Regulator sets sights on dividends in Kazakhstan

The Agency on Regulation and Development of the Financial Market (ARDFM) has prepared a set of amendments to the country’s Tax Code aimed at revising criteria for dividend tax exemption in favor of Kazakhstani residents. The draft document is available for public consideration.

The current rules allow both domestic and foreign investors to not pay taxes on dividends they received from stocks traded on Kazakhstani exchanges if they meet two conditions: first, they have to carry out at least 50 transactions with a certain stock per month; second, the total volume of these transactions should be at least $55,234.

Now, the ARDFM suggests adding a third criterion: there must be at least 10 million shares of a certain issuer on the exchange to make dividend tax exemption happen. In its explanatory note, the regulator said that it is pursuing two goals: to exclude dividends from the overall income of residents gained with the help of taxable securities and exclude the code’s provision that grants tax exemption for nonresidents who trade on Kazakhstani stock exchanges.

Another criterion for tax exemption for Kazakhstani retail investors whose dividends don’t exceed $244,577 hasn’t been mentioned in the proposal.

Taxation of income gained at the stock market is one of the key issues that have emerged during discussions of the upcoming tax reform. Once the reform is completed, a new tax code will emerge in Kazakhstan. It is expected to enter into force in 2025. Last year, some officials and MPs talked about possible benefits for investors. They even sent requests to heads of the ARDFM, the National Bank and authorized agencies. However, official responses sometimes didn’t match with the current legislation.

For instance, Timur Suleymenov, chair of the National Bank, praised the idea of taking into account various fees investors usually pay during their activities when calculating the size of taxable income from the stock market. The official also noted that these exemptions must cover only those transactions carried out on the domestic stock market, although they aren’t taxable anyway. In turn, Deputy Minister of National Economy Azamat Amrin said that the future exemption will cover transactions abroad. Currently, investors should pay 5% in taxes for dividends on such stocks and 10% when the cost of their portfolios goes up.

Public discussion of the ARDFM’s proposal will last until January 29, 2024.