AL FARABI KAZAKH NATIONAL UNIVERSITY HIGH SCHOOL OF ECONOMY AND BUSSINESS DEPARTMENT OF FINANCE Bayan Ermekbaeva Rimma Sagieva Raigul Doszhan TAXES AND TAXATION Educational manual Аlmaty «Kazakh university» 2013 1 UDC 336.22 BBK 65.261.4 E 729 Recommended by the Academic Council of the High School of Economy and Business, and Editorial and Publishing Council of KazNU Reviewers: Doctor of Economic Sciences, professor Sagyndyk Satybaldin Doctor of Economic Sciences, professor Vladimir Melnikov Ermekbaeva B. at all E 729 Taxes and taxation: educational manual / B. Ermekbaeva, R. Sagieva, R. Doszhan. – Аlmaty: Kazakh university. High school of economy and business, 2013. – 122 p. ISBN 978–601–04–0109–9 The purpose of the educational manual is to help deepening and systematize the knowledge in the tax area. The educational manual «Taxes and taxation» aimed at undergraduate degree in finance, also enterprise managers and individuals, which interested in tax reporting. UDC 336.22 BBK 65.261.4 © Ermekbaeva B., Sagieva R., Doszhan R., 2013 ISBN 978–601–04–0109–9 © KazNU al-Farabi, 2013 2 CONTENTS Introduction .......................................................................5 Section I Taxes on income ................................................................6 Theme №1. Individual income tax ......................................6 Theme №2. Social tax .........................................................16 Theme №3. Corporate income tax ......................................23 Section II Property Taxes ..................................................................37 Theme №4. Land tax ...........................................................37 Theme №5. Property tax .....................................................46 Theme №6. Vehicle tax ......................................................54 Section III Taxes on consumption ......................................................59 Theme №7. Value-added tax ..............................................59 Theme №8. Excise tax ........................................................74 Theme №9. Tax on gambling .............................................85 Theme №10. Rental tax for export ......................................87 Theme №11. Fixed tax ........................................................89 Section IV Taxation of the subsoil users ............................................92 Theme №12. Special payments of subsoil users .................92 Theme №13. Excess profits tax ..........................................95 Section V Special tax regimes (STR) ................................................102 Theme №14 Special tax regimes for small businesses ........103 Theme №15. The special tax regimes for legal entities-agricultural producers .............................................108 Theme № 16. Special tax regimes for peasant farms ..........110 Additional tasks ......................................................................................113 References ............................................................................................121 Abbreviations 1 MCI Monthly calculated index defined in the Act, «the Republican budget» for the year 2 MW Minimum wage specified in the Act «Republican budget» for the year 3 TC Tax Code 4 MPC Mandatory pension contributions 5 TI Taxable income 6 CIT Corporate income tax 7 IIT Individual income tax 8 TAI Total annual income 9 VAT Value added tax 10 ST Social tax 11 SC Social contributions 12 I Inventory 13 SSIF State Social Insurance Fund 14 SSA State social assistance 15 IE Individual entrepreneur 16 LLP Limited liability partnership 17 MET Mineral extraction tax 18 STR Special tax regime 19 c.c Cubic centimeter Introduction One of the most important tools of the government's economic policy implementation were always and continue to be the taxes. In connection with this, the knowledge of the tax legislation, procedure and conditions of its functioning is the essential condition for the society. The purpose of this study guide is a delivery of the assistance in deepening and systematization of the knowledge in the tax area. The authors' task is first of all to give a clear idea of the essence of the taxes, the main types of taxes, the tax system in general and its role in the economic development of the society. For the solving of this issue in the study guide the operating in Kazakhstan tax system is considered, a variety of materials for use of the current tax legislation is systematized. The content of the study guide is strictly based on the normative documents, legislation and regulation documents are given as of January 1, 2011. For the solid understanding of the given in the tutorial material, each theme in all sections completed by the checklist and the corresponding tasks. The study guide is intended for the students of the economic universities and faculties during the learning of the course «Taxes and taxation.» The study guide also gives a complete view of the procedure of the calculation and payment of specific taxes, set by the law benefits and conditions of their use, and a number of other important issues related to the taxation. 5 Section I. Taxes on income Theme № 1. Individual income tax Individual income tax - one of the most famous and widespread taxes. Refers to the direct and personal taxes, is included into a tax group on income and is the source of income of local budgets. It covers a large part of the population of a country. The economic essence of this tax is presented in its regulation, as the level of social production and consumption and income levels. Payers  Payers of individual income tax are individuals having the objects of taxation, determined in accordance with Art. 155 of the Tax Code.  Payers of the fixed tax on gambling, do not pay personal income tax on income from the type of the activities pointed out in Art. 411 and 420 of the Tax Code.  Individual entrepreneurs,who are using a special tax regime for peasant and individual farms do not pay individual income tax on income from activities covered by this special tax regime. Taxable items  Income taxed at source  Income not taxed at source. The tax rates  The income of taxpayer is taxed at a rate of 10 percent.  Incomes from dividends has obtained from sources in the Republic of Kazakhstan and abroad are taxed at the rate of 5 percent. Taxable period  The tax period for the calculation by the tax agents of the individual income tax on income taxed at source, is a calendar month.  