Transcript Slide 1

www.pwc.com
Tax and Legal
Environment in
Kazakhstan
March 2013
Local Content
• Local Content (“LC”) means Kazakhstan citizens, as well as goods, works and
services of Kazakhstan origin.
• LC requirements were originally established for the subsurface use sector.
Each subsurface user (oil and gas and mining) must ensure specified LC in
purchased goods, works and services and in its personnel.
• Separate LC requirements are also envisaged for state procurement
(government and Samruk-Kazyna).
• Subsurface use, government and Samruk-Kazyna procurement rules differ
but are generally aligned and have the same goal.
• Through work permit regulations, LC is also enforced with respect to
everyone regarding the hiring of personnel.
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Unified Local Content Formulas
1.
LC in personnel: Percentage of Kazakhstan employees in total headcount
engaged in performing the contract with a breakdown by category.
2.
LC in goods: Percentage of local materials costs and production /
processing costs incurred in Kazakhstan in the price of goods.
3.
LC in works and services: aggregate total percentage of LC in goods
used for works in the supplier/provider contracts’ price and/or salaries of
Kazakhstan citizens of the supplier’s/provider’s salary fund less the cost of
goods used for works and subcontract’s prices.
4.
LC in subsurface user’s purchases: aggregate total percentage of LC in
goods and LC in works and services in all subsurface user’s purchases.
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(1)
(2)
(3)
(4)
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Local Content in subsurface use sector:
“Kazakhstan Producer”
•
Obtaining the status of a “Kazakhstan producer” grants a deemed
20% reduction of your price for selection as the tender winner by a
subsurface user.
•
There are two legal definitions of “Kazakhstan producer”
― “Kazakhstan producer of works and services”
― “Kazakhstan producer of goods.”
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Local Content in subsurface use sector: Becoming
a “Kazakhstan Producer”
•
To obtain the status of a “Kazakhstan producer of works and
services” the producer
― must be a legal entity registered under Kazakhstan laws and
― use at least 95% of Kazakhstan citizens in its personnel.
•
To obtain the status of a “Kazakhstan producer of goods” the
producer
― must be a legal entity registered under Kazakhstan laws and
― produce goods of Kazakhstan origin as confirmed by a
Certificate of Origin issued by the Kazakhstan Chamber of
Commerce and Industry (CT-KZ certificate).
•
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Subsurface users may also require higher LC standards in tenders
to show best in class among potential providers regarding LC.
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State Procurement – Works and Services
•
To obtain the status of a “National
producer of works and services”
for state procurement the producer
― must be a legal entity
registered under Kazakhstan
laws and
― use at least 95% of Kazakhstan
citizens in its personnel.
•
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No more than 2/3 of the total
volume of works or services may be
subcontracted for state
procurement.
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State Procurement – Notional Discounts for LC in
Works and Services
• A notional discount of 5% would be applied to the price proposed by a
national supplier, therefore giving the national supplier a 5% pricing
advantage over its competitors.
• Moreover, a national supplier showing local content will get a
corresponding notional discount of 0.1% for each 1% of local content in
the price proposed.
• “Local content in work and services” is defined under the law as
remuneration of employees, who are Kazakhstani citizens, in the salary
fund of the services provider under a contract for performance of
rendering of services, less the value of goods used and costs related to
subcontracts.
• This calculation is designed to create a ratio showing how much
compensation Kazakhstani citizens are receiving. The more Kazakhstani
citizens who are used (and paid) in provision of the services will lead to a
higher LC figure.
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State Procurement – Goods
•
To obtain the status of a “National producer of goods” for state
procurement the producer
― must be a legal entity registered under Kazakhstan laws and
― must fully produce or process the goods in Kazakhstan
pursuant to the Customs Code, as confirmed by a Certificate of
Origin issued by the Kazakhstan Chamber of Commerce and
Industry (CT-KZ certificate).
•
A notional discount of 10% would be applied to the price proposed
by a national supplier of goods, therefore giving the national
supplier of goods a 10% pricing advantage over its competitors.
•
Moreover, a national supplier showing local content will get a
corresponding notional discount of 0.1% for each 1% of local
content in the price proposed as reflected in the CT-KZ certificate.
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Samruk-Kazyna Procurement – Works and
Services
•
To obtain the status of a “National
producer of works and services” for
Samruk-Kazyna procurement the
producer
― must be a legal entity registered
under Kazakhstan laws and
― use at least 95% of Kazakhstan
citizens in its personnel.
•
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No more than 2/3 of the total volume
of works or services may be
subcontracted for Samruk-Kazyna
procurement.
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Samruk-Kazyna Procurement – Notional
Discounts for LC in Works and Services
• A national supplier showing local content in works and services will get a
notional discount of 0.1% for each 1% of local content in the price proposed.
• “Local content” is defined under the rules as remuneration of employees,
who are Kazakhstani citizens, in the salary fund of the services provider
under a contract for performance of rendering of services.
• This calculation is designed to create a ratio showing how much
compensation Kazakhstani citizens are receiving. The more Kazakhstani
citizens who are used (and paid) in provision of the works or services will
lead to a higher figure.
