Payments to Non-Residents: Tax Obligations - FCHAIN

Payments to Non-Residents: Tax Obligations

Settlements with foreign suppliers require companies to monitor not only contractual terms and delivery deadlines but also the related tax implications. If a Kazakhstan company makes an advance payment to a non-resident and the goods are not delivered or the services are not provided within the prescribed period, the outstanding obligation may be recognized as income of the non-resident from sources in the Republic of Kazakhstan. Companies working with foreign counterparties and making advance payments should therefore keep track of the applicable deadlines and closely monitor the fulfillment of contractual obligations.

 

When an Advance Payment Is Recognized as Income of a Non-Resident

A non-resident’s obligation arising from an advance payment received is recognized as the non-resident’s income in either of the following circumstances:

1. the non-resident fails to fulfill the obligation within 12 months from the date the advance payment was made;
2. the obligation remains outstanding as of the date when the payer of the advance payment submits liquidation tax reporting in connection with the liquidation of the company.

Therefore, making an advance payment to a foreign supplier does not in itself automatically result in the amount being recognized as income of the non-resident. Tax consequences arise if the obligation remains unfulfilled when either of the above conditions occurs.

 

Income Recognition Period Reduced to 12 Months

Previously, an outstanding obligation related to an advance payment was recognized as income of a non-resident after two years. The new Tax Code has reduced this period to 12 months. At the same time, recognition of the income does not depend on whether a tax treaty exists with the non-resident’s country or on the term of the agreement concluded between the Kazakhstan company and the foreign counterparty. For businesses, this means that long-outstanding advance payments made as part of foreign economic activities require closer monitoring. If a foreign supplier fails to fulfill its obligation, the expiry of the 12-month period has specific tax implications.

 

Who Calculates and Withholds the Tax

The obligation to calculate and withhold corporate income tax at source rests with the Kazakhstan party that made the advance payment. In this situation, the company acts as the tax agent. The tax is calculated at the rates established under Article 682 of the Tax Code of the Republic of Kazakhstan. The relevant calculation is reported in Form 101.04. Monitoring advance payments to foreign counterparties is therefore not merely a matter of ensuring contractual performance. For a Kazakhstan company, delayed delivery of goods or provision of services may result in additional tax obligations.

 

What Businesses Should Consider

Companies working with non-residents should monitor the dates of advance payments and the actual fulfillment of obligations by foreign suppliers. Particular attention should be paid to advance payments approaching the 12-month threshold, as well as outstanding obligations when a company is preparing for liquidation. Timely monitoring of such transactions helps businesses properly account for the resulting tax implications and report the required amounts in their tax filings.

 

FChain: Professional Business Support

FChain helps companies establish effective accounting, legal, and HR processes and supports businesses at various stages of their operations. Depending on the company’s needs, our specialists can provide the following services:

• Accounting Recovery — restoration of accounting records and bringing accounting documentation into proper order where there are gaps, errors, or accumulated discrepancies.
• Payroll Services — organization and support of payroll calculations and related recurring processes.
• Legal Support for Business — legal support for a company’s ongoing operations and assistance with corporate and contractual matters.
• Legal Audit — review of a company’s legal documents and processes to identify potential legal risks and areas requiring attention.
• Company Liquidation — support throughout the process of terminating a company’s operations, including organizational matters related to liquidation.
• Contract Drafting — preparation of contracts taking into account the nature of the transaction, the parties’ obligations, and the company’s commercial interests.
• Company Registration — support with establishing and registering a business in Kazakhstan.
• Recruitment — search and selection of professionals in line with the company’s requirements and staffing needs.
• HR Audit — review of HR processes and documentation to assess their current status and identify areas requiring attention.
• C3 Work Visa — assistance with the process of obtaining a C3 work visa for foreign professionals.

If your company works with foreign suppliers, makes advance payments to non-residents, or is preparing for liquidation, FChain specialists can provide the necessary accounting and legal support, with careful attention to deadlines, documentation, and obligations arising from such transactions.

 

 Payments to Non-Residents: Tax Obligations

Prepared by: Anel Kosmaganbetova

Assistant to the Director

Fchain Kazakhstan

 📩almaty@f-chain.com
WhatsApp: +7 771 214 1820