It is necessary to pay tax over paid income calculated by the tax agents from the source of taxation by the 25th of the month following the month of payment, the place of its location. 6 Terms of IIT payment by the tax agents who are using a special tax regime for small businesses based on the simplified declaration and the peasant or individual farms, are set within the framework of an applied special tax regime.  By taxpayers - residents the tax for the tax period it should be payed no later than 10 calendar days after the deadline for delivery of the declaration at the location (residence).  Individual entrepreneurs applied a special tax regime for small businesses based on the base of the patent or the simplified declaration should pay the individual income tax on income taxable within these special tax regime. Declaration of individual income tax. Form № 200.  declaration of individual income tax are is submitted by the following resident taxpayers: 1) individual entrepreneurs; 2) private notaries, private bailiffs, attorneys; 3) Individuals who receive property income; 4) individuals who receive other income, including income outside of the Republic of Kazakhstan; 5) individuals who have money in bank accounts in foreign banks located outside the Republic of Kazakhstan.  Deputies of the Parliament of the Republic of Kazakhstan, the judges, as well as individuals who are responsible to submit a declaration in accordance with the Constitutional Law of the Republic of Kazakhstan «On Elections in the Republic of Kazakhstan», the Criminal-executable Code of the Republic of Kazakhstan and the Republic of Kazakhstan Law «On Fight against Corruption» submit a declaration of income and property being a subject of taxation, and located both on the territory of the Republic of Kazakhstan and beyond.  Individual entrepreneurs applying a special tax regime for small businesses based on the patent or simplified declaration according to income included in the object of taxation in accordance with Art. 427 of the Tax Code, the declaration of individual income tax do not represent. 7 Deadlines for submission of declarations  The declaration of individual income tax to the tax authority at the location (address) is submitted no later than March 31 of the year following the tax reporting period, except for the cases stipulated by the Constitutional Law of the Republic of Kazakhstan «On Elections in the Republic of Kazakhstan» and the Law of the Republic of Kazakhstan «On the fight against corruption». Checklists 1. What are the subjects and objects of the individual income tax? 2. What are tax rates on the individual income tax? 3. Who has to submit a declaration of individual income tax? 4. Call deadlines for submission and terms of payment of individual income tax? 5. How the individual income tax is calculated? 6. Who calculates the IIT? Task № 1. Required: 1. Determine the subject of taxation of individual income tax. 2. Sum of individual income tax. An employee Karimov Arman - the manager of the company has the income in the form of wages for the year 2011 in the sum of 2 200 000 tenge. In May, he was in the hospital for 20 days, he was accrued to payment 15 000 tenge. The financial assistance for the operation in the sum of 140 000 tenge was provided. Were reimbursed travel expenses 255 600 tenge for 10 days in Kazakhstan (travel 80 000, meals – 75 600, accommodation - 100 000), the rate of daily consumption is derived as 5 MCI per day. In June Arman visited advanced training sales courses at the cost of 55 000 tenge. In July, Armand was on vacation 18 days - 120 000tenge. In August, Arman sent a kid to a children's cams. Son is 17 years old, the price for the camp ticket is 45 000 tenge. Arman also has a bank account and received a reward of 50 000 tenge for 2011. Solution (2011): Employee income: Art156, 163 8 Salaries 2 200 000 Hospital 15 000 Financial assistance to 140 000 - (8 * 15 999) = 12 008 Selling 120 000 Kids camp ticket 45 000 Total income 392 008 Deductions: Art. 166 MPC 239 201 MW (12 * 15 999) 191 988 Total deductions 431 189 Taxable income 1 960 819 The sum of IIT, Art. 158 196 082 Task № 2. Define: Ivanov’s taxable income -The sum of mandatory pension contributions -The sum of the individual income tax. Sergei Ivanov's salary in year of 2012 was accrued in the sum of 3 710 000 tenge. During the year, Ivanov received the construction materials in sum of 75 000 tenge for the hous repair. He moved with the organization and within 30 days from the time of movement he confirmed his expencies at the sum of 280 000 tenge. In July, Ivanov was sent on a business trip to Astana for 4 days, he was given under accountability 63000 tenge. Upon arrival from a trip he had made an advance report where according to the submitted documents the following expenses were listed: -Round trip / tickets / 16000 -Bills from hotel 10000 - daily allowance/checks / 37000 At a rate of daily expenses 4 MCI per day In August, a son of Sergei was born, and he was given a one-time financial assistance of 130000 tenge (all documents are prepared accordingly). In September, Sergei took advanced training courses costing 35 000 tenge. 9 Sergei paid the costs on remuneration of credit issued in Zhilsotsstroybank to buy an apartment in the sum of 250 000 tenge. There was accrued interest on unpaid pension deductions in the sum of 32 000 tenge. Sergey won the lottery 150 000 tenge. Sergey also received a gift from his father, a car «Mazda -626» worth $6500 U.S. dollars. On the day of donation the currency rate of $1 U.S. dollar was 147,5 tenge. He donates voluntary pension contributions on a monthly basis for his spouse in the sum of 5000 tenge (the wife does not work and is a husband’s dependant). Solution (2011): Employee income: Salaries 3710000 Repair of housing 75000 Daily costs 37 000 - (4 * 1512 * 4) 12808 Mat. assistance 130 000 - (8 * 15 999) 2008 Lottery 150 000 – 8000 142000 Total income 3 941 816 Deductions: MPC (3,941,816 - 142 000) * 10% 379 982 MW (12 * 15 999) 191 988 Remuneration 250000 Total deductions 821970 Taxable income 3119846 Sum IIT 311985 Task № 3. Determine: the sum of individual income tax using the tax deduction for the period from January to March 2011. Employee for the month of January was accrued salary in the sum of 16000 tenge. In February, he took a vacation without payment for family reasons and had no accrued income. In March he was accrued income 20 000 tenge. Solution (2011): In accordance with s. 2 of Art. 166 TC of RK (cumulative total of unused deduction) calculation will be the following: January, 2011 MPC 16000x10% = 1600 10