Taxation of IP in Kazakhstan how to be a freelancer?
Speaking on IT parties and on the Internet about how to calculate and pay taxes to designers, programmers and other freelancers I was often asked to write about this simple and clear post. Simple in taxation is not enough, but I tried to make it at least understandable. This information is for those who live in Kazakhstan and want to sleep peacefully.
In this article we will not consider property taxes, since they are not the main source of income for IT specialists, at least for now. And also, for simplicity of understanding, we will describe many things not in a detailed legal language, with a bunch of reservations, which certainly exist, but for the discussion of which I invite you to comment.
To begin with, as in all countries, the logic of tax legislation in Kazakhstan comes from the fact that if there is income, there must be a tax. Today, in Kazakhstan income by individuals is not declared, but from 2020 a general declaration of income and property will be introduced, so very soon you will have to explain where your money comes from. Therefore, it is better to take care of the legalization of income in advance.
Next will be described the taxes that apply to entrepreneurs and consider options for what form of taxation will suit you the most.
Income tax
The income of individuals is subject to individual income tax (hereinafter, we will denote it by IIT), the income of legal entities is subject to corporate income tax (hereinafter CIT). Size IIT - 10%, the size of the CIT - 20%.
When you are employed, this tax is paid for you by the one who hires you, when you become an entrepreneur, you pay it yourself. Do not be afraid of such a high tax rate, for small enterprises there are special tax regimes in which the income tax is up to 1%, so everything is not so bad. On the contrary, working for hire without opening the PI, the employer cannot pay you less than 10% of the PIT, so many of them suggest that you open the PI and earn more.
Social tax
Social tax is a tax paid by entrepreneurs and employees upon receipt of income. The social tax rate is 9.5%, but for some tax regimes, for example, for a patent, there is none at all. That is, if you receive income as an employee, you pay it at one rate, but if you work as an entrepreneur, you either don’t pay at all or pay 1.5%.
Pension contributions
Pension and social deductions are not taxes, but as the name implies - deductions that you make in favor of yourself. But as their payment is obligatory, for simplicity we will consider them together with taxes.
Pension deductions (abbreviated as OPV) are deductions that you make to your account in the pension fund in order to save money for a comfortable old age. It is possible to argue about the effectiveness of the use of the fund by these funds, but they must be made in the amount of 10%.
The trick is that these 10% in different cases are calculated from different amounts, if you are an employee, even if you are not in the state, but entered into a one-time contract and received 500,000 tenge, then the amount of OPV will be 10%, that is, 50,000 tenge. And if you received 500,000 tenge as an individual entrepreneur, on a simplified basis, then the amount of OPV will be 4,250, since the basis for the calculation will not be all income, but the minimum wage. Of course, you can “report” the difference yourself if you really want to, but this is up to you.
Social Security contributions
Social contributions (JI), which are often confused with the social tax, are deductions that you make in case you give birth to a child and go on maternity leave. You will be paid childcare benefits from these funds. If you are not an unmarried man and are not going to go on maternity leave, you still need to pay, since theoretically you will still be able to go on maternity leave.
The size of social contributions is 3.5, but here, as in the case of OPV, it all depends on the base of calculation, if it is wages, then the entire amount of wages, if you are an entrepreneur, you can pay from the minimum wage.
If you have a spouse and she is going to be on maternity leave, you can arrange her as an employee in your company as an employee and pay her salary before the decree so that she will receive increased maternity pay.
Types of tax regimes
I will rank the types of tax regimes in order of increasing the maximum amount of turnover for the year, but I strongly recommend that you get acquainted with a more detailed description of each tax regime, since you can not always apply a particular regime due to its limitations. All tax regimes are described for individual entrepreneurs, who can simultaneously act as individuals and at the same time enter into contracts and issue documents as legal entities.
findings
There are a lot of options for legalizing incomes, which one to choose depends on your turnover and type of activity, how to define it I will write in the next post.
The material is given so that you can roughly estimate which of the options you prefer. It is necessary to choose it when registering IP. At the same time, to close the IP in Kazakhstan is now much easier than before, you can do it in 1 day, if everything was checked in and paid on time.
I would be glad if in the comments you write topics on accounting and taxation about which you would like to see detailed posts like this.
PS I wanted to place a post in the hub "Legislation in IT" but did not have enough karma, so I published it in "Finance in IT", although the hub does not quite fit.
In this article we will not consider property taxes, since they are not the main source of income for IT specialists, at least for now. And also, for simplicity of understanding, we will describe many things not in a detailed legal language, with a bunch of reservations, which certainly exist, but for the discussion of which I invite you to comment.
To begin with, as in all countries, the logic of tax legislation in Kazakhstan comes from the fact that if there is income, there must be a tax. Today, in Kazakhstan income by individuals is not declared, but from 2020 a general declaration of income and property will be introduced, so very soon you will have to explain where your money comes from. Therefore, it is better to take care of the legalization of income in advance.
Next will be described the taxes that apply to entrepreneurs and consider options for what form of taxation will suit you the most.
