The Impact of Kazakhstan’s Google Tax on Foreign Companies:
Starting in 2022, Kazakhstan introduced new Value-Added Tax (VAT) regulations impacting foreign companies engaged in electronic commerce or the provision of electronic services to individuals through internet platforms. This tax has also been called the “Google Tax” because of the entities targeted and forms part of the State Revenue Committee’s (SRC) efforts to address the growing digital economy. Thanks to these new measures, Kazakhstan has been able to recover millions of dollars in VAT that otherwise would not have been paid.
Which companies are subject to the Google Tax?
Under the Google Tax, VAT applies to foreign companies offering digital services or e-commerce to individuals in Kazakhstan. Criteria include transactions involving Kazakhstani residents, payment methods linked to Kazakhstan, network addresses registered in Kazakhstan, or the use of phone numbers with the country’s international code. As such, it is imperative that platform operators keep track of whether or not they fall under any of these conditions.
What are the legal obligations applicable to platform operators?
Regardless of their transaction volume or turnover, non-resident companies that qualify are required to register under the Google Tax scheme. However, VAT is not required for B2B transactions. Instead, the local customer handles VAT through the reverse-charge mechanism.
The VAT rate for digital services and e-commerce by foreign companies is set at 12%. Payments are due quarterly, with specific deadlines on May 25, August 25, November 25, and February 25 each year.
Foreign companies are exempt from providing VAT reports or issuing electronic invoices, with the tax administration relying on transaction data from banks. Regardless, even sophisticated in-house tax teams may struggle to keep track of the Google Tax’s nuances, which is why external advice and support is often essential.
How do companies register for the Google Tax?
Foreign companies must submit a confirmation letter to the SRC, including the company’s name, tax registration, state registration numbers, and bank details for VAT payments. This can be handled by experienced partners like VAT IT Compliance, who can leverage expertise and local contacts.
Are there specific banking and payment requirements?
All taxes must be paid in the local currency, Kazakhstani Tenge or KZT. Unfortunately, companies unable to open a bank account in this currency within their home country must establish one in Kazakhstan. Thisinvolves obtaining a Business Identification Number (BIN) — a process that can take 30 to 90 days.
What next?
The introduction of the Google Tax is a significant step towards adapting tax policies to the realities of the digital economy. As a result, foreign companies providing e-commerce or electronic services to Kazakhstani consumers must take careful note of these regulations to ensure compliance and avoid potential legal and financial complications.
VAT IT Compliance can assist with all the above, offering comprehensive advice and support at every stage of the process. You can consult our experts for tailored assistance to help navigate these regulations efficiently and expand your business’s reach.
