Restrictions on Transactions with Individual Entrepreneurs under the Simplified Declaration: Analysis of the New Tax Code of the Republic of Kazakhstan - FCHAIN

According to paragraph 16 of Article 286 of the new Tax Code, expenses for goods, works, and services purchased from individual entrepreneurs (IEs) applying the simplified declaration regime are not deductible when calculating corporate income tax (CIT).

This means that, starting from January 1, 2026, legal entities under the general taxation regime will no longer be able to reduce their CIT base by the amount of such expenses.

For companies, this will result in an increased tax burden. For example, if previously a purchase of services from an IE worth 1,000,000 KZT allowed the company to reduce its CIT base and save about 200,000 KZT (at a 20% rate), from 2026 such expenses will no longer be deductible, and CIT will be paid on the full amount.

 Why This Restriction Was Introduced

The legislator aims to increase transparency in tax relations. The simplified regime does not require detailed expense accounting and therefore does not ensure transparent confirmation of costs by counterparties. To prevent potential misuse, the law removes the buyer’s right to claim tax deductions for transactions with IEs applying this regime.

 Who Is Subject to the Restriction

According to Articles 722–727 of the new Tax Code, the special tax regime based on a simplified declaration may be applied by:

• individual entrepreneurs and legal entities whose annual income does not exceed 600,000 monthly calculation indices (MCI);
• organizations with up to 30 employees;
• businesses engaged in activities not included in the restricted list.

Therefore, the restriction on deductions applies only to counterparties using the simplified declaration regime and does not cover:

• IEs under the general tax regime;
• legal entities under the general regime;
• self-employed individuals applying the special self-employment regime (STR-S).

Impact on Accounting and Tax Reporting

Starting January 1, 2026, expenses under contracts with IEs on the simplified declaration regime will be recorded as permanent tax differences. These expenses will not reduce the CIT base and must be disclosed in the tax declaration (Form 100.00).

Companies are advised to update their tax and accounting policies in advance to specify that such expenses are non-deductible.

Recommendations for Businesses

To minimize tax risks and maintain cost efficiency, FChain experts recommend the following steps:

1. Conduct a legal audit of all current contracts with IEs applying the simplified declaration regime. Identify the scope and proportion of such expenses within procurement structures.
2. Negotiate with counterparties to transition to the general taxation regime or re-register as a limited liability partnership (LLP). This will preserve deductibility and prevent additional tax assessments.
3. Include a tax clause in contracts, for example:
   “The Contractor guarantees that they do not apply the special tax regime based on a simplified declaration. In case of any change in regime, the Contractor shall notify the Customer in writing within five calendar days.”
   This provision will help protect the company from tax risks.
4. Update internal procurement procedures to include mandatory verification of a counterparty’s tax status (via the State Revenue Committee or the e-Gov portal).

 Transition of IEs from Simplified Declaration to Other Regimes

According to Articles 718, 720, and 840 of the new Tax Code, the simplified declaration regime will cease to be effective as of March 1, 2026.
Individual entrepreneurs must notify tax authorities about their transition:

• to the general taxation regime, or
• to the special self-employment tax regime (STR-S).

If no notification is submitted, the entrepreneur will be automatically transferred to the general regime.

 STR-S: A New Alternative for the Self-Employed

The STR-S regime is designed for individuals without employees. It provides for a single tax payment of approximately 4% of income (up to 300 MCI per month) and does not restrict companies from claiming tax deductions.

For legal entities (including ADI), cooperation with self-employed individuals under the STR-S regime remains compliant and low-risk:

• expenses under contracts are deductible if properly documented;
• no CIT withholding or social contributions are required, as the self-employed individual pays them independently;
• documentary proof includes a contract, act of services rendered, and a QR code from the e-Salyq Business

It is essential to avoid signs of employment relationships and to ensure contracts specify services or deliverables rather than work functions.

*Reservation regarding the special tax regime for self-employed persons:

Paragraph 16 of Article 286 of the new Tax Code of the Republic of Kazakhstan prohibits the deduction of expenses under contracts with persons applying a special tax regime based on a simplified declaration. Despite the fact that Articles 719–721 of the Tax Code of the Republic of Kazakhstan distinguish STR-S (self-employed) as a separate regime, and Article 723 applies simplified declarations only to individual entrepreneurs and legal entities, the wording “persons applying a special tax regime” allows for broad interpretation.

Thus, the current version of the Tax Code of the Republic of Kazakhstan (with contradictory provisions) allows for the fact that self-employed persons under the STR-S may also be subject to the restriction under paragraph 16 of Article 286 of the Tax Code of the Republic of Kazakhstan. There are no official explanations from state authorities on this issue yet, so there is still a risk that expenses under contracts with self-employed persons will also not be recognized as a deduction. This disclaimer is included to give ADI a fair warning about possible changes in law enforcement practice.

 Frequently Asked Questions

1. Which provisions regulate work with IEs?
   Articles 722–727 of the new Tax Code set out the rules for applying the simplified declaration regime, including activity restrictions and exclusions.
2. What are the risks of maintaining contracts with IEs after January 1, 2026?
   Expenses under such contracts will not be deductible, which increases CIT liabilities. The tax authorities may also impose additional assessments, penalties, and fines under Articles 41 and 611 of the new Tax Code.
3. How can companies minimize tax losses?
   Conduct a contract audit, transfer key counterparties to the general regime or STR-S, and revise contract prices to offset the loss of deductibility.

Conclusion

From January 1, 2026, paragraph 16 of Article 286 of the new Tax Code of the Republic of Kazakhstan prohibits legal entities from deducting expenses incurred under contracts with IEs applying the simplified declaration regime. This change will significantly affect corporate accounting and legal practices, increasing the tax burden and requiring a review of contractual procedures.

To adapt to the new requirements, companies are advised to conduct a legal and tax audit of contracts and documents, revise tax policies and procurement procedures, and engage professional legal support for contract review, registration of amendments, and preparation of updated templates.

FChain offers a full range of professional services for businesses, including:

• legal support and compliance audits for organizations;
• drafting and review of contracts (including international, labor, and lease agreements);
• outsourced legal services for companies;
• registration services (establishment of LLPs, registration of representative offices);
• comprehensive accounting and tax support.

Contact us for a personalized consultation on the application of the new Tax Code and the adaptation of your business to the upcoming legislative changes.

 For professional support, please contact us at almaty@f-chain.com or via WhatsApp at +7 771 214 1820