Revised Tax Code Enacted with 16% VAT Rate in Second Reading: Majelis Approval
In a recent development, the Mazhilis—Kazakhstan's lower house of parliament—approved the new Tax Code and associated amendments in a second reading, as per our website reports.
Notably, several decisions have been made, particularly regarding the reform of Value-Added Tax (VAT). The initial government-proposed VAT rate of 20% has been reduced to 16%, and the threshold for mandatory VAT registration has been raised from 15 million to 40 million tenge.
Starting from 2026, reduced VAT rates of 5% will be implemented for medications and medical services, with a further drop to 10% in 2027. VAT will also be abolished for goods and services within the guaranteed volume of free medical care, mandatory health insurance, and treatment of rare and socially significant diseases.
Additionally, VAT will no longer apply to socially significant food products, books published in Kazakhstan, and services for printing books. Agricultural producers will also benefit from an increased VAT offset size, rising from 70% to 80%.
Further adjustments include the introduction of a prohibited list of activities instead of a permit list, with a unified rate of 4% set, adjustable by maslikhats by up to ±50% to account for regional specifics. The special tax regime for business transactions has also been expanded.
The Communication and Income Tax (CIT) rate for the gambling business and banks has been increased to 25%, while for banks, the rate for income from lending to entrepreneurs remains at 20%. A progressive Individual Property Tax (IPT) scale has been proposed:
- For wages: 10% on income up to 8,500 Monetary Calculation Indicators (MCI), amounting to 33.5 million tenge per year, and 15% on the excess amount.
- For dividend income: 5% up to 230,000 MCI (almost 1 billion tenge), and 15% on the excess amount.
- For non-resident individuals: 10% on income up to 8,500 MCI, and 15% on the excess amount.
Mazhilis members assert that this structure avoids increasing the tax burden on citizens with low and middle incomes, maintaining "fairness and proportionality in taxation."
Initial proposals by Prime Minister Olzhas Bektenov to increase VAT were followed by statements from President Kassym-Jomart Tokayev, expressing concern over the proposed VAT rate. Consequently, discussions have been underway, addressing the concerns and developing a balanced approach to these tax reforms.
As the conversation unfolded, citizens of Kazakhstan launched a petition against lowering the VAT registration threshold to 15 million tenge. Subsequently, the government presented the potential VAT rates, including a differentiation of 16%, 10%, and 0%. Although the initial VAT rate increase proposal has reportedly been abandoned, the Mazhilis' ongoing deliberations on these reforms may lead to further changes.
- The new Tax Code, approved by Kazakhstan's Mazhilis, includes significant changes to the Value-Added Tax (VAT), with the proposed rate reduced from 20% to 16% and the threshold for mandatory VAT registration raised from 15 million to 40 million tenge.
- In the realm of healthcare, VAT will be reduced to 5% for medications and medical services starting in 2026, with a further decrease to 10% in 2027.
- Agricultural producers in Kazakhstan will see an increased VAT offset size, rising from 70% to 80%, as part of the reforms.
- The Mazhilis members assert that the new tax structure maintains "fairness and proportionality in taxation," avoiding an increased tax burden on citizens with low and middle incomes.
- Ongoing deliberations in the Mazhilis may lead to further changes in the tax reforms, as initial proposals for a VAT increase have reportedly been abandoned following citizen petitions and discussions between political leaders.
