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

Article 651. Identification of taxable income

1. Unless otherwise established by this article and Article 653 of this Code, the identification of taxable income, the calculation and payment of corporate income tax on the income of a permanent establishment of a non-resident legal entity shall be made in accordance with the provisions of this article and Articles 224-293, 299-315 of this Code.

2. The total annual income of a permanent establishment of a non-resident legal entity consists of the following types of income from the activity of such a permanent establishment (to be) received from the date of commencement of its activity in the Republic of Kazakhstan:

1) income from sources in the Republic of Kazakhstan provided for by paragraph 1 of Article 644 of this Code;

2) income specified in paragraph 1 of Article 226 of this Code, not included in subparagraph 1) of part one of this paragraph;

3) income from sources outside the Republic of Kazakhstan, including that received through employees or other hired personnel;

4) income of a non-resident legal entity, including income of its structural units in other states, received from carrying out activity in the Republic of Kazakhstan, which is similar to or of the same kind of that carried out through the permanent establishment of this non-resident legal entity in the Republic of Kazakhstan.

The total annual income of a permanent establishment of a non-resident legal entity shall not include:

1) income identified in subparagraphs 3) and 4) of paragraph 2 of Article 644 of this Code;

2) excess of the amount of the positive exchange rate difference over the amount of the negative exchange rate difference arising in accordance with international financial reporting standards and the legislation of the Republic of Kazakhstan on accounting and financial reporting for the obligations of a permanent establishment of a non-resident legal entity to its head office or other structural units of such a resident legal entity.

3. If a non-resident carries out entrepreneurial activity both in and outside the Republic of Kazakhstan within the framework of one and the same project or related projects performed together with its permanent establishment in the Republic of Kazakhstan, the income of such a permanent establishment is the income it could receive if it were an independent and separate legal entity, engaged in the same or similar activity under the same or similar conditions, and acted independently of the resident legal entity, whose permanent establishment it is.

4. If the goods produced by a permanent establishment of a non-resident legal entity in the Republic of Kazakhstan are sold by another structural unit of the non-resident legal entity located outside the Republic of Kazakhstan, the income of such a permanent establishment of a non-resident legal entity is recognized as income that it could receive if it were an independent and separate legal entity, engaged in the same or similar activity under the same or similar conditions, and acted independently of the non-resident legal entity, whose permanent establishment it is.

5. For the purposes of applying this article, the income of a permanent establishment of a non-resident legal entity shall be determined with account of the norms of the legislation of the Republic of Kazakhstan on transfer pricing.

6. Expenses directly related to the receipt of income from activity in the Republic of Kazakhstan through a permanent establishment shall be allocated to deductibles, regardless of that whether they were incurred in or outside the Republic of Kazakhstan, except for expenses not subject to deduction in accordance with this Code, and expenses aimed at obtaining income defined in subparagraphs 3) and 4) of paragraph 2 of Article 644 of this Code.

7. A non-resident legal entity shall not be entitled to allocate to deductibles of its permanent establishment the amounts presented to the permanent establishment in the form of:

1) royalties, fees, charges and other payments for the use or granting of the right to use the property or intellectual property of this non-resident legal entity;

2) income from services rendered by the non-resident legal entity to the permanent establishment;

3) interest on loans granted by this non-resident legal entity to the permanent establishment;

4) expenses not related to the receipt of income from the activity of the non-resident legal entity through the permanent establishment in the Republic of Kazakhstan;

5) expenses without supporting documents;

6) managerial and general administrative expenses of the non-resident legal entity specified in paragraph 2 of Article 662 of this Code, not related to carrying out its activity in the Republic of Kazakhstan through its permanent establishment.

8. It is not allowed to allocate to deductibles of a permanent establishment of a non-resident legal entity the excess of the amount of the negative exchange rate difference over the amount of the positive exchange rate difference arising in accordance with international financial reporting standards and the legislation of the Republic of Kazakhstan on accounting and financial reporting for obligations of the permanent establishment of the non-resident legal entity to its head office or other structural units of such a resident legal entity.