Kazakhstan: Latest tax amendments make the use of double tax treaties more difficult

In brief

In December 2022, Kazakhstan amended its Tax Code1. Below we summarize some of the most important amendments:


  1. Additional Restrictions on Treaty Benefits for Dividends/Royalty and Interest. From 1 January 2023, additional restrictions were imposed on the possibility for a Kazakhstani company to apply double tax treaty benefits in relation to dividends, royalty or interest payable to its foreign related party. In particular, if the recipient of income (related party) is a tax resident of the country, the double tax treaty of which with Kazakhstan has been amended by the OECD Multilateral Instrument,2 the treaty rates may only be applied if the recipient is subject to an effective income tax rate of at least 15% on the dividends, royalty or interest in its home country.

    This amendment is clearly in breach of applicable double tax treaties which do not impose such restrictions and which override domestic tax laws in the event of discrepancies. However, this amendment will likely be enforced in practice anyway.
  2. The Definition of Withholding Agents in Share Deals has been Expanded. With effect from 21 February 2023, individuals who are not independent contractors will also become withholding agents in relation to capital gains in share deals. As such, they will need to deduct the capital gains tax from the purchase price and pay it to the state.

    Technically, this amendment could be adopted not later than 1 July of 2022. However, it will likely be enforced in practice anyway.

Recommended actions

  • If you have a Kazakhstani subsidiary that plans to pay dividends, royalty or interest to its offshore related party, we suggest preparing paperwork confirming payment of income tax in the home country and providing it to the subsidiary. If the recipient is not subject to tax (or the tax is lower than 15%), the application of treaty rates on dividends, royalty or interest should be discontinued.
  • If you have a share deal with a citizen of Kazakhstan who is not an independent contractor, you may wish to consider the capital gains tax implications in Kazakhstan.


For further information and to discuss what the above developments might mean for you, please get in touch with your usual Baker McKenzie contact.


1 Law of the Republic of Kazakhstan No. 165-VII ZRK dated 21 December 2022 “On Introducing Changes and Additions to the Code of the Republic of Kazakhstan On Taxes and Other Mandatory Payments to the Budget (Tax Code) and the Law of the Republic of Kazakhstan On Enactment of the Code of the Republic of Kazakhstan On Taxes and Other Mandatory Payments to the Budget (Tax Code)”. Multilateral Convention to Implement Tax Treaty Related Measures to Precent Base Erosion and Profit Shifting.

2 Multilateral Convention to Implement Tax Treaty Related Measures to Precent Base Erosion and Profit Shifting.

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