On taxes and other obligatory payments to the budget (Tax Code)

Article 406. VAT subject to offset with account of adjustment

1. The amount of VAT subject to offset with account of adjustment is calculated for a taxable period as follows:

the amount of VAT subject to offset determined in accordance with Article 400 of this Code

minus

the amount of adjustment of VAT subject to offset provided for in Articles 403, 404 and 405 of this Code

plus

the amount of upward adjustment of VAT subject to offset provided for in paragraph 3 of Article 404 and paragraph 2 of Article 405 of this Code.

2. The amount of VAT subject to offset inclusive of the adjustment, determined in accordance with this article, may have a negative value.
Article 407. Methods for determining amounts of VAT allowed to be offset

1. Unless otherwise provided for by paragraph 2 of this article, a VAT payer, except for the one specified in paragraph 3 of this article, shall determine the amount of VAT allowed to be offset using one of the following methods:

the proportional method;

by maintaining separate accounting for VAT on goods, works, services that are used or will be used for the purposes of taxable and non-taxable turnovers.

2. The following persons, using the proportional method for offsetting, have the right to determine the amounts of VAT allowed to be offset by maintaining separate accounting for specific types of turnovers:

1) second-tier banks, organizations engaged in certain types of banking operations, organizations engaged in microfinance activities (except for credit partnerships and pawnshops) - in terms of turnovers associated with the receipt and sale of pledged property (goods);

Note!

Subparagraph 2) is in effect until 01.01.2027 according to Law of the Republic of Kazakhstan № 121-VI as of 25.12.2017.

2) an organization focusing on the improvement of the quality of loan portfolios of second-tier banks, whose sole shareholder is the Government of the Republic of Kazakhstan, using the proportional method for offsetting - with regard to turnovers from the acquisition, ownership and (or) sale of:

pledged assets (goods) received from a bank as a result of the purchase from such a bank of the rights of claim;

assets (goods) transferred into the ownership of a bank as a result of foreclosure on pledged assets and received by an organization focusing on the improvement of the quality of loan portfolios of second-tier banks, whose sole shareholder is the Government of the Republic of Kazakhstan, as a result of the purchase from such a bank of the rights to claim doubtful and bad assets;

Note!

Subparagraph 3) is in effect until 01.01.2027 according to Law of the Republic of Kazakhstan № 121-VI as of 25.12.2017.

3) a subsidiary bank acquiring doubtful and bad assets of its parent bank – with regard to turnovers from the acquisition, ownership and (or) sale of:

pledged assets (goods) received as a result of foreclosure on the rights to claim doubtful and bad assets acquired from the parent bank;

assets (goods) transferred into the ownership of the parent bank as a result of foreclosure on pledged assets and acquired by a subsidiary bank from its parent bank;

4) a lessor – with regard to turnover from the transfer of property into financial lease. The costs of the lessor associated with the acquisition of property to be transferred into financial lease are considered as costs incurred for the purposes of taxable turnover;

5) Islamic Bank – with regard to financing individuals and legal entities as a trade intermediary by way of granting a commercial loan without the term of subsequent sale of goods to a third party in accordance with the legislation of the Republic of Kazakhstan on banks and banking activity;

6) a VAT payer – with regard to transactions for the purchase and sale of goods as part of financing individuals and legal entities as a trade intermediary by way of granting a commercial loan on terms of subsequent sale of goods to a third party in accordance with the legislation of the Republic of Kazakhstan on banks and banking activity;

7) individual entrepreneurs and legal entities holding a tour operator license (a license for the tour operator activity), in accordance with the legislation of the Republic of Kazakhstan on tourism activity, maintain accounting for goods, works, services for the purposes of providing tour operator services separately from other activities. Accounting for goods, works, services for the purposes of providing tour operator services is maintained separately for turnover exempt from VAT in accordance with subparagraph 15) of Article 394 of this Code and taxable turnover.

3. A person constructing buildings, turnovers from the sale of which are exempt from VAT in accordance with paragraph 1 of Article 396 of this Code, is obliged to maintain separate accounting for amounts of VAT on goods, works, services that are used or will be used:

for the purposes of turnovers exempt from VAT in accordance with paragraph 1 of Article 396 of this Code and other turnovers;

in the process of construction of each building - for the purposes of applying paragraph 3 of Article 402 and Article 410 of this Code.

With regard to other turnovers, such a VAT payer is entitled to determine the amount of VAT allowed to be offset using the proportional method in accordance with Article 408 of this Code.

Footnote. Article 407 as amended by Law of the Republic of Kazakhstan No. 262-VI dated 03.07.2019 (shall be enforced since 01.01.2020).