Regulatory Legal Acts Developed in Performance of the New Law of the RK on Transfer Pricing

Regulatory Legal Acts Developed in Performance of the New Law of the RK on Transfer Pricing

The Law of the Republic of Kazakhstan ‘On Transfer Pricing’ (hereinafter – the ‘Law’) contains references to the regulatory legal acts, which include:

v Rules of Cooperation between Custom and Tax Agencies.

v Rules of Transactions Monitoring.

v List of Goods (Works, Services) Subject to Monitoring.

v Rules of Agreement Conclusions.

v List of the Official Information Sources on Market Prices.

v List of the Foreign Countries with Preferential Taxation

v List of Exchange Goods.

Rules of Cooperation of Authorised Agencies when Controlling Transfer Pricing

Tax and custom agencies cooperate in performing audits on transfer pricing. The audits are performed in relation to the following sectors:

v exchange goods approved by the Government of the Republic of Kazakhstan;

v goods (works, services) subject to monitoring approved by the Government of the Republic of Kazakhstan;

With regards to other products, the audits will be appointed:

v on the basis of information on the application of transfer prices from the state agencies;

v when performing tax and custom audits in accordance with the tax and customs legislation of the Republic of Kazakhstan.

Rules of Transactions Monitoring

Transactions monitoring is performed by monitoring prices applied by parties to the transactions by authorised agencies.

Transactions monitoring will apply to those tax payers, who are specified in accordance with the   Government Decree of the Republic of Kazakhstan of 31 December 2008 № 1344. The letter from the Tax Committee of the Ministry of Finance of the Republic of Kazakhstan of 25 August 2009 № NK-05-22/8102 explains the taxpayers categories that are subject to monitoring of transactions.

Monitoring of transactions is reported to the Tax Committee on or before 15 April of the year following the reporting period (calendar year) in Excel with support by hard copies.

Taxpayers that are not included in the list of taxpayers subject to monitoring of transactions are also required to keep records substantiating the validity of applicable price, and only at the request of authorized bodies to provide it to the competent authorities.

The differential (discount) is considered when determining the market price in the case of a timely and founded submission of the information on transactions monitoring, i.e. in case of a failure to submit or incompletely submit the documents in the course of transactions monitoring, the data will not be considered even if submitted in the course of a tax audit.  

List of Goods (Works, Services) Subject to Monitoring of Transactions

There is a list of goods (works and services) subject to monitoring of transactions approved in accordance with the Resolution of the Government of the Republic of Kazakhstan dated 12 March 2009, No. 293.

This list includes the basic commodity items to be exported by Kazakhstani companies as well as:

v construction work

v assembly work

v marketing services

v forwarding services

At present, all companies rendering the abovementioned works and services or using them in their entrepreneurial activity will submit the reports thereon to the Tax Committee, i.e. who they were rendered to or who they were purchased from, at what price, in what amount, method of transaction pricing, place of the supplier’s registration, etc.

The procedure for submission of the reports is specified in the Rules of monitoring of transactions.

Rules of Conclusion of Agreements on Transfer Pricing

At the present time, you may conclude an agreement for the transfer pricing application with authorised agencies.

Such an agreement for the transfer pricing application is a written agreement between the competent authorities and transaction parties establishing a method for determining the market price and source of information used to determine the market price. The agreement is signed between the Tax and Customs Committees of the Ministry of Finance of the Republic of Kazakhstan and you. The agreement is valid for 3 years from the date of its signing.

List of the Official Information Sources on Market Prices

There is the list of export goods (works, services) and information sources, which may be used when determining the market price:

v Oil and oil products – ‘Platts’, ‘Reuters’

v Natural and liquefied gas –  ‘Platts’, ‘Reuters’

v Grain and oil crops – ‘APK – Inform’, ‘Tcena – Inform’

v Cotton – ‘Cotlook Limited’

v Precious metals – ‘Reuters’, ‘Metal Bulletin’

v Ferrous and non-ferrous metals – ‘Platts’, ‘Reuters’, ‘Metal Bulletin’, ‘Megasoft Russia’

v Financial services – ‘Reuters’, ‘Bloomberg’

v Ores and concentrates – ‘Tcena – Inform’, ‘Megasoft Russia’, ‘The TEX Report Ltd’, ‘Ryan’s Notes’, ‘Alloy Metals and Steel Market Research’

You may find the complete list in the Resolution of the Government of the Republic of Kazakhstan dated 12 March 2009 No. 292.

‘Argus Media’, which provided not only information on the world markets but associated expenses related to products delivery to the world markets as well, has been withdrawn from the list.

List of the Foreign Countries with Preferential Taxation

The Resolution of the Government of the Republic of Kazakhstan dated 31 December 2008 No. 1318 approved the list of countries with preferential taxation.

This list contains 63 territories including:

- Swiss Confederation;

- Grand Duchy of Luxembourg;

- People's Republic of China (Macao and Hong Kong in particular);

- Kingdom of the Netherlands (Aruba and Antilles in particular);

- United Arab Emirates (Dubai in particular);

- Republic of Singapore.

In the case of transactions with the countries with preferential taxation, the differential (discount) is not considered when determining the market price.

Best Regards,

Transfer Pricing Department

Tel.: +7 (727) 2445-777
Fax: +7 (727) 2445-776
info@gratanet.com
amendybayev@gratanet.com