What is an investment tax credit ?

Pursuant to the legislation, the taxpayers should meet the tax liabilities within the prescribed time limits.

Nonetheless, Article 49 of the Tax Code of the Republic of Kazakhstan stipulates the possibility to change the deadline for fulfilment of liabilities.   

The following options are provided:

• deferral of due date for the later period;
• extension of  payment terms for tax liabilities.

In practical terms, the taxpayers can change the deadline for fulfillment of liabilities in the following forms:

• taxes and payments deferral (sum is paid in one installment);
• installment (sum is paid in several installments on a monthly or quarterly basis).

Thus, the payment term can be changed both for the entire tax liability sum and for a part of it (Clause 2, Article 49, TC of RK). 

However, the existing procedure is not beneficial for the taxpayers. 

In order to get a deferral or installment for taxes, taxpayers should pledge their property or provide a bank guarantee (Clause 5, Article 49, TC of RK).

In the meantime, change of terms does not exempt a taxpayer from payment of penalty for late payment of taxes and fees (Clause 7, Article 49, TC of RK).

According to Clause 1, Article 51 of TC of RK, deferral term cannot exceed 6 months, while installment term cannot exceed 3 years. 

A new tool for the domestic tax system called an investment tax credit was introduced in order to support entrepreneurs. 

An investment tax credit involves such a change of due dates when a taxpayer can fully reduce payments for corporate and property tax up to 100% with subsequent stage-by-stage payment within no more than three years.   

How an investment tax credit is useful for entrepreneurs?

Compared to the previous conditions provided for change of deadlines for fulfilment of tax liabilities, an investment tax credit enables:

• reducing tax payments up to 100% with subsequent stage-by-stage payment;
• getting a deferral for up to 3 years.

An investment tax credit is provided for:

• corporate income tax;
• property tax.

Also, one can use the credit for the two types of taxes simultaneously.   

This will enable the entrepreneurs spending the funds saved on corporate income tax (20% out of the net profit) for a business development.   

Who can apply for the tax credit and how to get it?

An investment tax credit is provided to the taxpayers based on an agreement concluded on an investment tax credit.

The taxpayers complying with one of the following criteria are not entitled for an  investment tax credit:

• applying special tax regimes provided for by the section 20 of the Tax Code
• performing production and (or) sales of all types of alcohol, alcoholic products, tobacco products;
• performing activities on the territory of the free economic zone or being a subsoil user observing relevant taxation regimes pursuant to sections 21 and 23 of the Tax Code.

Decision on provision of an investment tax credit is made based on a taxpayer`s application and is executed through an agreement in an established format between an applicant and an authorized agency in the field of investments. 

The procedure for reduction of tax payments is stipulated by a concluded agreement on an investment tax credit.

The following is indicated in an agreement:

• procedure for tax payments reduction;
• validity term of an agreement;
• prohibition for sale of property acquired as a condition for provision of an investment tax credit to a taxpayer
• liability of the parties.

A copy of an agreement is sent to a tax agency at the place of a taxpayer`s registration no later than five calendar days from the date of its submission to an authorized agency in the field of investments. 

Thus, an investment tax credit cannot be considered as concession for tax payments.  

The three-year period within which once might not pay for corporate income tax and property tax should be used for stabilization of financial state and development of an organization at the expense of the saved funds.