Question: During the reporting period, cash payments were made to one counterparty on four occasions (KZT 3,500.0 thousand, KZT 2,750.0 thousand, KZT 2,900.0 thousand, and KZT 1,070.0 thousand). The total purchase amount was KZT 9,920.0 thousand. Can these expenses be deducted for Corporate Income Tax (CIT) purposes and can the VAT be credited?
Answer: If there is a written contract with a single counterparty, the total contract amount shall be regarded as the amount of one transaction, and all payments made under such transaction shall be considered collectively (Civil Code of the Republic of Kazakhstan – Article 151, paragraph 1, and Article 378).
At the same time, taking into account the requirements of Article 25, paragraph 9 of the Law of the Republic of Kazakhstan “On Payments and Payment Systems”, if the amount of such transaction exceeds 1,000 times the monthly calculation index (MCI), payment must be made exclusively in a non-cash form.
Based on the above, if the total amount of the transaction specified in the request under a contract concluded with a single supplier-counterparty (a VAT payer), including VAT, exceeds the permissible threshold of 1,000 times the MCI applicable on the date of payment, regardless of the frequency of cash payments, such expenses shall not be deductible for Corporate Income Tax purposes and the corresponding VAT shall not be eligible for input VAT credit by the purchaser who is a VAT payer.