of February 4, 2014 No. NK-13-YuL-E-81-NK-847
"Concerning the demurrage taxation"
Ministries of Finance
Republic of Kazakhstan
Now there is the following situation: The legal entity - the resident of Kazakhstan (Seller) has the contract in foreign trade on oil supply with the legal entity - the resident of Switzerland (Buyer). The property right to oil and all risks, pass from the Seller to the Buyer during passing of oil through permanent flange connection of the tanker in shipping port. Loading is made in one of the ports of the Black Sea, i.e. outside RK. At the same time, in this contract the condition is stipulated that the Seller compensates costs of the Buyer on demurrage in each hour or it is pro rata for part of hour at the rate specified in the agreement of the freight during the all the time spent on loading, which exceeded allowed time of loading. The agreement of the freight (maritime transport) is signed between the Buyer (resident of Switzerland) and the Cargo carrier (The owner/manager of the vessel - resident of Turkey). Thus, the Cargo carrier makes out bills on demurrage to the Buyer in accordance with the terms of the agreement of the freight, and then the Buyer perevystavlyat accounts on demurrage to the Seller, providing all necessary documents for compensation of these costs.
In this case, compensation for demurrage is not penalty (penalty, penalty fee) for non-execution or improper execution of any obligations by the Seller or Buyer. The parties fulfill the obligations before each other in full and at the scheduled time. Let's note that demurrage arises in case of idle time in port of the vessel which is not belonging to the Seller or the Buyer and regardless of will of the Seller or the Buyer. Besides, the Seller complies all conditions on proper and timely transportation of goods to basis of delivery.
Also, it should be noted that the Buyer does not gain any income from sales of goods, performance of works, rendering services in the Republic of Kazakhstan, does not perform any activities in the Republic of Kazakhstan and will not form in the territory of the Republic of Kazakhstan of permanent organization.
Considering the above, we ask you to report whether the payments for demurrage in the port of the Black Sea compensated by the Kazakhstan selling company, the Swiss Company - to the Buyer based on accounts of the Cargo carrier - the resident of Turkey are subject to taxation by the corporate income tax at payment source? If the Buyer - the nonresident provides the document confirming residence of Switzerland whether the taxpayer of RK (Seller) will be able to apply the Convention on avoidance of double taxation?
Chairman of Management board
Associations of taxpayers of Kazakhstan
Ertlesova Zh. D.
According to the subitem 6) of article 1 of the Law of the Republic of Kazakhstan "About merchant shipping" the term "demurrage" means payment for kontrstaliyny time (period of time during which the vessel is under loading over lay days).
According to subitem 16-1) of Item 1 of article 192 of the Code of the Republic of Kazakhstan "About taxes and other obligatory payments in the budget" (further - the Tax code) the income in payment type for vessel idleness under materials handling operations over the lay days provided in the agreement (contract) of maritime transport is recognized the income of the nonresident from sources in the Republic of Kazakhstan.
Thus, the compensation amount resident of the Republic of Kazakhstan of costs of the nonresident who does not have permanent organization in the Republic of Kazakhstan on payments for vessel idleness under materials handling operations over lay days (demurrage) is recognized the income from source in the Republic of Kazakhstan and is subject to taxation by the corporate income tax at source of payment for rate of 20 percent.
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