in cash (in case of the positive decision on issue of loan) the amount of remuneration including the amounts of percentage remuneration and commission amount provided by the loan agreement are subject to tax exemption on value added.
In case of refusal in issue of loan the consideration commission on issuance of credit is payment for the rendered services in consideration of the request for issuance of credit, and, respectively, joins in leviable turnover on rendering of services.
The line item of the Ministry of Finance of the Republic of Kazakhstan on the matter was stated in the letter of 07.08.2006 No. NK-UM-2-17/7672, sent to your address in this connection there are no contradictions on the tax matter on value added of the commissions for issuance of credit.
In addition we report that for the purpose of the correct interpretation of regulations of the tax legislation the letter of the Tax Committee of the Ministry of Finance of the Republic of Kazakhstan of 31.03.2006 No. NK-UM-2-12/2744 sends inquiry to the Prosecutor General's Office of the Republic of Kazakhstan concerning release of loan transactions from the value added tax.
The Prosecutor General's Office of the Republic of Kazakhstan the letter of 03.05.2006 No. 7-26-7600-06 makes explanation according to which, article 227 of the Tax Code provides the exhaustive list of the financial services which are subject to tax exemption on value added. At the same time, loan transactions, except for bank, do not belong to them, respectively, according to the letter of the Prosecutor General's Office of the Republic of Kazakhstan, are subject to taxation on value added in generally established procedure.
Vice-Minister A. Smailov
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