Differentiated Income Tax Rates for Kazakhstan Residents
Tomorrow's Tax Code Shake-up: Differentiated Individual Income Tax Rate on the Horizon
Get ready, Kazakhstan! April 30, 2025, is the day the Mazhilis will dive deep into the second reading of the new Tax Code draft. And guess what's the buzz? A revamped progressive income tax system for individuals! This system directly impacts all citizens by fluctuating tax rates based on income, affecting both self-employment income and wages.
Taking a stroll down memory lane, Kazakhstan previously employed a progressive tax scale back in 2006, featuring a range of rates from 5% to a max of 20%, depending on income. However, fewer taxpayers were honest about their incomes, preferring to keep their cash "under the table." So, it was sayonara to the progressive scale, and hello to a universal tax rate.
But, it seems times are a-changin'. So, what's brewing?
Our current Tax Code, dated December 25, 2017, features a flat individual income tax (IIT) rate outlined in Article 320. For those lucky ducks earning less than 25 monthly calculation indices (MCI) monthly (approximately 98,300 tenge per month, or 1,179,600 tenge annually), the taxable income plunges by 90%, making their IIT a super-low 1%. Moreover, tax exemptions are there for the poor, with a standard allowance of 14 MCI (55,048 tenge in 2025).
Currently, the down-and-dirty world of small business sees a 1% IIT rate, but this bobber is set to rise to 4%. But before you let your freak flag fly, remember that if your income falls below 25 MCI per month, your IIT will only be 1%.
Now, let's get our hands dirty with the new kid on the block: The Progressive IIT Scale. This multi-tiered table lists the IIT rates for various income levels in ascending order:
- Income for peasant or farmer households: 3%
- Income for entrepreneurs from production and sale of their own products related to processing industry: 5%
- Income for a person engaged in private practice: 9%
- Income for other physical persons: 10%
For the big wig earners hitting the 8,500 MCI income mark annually (almost 35 million tenge per year), the tax rate will skyrocket to a not-so-sweet 15%.
Ah, but our shiny new Tax Code hasn't forgotten about you astute self-employed folks! If you meet certain conditions, you can still snag a non-standard tax regime. However, the number of special tax regimes has been whittled down to three, including one with a zero IIT rate, branded as the Special Non-Taxable Regime (SNR) for the self-employed. This regime allows for a 4% pension contribution instead of IIT, but you must earn under 4080 MCI annually (around 16 million tenge in 2025).
Overall, that's quite the financial storm brewing on the horizon! Keep these changes in mind, as these tax tweaks promise to generate some serious buzz in Kazakhstan. Stay tuned for more updates!
Insights:
- The newly proposed progressive tax system is intended to address tax fairness and target unscrupulous taxpayers evading taxes. This system will replace the current flat 10% personal income tax rate.
- Under the new system, a higher tax rate of 15% is proposed for individuals earning more than 8,500 MCI annually.
- Certain specifics about exemptions and additional details about exemptions under the new system have not been widely detailed in available information.
- I, as a Kazakhstan citizen, anticipate a decrease in my business finances due to the implementation of a revamped progressive income tax system set to take effect on April 30, 2025.
- With the upcoming return of a progressive tax system, I might face higher tax rates if my income exceeds the specified MCI thresholds, such as the proposed 15% for individuals earning more than 8,500 MCI annually.
- I, as a business owner, find the prospect of a decreased 1% individual income tax rate for those whose income falls below 25 MCI per month attractive, especially since the current 4% rate may apply to small businesses.
- Kazakhstanis may experience greater financial regulation with the introduction of Kazakhstan's new progressive income tax system, which aims to increase tax fairness and promote honest reporting of income by individuals.
