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

Article 359. Offset of a foreign tax

1. Amounts of income taxes or any foreign tax similar to individual income tax (for the purposes of this article, hereinafter referred to as a foreign income tax) paid outside the Republic of Kazakhstan on income received by a resident individual from sources outside the Republic of Kazakhstan shall be applied against individual income tax paid in the Republic of Kazakhstan within the range of the individual income tax rate in the manner specified in Article 303 of this Code, given a document confirming the payment of such a foreign income tax.

2. The amount of a foreign income tax on the financial profit of a controlled foreign company or the financial profit of a permanent establishment of a controlled foreign company shall be applied against the individual income tax paid in the Republic of Kazakhstan and calculated using the formula below:

To = P х D х Re/100%, where:

To - the amount of a foreign income tax to be offset;

P - positive value of the financial profit of a controlled foreign company or positive value of the financial profit of a permanent establishment of a controlled foreign company included in annual income of a resident individual in accordance with Article 340 of this Code;

D – the ratio of direct or indirect or constructive participation or direct or indirect or constructive control of a resident in a controlled foreign company, determined in accordance with Article 297 of this Code;

Re - the effective rate calculated in accordance with Article 294 of this Code.

The provisions of this paragraph do not apply to a controlled foreign company and (or) a permanent institution of a controlled foreign company, which are registered in states with preferential taxation and (or) when calculating the total profit of a controlled foreign company and (or) a permanent institution of a controlled foreign company, the resident uses in the current tax period the formula with a share of passive income.

The provisions of this paragraph apply if a foreign income tax is paid from the financial profit of a controlled foreign company or the financial profit of a permanent establishment of a controlled foreign company at an effective rate of less than 10 percent in the state of registration of:

1) a controlled foreign company or a permanent establishment of a controlled foreign company;

2) a controlled foreign company that set up a permanent establishment;

3) a controlled person, through which a resident indirectly owns participatory interests (voting shares) or has indirect control in a controlled foreign company.

In case a foreign income tax was imposed on the financial profit of a controlled foreign company or the financial profit of a permanent establishment of a controlled foreign company in two or more foreign states, only that foreign income tax is subject to offset, the effective rate of which has the maximum value out of all the effective rates of a foreign income tax paid in such foreign states. The provisions of this paragraph apply:

1) in case of indirect ownership of participatory interests (voting shares) or indirect control in a controlled foreign company and the payment of a foreign income tax on the financial profit of a controlled foreign company or the financial profit of a permanent establishment of a controlled foreign company in two or more foreign states (the states of registration of a controlled person (controlled persons), through which such indirect ownership or such indirect control is exercised), or

2) in case of direct ownership of participatory interests (voting shares) or direct control in a controlled foreign company and the payment of a foreign income tax on the financial profit of a permanent establishment of a controlled foreign company in foreign states of registration of:

a permanent establishment of a controlled foreign company;

a controlled foreign company that set up a permanent establishment.

In case of the resident’s direct and indirect ownership or direct and constructive ownership of participatory interests (voting shares) or the resident’s direct and indirect or direct and constructive control in a controlled foreign company, the amount of a foreign income tax on the financial profit of a controlled foreign company or the financial profit of a permanent establishment of a controlled foreign company, to be offset in accordance with this paragraph, shall be calculated separately for each direct and indirect ownership or direct and constructive ownership of participatory interests (voting shares) or direct and indirect control or direct and constructive control in a controlled foreign company. In this case, the amount of such a foreign income tax calculated separately for direct and indirect ownership or direct and constructive ownership of participatory interests (voting shares) or direct and indirect control or direct and constructive control in a controlled foreign company is subject to offset in accordance with this paragraph.

To apply this paragraph, a resident shall have documents specified in part five of paragraph 4 of Article 303 of this Code.