In the first edition of our Kazakhstan Tax Series, we set out some tax tips for companies who have already registered a business or a branch of their business in Kazakhstan. Getting to grips with tax issues in a foreign country involves careful preparation to make sure your business does not, in the worst case scenario, fall foul of the relevant rules and regulations. Best case scenario is that you are up to date, fully aware and in a position to take advantage of all available tax breaks. Ideally, such work needs to be done well in advance to ensure that your company gets it right from the outset. In this edition, the focus is on with-holding tax (WHT) and non-resident VAT.
Top Tips on WHT and non-resident VAT
It is essential that you properly account for tax on overseas supplier invoices. Typically these taxes will be with-holding tax and non-resident VAT.
There are good operational reasons for doing so.
Let’s imagine that one of your Kazakhstan customers has asked you to supply items which you’ll need to import. Perhaps they’re not part of the every-day package of services which you deliver locally on unit rates (e.g. day or project rates). Many clients operating in the oil and gas sector will allow you to mark-up the cost of a product by an agreed percentage to cover your procurement costs and profit. It’s a straightforward way of meeting the customer’s needs, and adding to your profits (although it may well reduce your profit margins if you are used to a higher margin on your day-to-day work).
What’s the catch?
If you fail to correctly account for WHT or non-resident VAT you may risk wiping out the profits you should have made. For instance, if you mark-up the invoice without including WHT, you may not receive sufficient income from your supplier to cover the WHT, let alone the procurement costs and profit which you should have covered. In our experience, it’s unlikely that clients will accept retrospective claims for additional costs, and the tax remains payable whether or not you recovered it from your client.
You may be at particular risk of falling foul of this issue if you have a branch in Kazakhstan, but your head office is paying the supplier’s invoices.
Check you are correctly accounting for WHT and non-resident VAT BEFORE you mark-up supplier invoices for payment by your client.
If you are considering setting up a business or are already established in Kazakhstan and could benefit from advice on tax or other business issues, we’d be delighted to help.
Contact us for further information.
The above information is for general purposes only and is not intended and should not be construed as legal, accounting or tax advice. The content may not be applicable or suitable for every individual’s particular circumstances and should not be used as a substitute for consultation for professional advice on tax or accounting matters.
Disclaimer: This blog is provided for information purposes only. We accept no responsibility for any losses arising from any action you take or do not take as result of this information. If you require specific advice, please contact us and we will be happy to help.