January events: state aid is exempt from taxes

Monetary assistance in the form of compensation from the state received by entrepreneurs who suffered losses due to damage to property during the January events is exempt from income tax. This was reported in the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan.

The Law of the Republic of Kazakhstan dated July 11, 2022 No. 135-VII ZRK amended and supplemented the Tax Code, which regulates the taxation procedure for compensation of property damage caused during the state of emergency.

The new subparagraph 28) of paragraph 1 of Article 241 of the Tax Code provides for the exclusion from the total annual income (adjustment of the SRS) of the amount of money received by a small and medium-sized business entity for compensation of property damage caused during the state of emergency. The norm is temporary and is valid from January 1, 2022 to January 1, 2023.

Also, subparagraph 17) of paragraph 1 of Article 341 of the Tax Code has been supplemented with a new paragraph providing for the exclusion from income subject to individual income tax, payments from the budget in accordance with the legislation of Kazakhstan in the form of compensation for property damage caused during the state of emergency. The norm was introduced retrospectively, from January 1, 2022.

Thus, legal entities and individual entrepreneurs - subjects of small and medium-sized businesses have the right to adjust the total annual income in case of receiving money for compensation of property damage caused during the state of emergency. Such an adjustment can be applied if there is a decision of the commission created by the akimat and the subject is included in the register of this commission.

For the purposes of calculating corporate income tax, the adjustment of total annual income in accordance with paragraph 1 of Article 241 of the Tax Code is subject to reflection in the Corporate Income Tax Declaration (form 100.00).

Payments to individuals are recognized as income of individuals, but are not subject to individual income tax. At the same time, the tax agent (employer) is obliged to reflect the amounts paid in the Declaration on individual income tax and social tax (form 200).

In addition, an addition has been made to subparagraph 2) of paragraph 2 of Article 404 of the Tax Code regarding the non-application of adjustments to the amount of value added tax (VAT) attributed to offset (reduction of offset) in case of damage, loss of goods also during a state of emergency. The supplement will come into effect on January 1, 2022. It also provides for the requirement for a small and medium-sized business entity to have supporting documents on the fact of damage, loss of goods, as a result of an emergency or during a state of emergency and to reflect information on such damage, loss of goods in the tax register.

Thus, if a small and medium-sized business entity receives money for compensation of property damage caused during the state of emergency, by the decision of a commission established by a local executive body, when such a subject is included in the register formed by the specified local executive body, the recipient of the money makes an adjustment to the amount of VAT previously attributed to such goods.

At the same time, the amount of VAT adjustment attributed to offset is reflected in the VAT Declaration for the tax period in which the case of damage or loss of goods occurred.