In detail
The Kazakhstan tax authorities are challenging exemption of interoffice services from withholding tax and trying to reclassify such services as a royalty. These interoffice services could include consulting, IT related, training, design, engineering and any other services provided to Kazakhstan companies by non-resident companies.
Such reclassification of services to royalty would result in application of withholding tax on these payments when the income is paid to non-residents or expenses are claimed for corporate income tax purposes. Under a double tax treaty ("DTT"), a royalty could be subject to reduced withholding tax rate of 10% in most cases (domestic rate is 15%), while consulting services can be exempt from withholding tax under a DTT if certain conditions are met.
If services are reclassified as a royalty for earlier periods, Kazakhstan companies which are recipients of services could be subject to an extra 15% withholding tax burden.
How we can help you?
We recommend reviewing interoffice services contracts to identify if they contain elements of intellectual property rights (royalty).
We can:
- review your contracts and provide our opinion if these contracts contain a royalty element;
- prepare position papers;
- support with the tax appeal process during cameral control or tax audit.
If you are interested in our support or any additional information, please contact us.
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If you are interested in additional information, please contact us.