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Samruk-Kazyna Procurement – Goods
•
To obtain the status of a “National producer of goods” for SamrukKazyna procurement the goods must be fully produced or processed
in Kazakhstan pursuant to the Rules on identification of country of
origin, as confirmed by a Certificate of Origin issued by the
Kazakhstan Chamber of Commerce and Industry (CT-KZ
certificate).
•
A notional discount of 5% would be applied to the price proposed
by a national supplier of goods, therefore giving the Kazakhstan
supplier of goods a 5% pricing advantage over its competitors.
•
Moreover, a national supplier showing local content in goods will
get a corresponding notional discount of 0.15% for each 1% of local
content in goods as reflected in the CT-KZ certificate.
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General tax environment
• Kazakhstan tax legislation continues to change and is subject to
interpretation.
• Kazakhstan is, in general, a “form over substance” tax environment.
• Kazakhstan tax authorities are aggressive/demanding.
• Non-compliance with the tax legislation causes additional tax assessments,
penalties and administrative fines.
• It is important to have good chief and tax accountants.
• There is an electronic system for filing of tax returns and tax applications.
• Accounting software, e.g. 1C, is widely used for bookkeeping and tax
reporting.
• Currently Kazakhstan tax authorities are developing project for
implementation of electronic invoices.
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Repatriation of dividends
• Kazakhstan has concluded Double Tax Treaties with 44 countries (including
Spain) and an additional 2 Double Tax Treaties with Luxembourg and the
United Arabic Emirates have been signed, but not yet ratified.
• International treaties ratified by Kazakhstan have priority over its domestic
laws and are directly implemented except in cases when the application of an
international treaty requires the promulgation of a law.
• The dividend withholding tax rate is 15%, however it may be conditionally
reduced to 5% under the Double Tax Treaty with Spain.
• Kazakhstan tax legislation provides full exemption from Kazakhstan taxation
for dividends payable by Kazakhstan resident entity to a non-resident
shareholder provided that (i) holding period is more than 3 years; (ii) entity
paying the dividends is not a subsurface user in Kazakhstan; and (iii) 50% or
more of assets of the entity paying the dividends is not derived from the
Kazakhstan subsurface use property.
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Tax requirements
• Importation of goods to Kazakhstan attracts import VAT at 12%. However,
there is a list of goods that can be exempted from import VAT according to
offset VAT method.
• Kazakhstan, as a member of Customs Union starting from 1 July 2010,
applies import customs duties at rates ranging from 0% to 25% (on average;
higher rates exist for certain goods) depending on the classification of a
particular imported good, and excise duties (in case of importation of
excisable goods).
• There are nine special economic zones established in Kazakhstan which may
enjoy certain tax incentives, e.g. exemption from import taxes and customs
duties.
• Kazakhstan established a list of 62 countries with privileged taxation, also
known as the black list. Any income realized by non-residents
registered/located in a black-listed jurisdiction is subject to special tax rules.
The withholding tax rate is generally 20%.
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Tax requirements
• Foreign legal entities may choose to operate through simple PE, a branch or
a subsidiary.
• If a foreign legal entity does not register a PE, income paid to such legal
entity from Kazakhstan source should in most cases be subject to
withholding tax based on domestic law.
• Simple PE cannot be registered for value-added tax (VAT) purposes. Other
taxpayers are required to register for VAT purposes if their taxable supply in
the preceding 12 months exceeded 30,000 monthly calculation indexes
(currently, approximately USD 346,000).
• Services rendered in Kazakhstan (place of supply rule) by foreign legal
entities, which do not have a branch or representative office in Kazakhstan
and are not registered for VAT purposes, could be subject to reverse-charge
VAT at 12%.
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Branch vs. Kazakhstan legal entity
• Taxation scope (Kazakhstan-sourced
income vs. world-wide income)
• Net income taxation (frequency, base,
rate)
• Financing
• Head office G&A expenses
• Other, e.g. tax incentives
• Licensing
• Local content
• Work permit
• Foreign currency control
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Joint Venture Basic Structuring Options
Option 1: Onshore
Spanish
Partner
Option 2: Offshore
KZ Partner
Spanish
Partner
KZ Partner
Offshore HoldCo
JV (KZ
LLP)
•
•
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Relations between JV Partners will be
governed by Kazakhstan laws and
potentially subject to Kazakhstan courts. •
Some standard international JV
concepts (i.e., tag-along, drag-along,
forced sale / withdrawal for default) may
•
not be enforceable.
JV (KZ
LLP)
Relations between JV Partners can be
governed by foreign laws, e.g., foreign
law shareholders agreement and subject
to international arbitration.
Offshore HoldCo owns 100% of JV.
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PwC Kazakhstan
Walter Daniel
Director, Legal Services
Omon Tursunov
Director, Tax Services
34 Al-Farabi Ave., Building A, 4th floor,
050059 Almaty, Kazakhstan
6 Sary Arka Str., Business Centre Arman, 16th floor,
010000 Astana, Kazakhstan
T: +7 (727) 298 0448, F: +7 (727) 298 0252
www.pwc.com/kz
T: +7 (7172) 55 0707, F: +7 (7172) 55 0708
www.pwc.com/kz
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