The draft law "on amendments and additions to certain legislative acts of the Republic of Kazakhstan on the formalization of employment" (hereinafter – the draft Law) provides for the introduction of a new legal regime – a Single aggregate payment (ESP), which provides for a simplified procedure for registering the activities of informally employed persons with tax authorities.
For reference:
According to the results of the third quarter of 2018, the number of employed people was 8.6 million, including 6.6 million employees and 2.1 million self-employed.
In the economy of the Republic, 16% of the total number of employees were informally employed (1,376 thousand people), of which employees who work without registration of employment contracts make up about 800 thousand people and self – employed-588 thousand people.
As the current situation shows, informal employment is facilitated by such factors as the complex procedure for registration and de-registration with the tax authorities, the presence of numerous payment systems and the complexity of determining the tax regime.
To simplify the registration of activities of informally employed people, it is proposed to introduce a Single aggregate payment.
Payment of the ESP will allow not only to register informal activities, but also to participate in the system of compulsory medical and social insurance, and pension provision.
The ESP will replace 4 mandatory payments for all working citizens of Kazakhstan in one single payment.
For ESP payers, the minimum rates for income tax and social payments are set at 1 MCI (2,525 tenge) for cities of national significance, the capital and regional significance, and twice lower at the level of half of the MCI (1,263 tenge) for residents of other localities.
The shares of a Single aggregate payment will be:
- 10 % on individual income tax;
- 20 % - social contributions to the State social insurance Fund;
- 30 % - pension payments to the Unified accumulative pension Fund;
- 40 % - deductions to the mandatory social and medical insurance Fund.
The ESP will apply to individuals engaged in income-generating activities, subject to the following conditions:
1) do not use the labor of employees;
2) perform work, provide services for individuals. faces;
3) sell agricultural products from the operation of a personal subsidiary farm for consumption by individuals.
The ESP will not apply to:
1) individuals providing services on the territory of commercial real estate objects, including commercial objects;
2) persons who lease (property hire) property, except for housing;
3) persons engaged in private practice;
4) foreigners and stateless persons, with the exception of oralmans;
5) persons who have state registration as an individual entrepreneur.
At the same time, the maximum income for a calendar year should not exceed 100 MZP (2,969. 8 thousand tenge per year, 247.4 thousand tenge per month in 2019).
The ESP will cover individuals who provide services exclusively to individuals and sell surpluses from personal subsidiary farms to individuals.
For other categories of citizens, the current procedure for paying taxes and social payments is maintained.
As a result of the introduction of the ESP, it is planned to formalize the activities of 500 thousand people from among the informally employed, and it is also expected to transfer 65.4 thousand payers from the current tax regimes on the basis of a patent and a simplified Declaration.
In General, the introduction of the ESP for the informally employed will allow:
participate in the system of compulsory social health insurance and get access to medical services, unlimited in amount and types, with the right to choose a medical institution;
participate in the accumulative pension system and receive a basic pension payment depending on the length of participation in the system;
receive social benefits in cases of disability, loss of breadwinner, pregnancy and childbirth, adoption of a child, or care for a child under 1 year.