Tax rate and compliance

MINISTRY OF EDUCATION AND SCIENCE OF THE REPUBLIC OF KAZAKHSTAN

INTERNATIONAL ACADEMY OF BUSINESS

“ECONOMY, MANAGEMENT AND ENTERPRISE” FACULTY

DEPARTMENT “FINANCE”

Analysis of state budget

on discipline “Financial and Bank Statistics”

“Corporate Income Tax”

made by 2th year students F 1102 from English department

Utegenova Altynay

Pavluk Ivan

Scientific leader:

T. M. Mursalimova

ALMATY 2013

Corporate Income Tax.

History.

Corporate income tax (CIT) is imposed on the profits of resident legal entities from worldwide sources, and Kazakhstan-source income of nonresident legal entities.

The basic principles are consistent with those used in most developed economies. However, the required standards of documentary support are particularly high in Kazakhstan.

The main legal act establishing and regulating taxation in Kazakhstan is the Code of the Republic of Kazakhstan On Taxes and Other Obligatory Payments to the Budget (the “Tax Code”). The Tax Code was adopted on 10 December 2008 and came into effect as of 1 January 2009.

Payers

Resident legal entities are taxed on their worldwide income, and non-residents of Kazakhstan on their income from Kazakh sources.

Non-residents carrying out business in Kazakhstan through a permanent establishment (PE) are taxed on the profits of that establishment, calculated in basically the same way as for residents.

Non-residents deriving Kazakhstan-source income not through a PE are taxed by withholding.

Taxable income

Taxable income is calculated as the difference between aggregate annual income (AAI) and certain adjustments and statutory deductions. AAI includes practically all forms of income, including capital gains.

Deductions generally include all expenses related to business activities and directed at the receipt of income, although a number of generally minor exclusions also apply.

In addition to normal operating expenses, examples of expenses that are allowed for deduction include the following:

• interest (within a thin capitalization limit)
• foreign exchange losses
• representational expenses up to a limit of 1% of payroll subject to taxation
• charitable expenses (up to 3% of taxable income)

Tax rate and compliance

CIT is applied to companies at the current general rate of 20% of taxable income. In addition, net income (after deduction of CIT) of a non-resident’s PE (branch) in Kazakhstan is subject to branch profits tax at a rate of 15%.

It is usually reduced by tax treaties.

As a general rule, the tax period is a calendar year. The general CIT Tax Declaration deadline is March 31 in the year following the reporting period.

As a general rule, all taxpayers (with certain exceptions) are subject to the CIT advance payment procedure, which requires taxpayers to estimate the tax liability for the year and pay the tax in installments monthly, not later that the 25th day of the current month.

The following withholding tax rates apply to income from Kazakhstan sources where such income is not attributable to a non-resident's permanent establishment in Kazakhstan:

Types of Income from Kazakhstan Sources	Tax Rate
Dividend type of income	15 %
Insurance premia paid under risk insurance contracts	10 %
Insurance premia paid under risk re-insurance contracts	5 %
Income from international transportation services	5 %
Other types of income from Kazakhstan sources	20 %

These rates may be reduced if the recipient of income is a resident of a country participating in a double tax treaty with Kazakhstan (for example, double tax treaty with PRC reduces tax on dividends to 10%).

Such withholding tax has to be withheld by Kazakhstani payers of income acting as "tax agents".

Table 1.Tax revenues to the state budget of Kazakhstan of corporate income tax for period from 2007-2011(Million tenge).

Years
CIT, mln KZT
Revenues, mln KZT

Table 2. Changes the share of CIT in total tax revenue for 2007-2011 years.

Years		%		%		%		%		%
Revenues mln KZT
CIT mln KZT		26,2		22,8		18,4		19,5		19,6

Table 3. Changes of Income CIT for 2007-2011 years.

Years
CIT, mln KZT

According to the graph, we see that in 2007-2008 corporate tax revenues to the state budget of the Republic of Kazakhstan had tendency of growth. In 2009 there was the fall from 920912 to 643669 mln KZT. And in 2010-2011 its starts to growth again.

Table 4. The dynamics of changes in the structure of the tax in State Budget of Republic of Kazakhstan for period 2007-2011 yy.

Years
Revenues in %
CIT in %	26,2	22,8	18,4	19,5	19,6

Indicators						Formula
Million tenge, y	y0,y1	y2	y3	y4	y5
Absolute increase, mln KZT Δ y base Δ y chain	…		-114632 -277243			Δ y base=yᵢ-yₒ Δ y chain=yᵢ-yᵢ-1
Coefficient of growth, K base K chain	…	1,2 1,2	0,8 0,7	1,1 1,3	1,4 1,2	K base=yᵢ/yₒ K chain= yᵢ/ yᵢ-1
Rate of growth, % T base T chain	…	121,4 121,4	84,9 69,9	110,4 130,0	138,5 125,4	T base = K base*100% T chain= K chain*100%
Rate of increase,% Δ T base Δ T chain	…	21,4 21,4	-15,1 -30,1	10,4 30,0	38,5 25,4	Δ T base = T base--100% Δ T chain= T chain- 100%

Mean level of the time series data

According to the condition of the task, i.e. the data series are given for 2007-2011, we will calculate the mean level by the formula of the mean chronological:
y¯=(y1+ y2+ y3+y4+y5)/n=(758301+920912+643669+837233+1050380)/5=

=842099

Mean annual absolute increase

¯ Δ y base= (yₓ-yₒ)/x=(1050380-758301)/5=58415,8

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