Income tax
The income of individuals is subject to individual income tax (hereinafter, we will denote it by IIT), the income of legal entities is subject to corporate income tax (hereinafter CIT). Size IIT - 10%, the size of the CIT - 20%.
When you are employed, this tax is paid for you by the one who hires you, when you become an entrepreneur, you pay it yourself. Do not be afraid of such a high tax rate, for small enterprises there are special tax regimes in which the income tax is up to 1%, so everything is not so bad. On the contrary, working for hire without opening the PI, the employer cannot pay you less than 10% of the PIT, so many of them suggest that you open the PI and earn more.
Social tax
Social tax is a tax paid by entrepreneurs and employees upon receipt of income. The social tax rate is 9.5%, but for some tax regimes, for example, for a patent, there is none at all. That is, if you receive income as an employee, you pay it at one rate, but if you work as an entrepreneur, you either don’t pay at all or pay 1.5%.
Pension contributions
Pension and social deductions are not taxes, but as the name implies - deductions that you make in favor of yourself. But as their payment is obligatory, for simplicity we will consider them together with taxes.
Pension deductions (abbreviated as OPV) are deductions that you make to your account in the pension fund in order to save money for a comfortable old age. It is possible to argue about the effectiveness of the use of the fund by these funds, but they must be made in the amount of 10%.
The trick is that these 10% in different cases are calculated from different amounts, if you are an employee, even if you are not in the state, but entered into a one-time contract and received 500,000 tenge, then the amount of OPV will be 10%, that is, 50,000 tenge. And if you received 500,000 tenge as an individual entrepreneur, on a simplified basis, then the amount of OPV will be 4,250, since the basis for the calculation will not be all income, but the minimum wage. Of course, you can “report” the difference yourself if you really want to, but this is up to you.
Social Security contributions
Social contributions (JI), which are often confused with the social tax, are deductions that you make in case you give birth to a child and go on maternity leave. You will be paid childcare benefits from these funds. If you are not an unmarried man and are not going to go on maternity leave, you still need to pay, since theoretically you will still be able to go on maternity leave.
The size of social contributions is 3.5, but here, as in the case of OPV, it all depends on the base of calculation, if it is wages, then the entire amount of wages, if you are an entrepreneur, you can pay from the minimum wage.
Types of tax regimes
I will rank the types of tax regimes in order of increasing the maximum amount of turnover for the year, but I strongly recommend that you get acquainted with a more detailed description of each tax regime, since you can not always apply a particular regime due to its limitations. All tax regimes are described for individual entrepreneurs, who can simultaneously act as individuals and at the same time enter into contracts and issue documents as legal entities.
The single cumulative payment (CAP) - 2 96 6875 per year
In 2019, Kazakhstan introduced a single cumulative payment that can be used by individuals providing services to other individuals. There are two key points:
1) you can use the CAP only if you provide services or perform work, that is, do not trade or do not produce.
2) You can provide services only to individuals, that is, you cannot enter into a contract with a limited liability company or a joint-stock company.
Calculation on the CAP for the payer is not, you just need to determine where you live.
If you live in the capital, a city of republican or regional significance, then pay 2,525 every month.
If you live in another village - then 1,263 tenge per month.
Note that being a CSP payer you will not be able to issue checks, invoices and other accounting documents. When exceeding the turnover of the CAP will need to open the PI.
1) you can use the CAP only if you provide services or perform work, that is, do not trade or do not produce.
2) You can provide services only to individuals, that is, you cannot enter into a contract with a limited liability company or a joint-stock company.
Calculation on the CAP for the payer is not, you just need to determine where you live.
If you live in the capital, a city of republican or regional significance, then pay 2,525 every month.
If you live in another village - then 1,263 tenge per month.
Note that being a CSP payer you will not be able to issue checks, invoices and other accounting documents. When exceeding the turnover of the CAP will need to open the PI.
IP on patent - no more than 8 908 200 per year
To open the IP, you can choose two taxation options for the simplified payment and the patent. Work on the patent implies that you need to buy it immediately, that is, to pay taxes and deductions before the start of activities. To do this, you estimate the amount that you earn for the period for which the patent will be purchased and pay 1% of this amount, also OPV and JI from the minimum wage for all months for which the patent is open.
You can open a patent for a month, quarter, half year or year. On the patent, you do not need a cash register, but you can accept cash, as well as issue work completion certificates and invoices by attaching a copy of your patent to them.
In the event that your actual income exceeded the income declared initially, you will need to submit correction reports and pay additional tax.
You can open a patent for a month, quarter, half year or year. On the patent, you do not need a cash register, but you can accept cash, as well as issue work completion certificates and invoices by attaching a copy of your patent to them.
In the event that your actual income exceeded the income declared initially, you will need to submit correction reports and pay additional tax.
PI on simplified payment - 121 391 900 per year, but not more than 60 695 950 per semester
PI on the simplified order for the freelancer is the most suitable option. In this tax regime, you do not need to pay anything in advance without knowing whether you will have income or not. Moreover, for the month when you did not have income, you do not pay CO and OPV. That is, everything is simple - if for this month there is an income, pay OPV and SO, there is no income - do not pay. The receipt of income is determined by the invoices issued by you to your customers. The tax rate is 3%, with the due date being the end of the half year.
