An updated draft law – approved by the lower house of the Kazakhstan Parliament in late September – shows that plans to extend the Kazakh VAT system to foreign-supplied digital services will apply from January 1, 2022, instead of January 1, 2021, as originally planned.
In doing so, Kazakhstan is following the path of its Central Asian neighbour Uzbekistan. The Uzbek VAT obligations commenced for non-resident digital businesses on January 1, 2020.
The region had not witnessed much movement until Uzbekistan's legislative change with only Azerbaijan, across the Caspian Sea, being the closest tax jurisdiction to have made any amendments to their tax code to bring foreign-supplied digital services into scope.
Rules in Azerbaijan for foreign suppliers of digital services to pay VAT at the place of consumption have been in place since January 2017. However, the burden of the collection is currently with the local card issuers.
Here we outline some of the characteristics of the Kazakhstan, Uzbekistan, and Azerbaijan rules:
Planned date of introduction: January 1, 2022
Tax rate: 12% (VAT)
According to the proposed draft law, a foreign digital service supplier with customers in Kazakhstan will be required to register for VAT. These suppliers will also be obliged to regularly remit VAT on their sales in Kazakhstan based on the turnover of services rendered.
Affected digital services would include (non-exhaustive list) the provision of the following services via the internet:
Date of introduction: January 1, 2020
Tax rate: 15% (VAT)
Foreign suppliers of affected digital services must register for the collection and remittance of VAT on the sales they have in Uzbekistan. The rules were introduced on January 1, 2020, and foreign suppliers with digital sales to customers in Uzbekistan can register online here: http://tax.uz/en
By late October 2020, a total of 20 foreign suppliers had registered to collect and remit VAT on their sales in Uzbekistan. The list is publicly available here: https://tax.uz/en/site/companys
At the same time Uzbekistan's Ministry of Finance also released a lengthy statement on the importance of the digital economy to the country's continued growth.
The place of supply of affected digital services are deemed to be in Uzbekistan if:
Affected digital services include the following (non-exhaustive list):
Date of introduction: January 1, 2017
Tax rate: 12% (VAT)
Rules in Azerbaijan for foreign suppliers of digital services to pay VAT at the place of consumption have been in place since January 2017.
However, the rules differ from those proposed in Kazakhstan and Uzbekistan as the burden of the collection is currently with the local card issuers. We will, of course, update you if there is a change to this obligation.
Acknowledgement: Thanks to Liya Akzhanova, of GRATA International, for her help in researching this article.
The information contained in this publication (“Information”) has been provided to you for general information purposes only and we recommend that you obtain professional advice before acting or refraining from action as a result of the Information. Taxamo accepts no liability for any loss occasioned to any person acting or refraining from action as a result of the Information.
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