If the costs associated with demurrage and penalties are related to income-generating activities and are supported by primary accounting documents issued in accordance with the Law of the Republic of Kazakhstan "On Accounting and financial reporting," such amounts may be claimed as deductions for Corporate Income Tax (CIT) purposes.
Conversely, fines and penalties payable to the state budget are non-deductible, with the sole exception of administrative sanctions incurred under public procurement contracts.
If the amounts for fines, penalties, and expenses for demurrage are overpaid by a counterparty, these amounts must be recognized as taxable income by the receiving party when calculating CIT.
The applicable VAT treatment depends on the terms of the contract and the nature of the payments:
1) if the amounts are directly tied to the sale of goods, the performance of work, or the provision of services, they must be included in the taxable VAT turnover;
2) If the penalties are compensatory and not related to a taxable sale, there is no obligation to assess VAT or issue an EIF.
Taxpayers are advised to carefully structure their contractual relationships and ensure all supporting documentation is maintained.
The State Revenue Department of EKR