That is, for example, for the period from January 1 to June 30, you completed one order for 1,000,000 tenge today, in February. You will pay OPV and SB only for February, and you will have to pay 3% (30,000 tenge) of the order amount from July 1 to August 25. That is, you will have a six-month delay in payment.
Reporting is necessary every six months, from January 1 to February 15 and from July 1 to August 15. After submitting the declaration, you will need to pay taxes from January 1 to February 25 and from July 1 to August 25.
Here you need to be careful, because the CO and OP need to be paid in the next month after receiving income, that is, if we take our example, then by March 25.
The income limit on this tax regime is large and will be sufficient for most entrepreneurs - 60,695,950 in the first half of the year. But note that if your turnover for the year exceeds 75,750,000 tenge, you will need to register for VAT, so the income of 121,391,900 per year is not so simple. Anticipating the question of whether it is possible to be an IE on a simplified payment system and at the same time I will answer the VAT payer immediately - it is possible. But VAT is a topic for a separate big post.
Also on simplified lines there can not be separate types of activity, for example, agency activity, therefore if in your type of activity there is the word “agent” or “agency” then it does not suit you.
That is, for example, for the period from January 1 to June 30, you completed one order for 1,000,000 tenge today, in February. You will pay OPV and SB only for February, and you will have to pay 3% (30,000 tenge) of the order amount from July 1 to August 25. That is, you will have a six-month delay in payment.
Reporting is necessary every six months, from January 1 to February 15 and from July 1 to August 15. After submitting the declaration, you will need to pay taxes from January 1 to February 25 and from July 1 to August 25.
Here you need to be careful, because the CO and OP need to be paid in the next month after receiving income, that is, if we take our example, then by March 25.
The income limit on this tax regime is large and will be sufficient for most entrepreneurs - 60,695,950 in the first half of the year. But note that if your turnover for the year exceeds 75,750,000 tenge, you will need to register for VAT, so the income of 121,391,900 per year is not so simple. Anticipating the question of whether it is possible to be an IE on a simplified payment system and at the same time I will answer the VAT payer immediately - it is possible. But VAT is a topic for a separate big post.
Also on simplified lines there can not be separate types of activity, for example, agency activity, therefore if in your type of activity there is the word “agent” or “agency” then it does not suit you.
Generally established tax regime - no limit
In the standard mode, you will have everything as in large, except that LLP income tax is 20% since it is CIT, and at IP it is 10% since it is IIT.
A feature of this mode is that, unlike the above modes, you can pay 10% not of the total amount received, but of the difference between your income and expense. That is, for example, you received from the customer 1,000,000 tenge, but at the same time spent 800,000 tenge on the execution of the order. 10% you pay with a difference of 1,000,000 - 800,000 = 200,000 tenge. That is 200,000 * 10% = 20,000 tenge.
Often this mode is more beneficial, but in order to keep track of it you need more effort, because firstly you need to collect all the expenditure documents, keep records on them and submit reports, and secondly, not all costs can be taken into account.
For example, you have a design studio. Salaries of designers and layout designers can be taken at an expense, but the New Year corporate party is not for them. Because the cost of paying for their labor is production costs, and holding a New Year's corporate party is already non-production costs, although your employees may think differently :)
In general, record keeping in the generally established mode without the involvement of a specialist is not recommended, unlike other tax regimes.
A feature of this mode is that, unlike the above modes, you can pay 10% not of the total amount received, but of the difference between your income and expense. That is, for example, you received from the customer 1,000,000 tenge, but at the same time spent 800,000 tenge on the execution of the order. 10% you pay with a difference of 1,000,000 - 800,000 = 200,000 tenge. That is 200,000 * 10% = 20,000 tenge.
Often this mode is more beneficial, but in order to keep track of it you need more effort, because firstly you need to collect all the expenditure documents, keep records on them and submit reports, and secondly, not all costs can be taken into account.
For example, you have a design studio. Salaries of designers and layout designers can be taken at an expense, but the New Year corporate party is not for them. Because the cost of paying for their labor is production costs, and holding a New Year's corporate party is already non-production costs, although your employees may think differently :)
In general, record keeping in the generally established mode without the involvement of a specialist is not recommended, unlike other tax regimes.
findings
There are a lot of options for legalizing incomes, which one to choose depends on your turnover and type of activity, how to define it I will write in the next post.
The material is given so that you can roughly estimate which of the options you prefer. It is necessary to choose it when registering IP. At the same time, to close the IP in Kazakhstan is now much easier than before, you can do it in 1 day, if everything was checked in and paid on time.
I would be glad if in the comments you write topics on accounting and taxation about which you would like to see detailed posts like this.
PS I wanted to place a post in the hub "Legislation in IT" but did not have enough karma, so I published it in "Finance in IT", although the hub does not quite fit.
Source: https://habr.com/ru/post/439922/