Background
Kazakhstan State Revenue Authority initiated a countrywide tax/financial investigation of foreign e-commerce marketplaces and digital platforms that operate in the country. The desk tax audit covers both registered foreign digital marketplaces and platforms, as well as those that aren’t registered for VAT in Kazakhstan.
The investigation is based on a cross-comparison of the financial data that the responsible platform operators have stated through tax returns, and the payments that these platforms have received from the local consumers.
State Revenue Authorities have reached out to payment service providers and local financial institutions to provide them with up-to-date collective financial information on the payments which local customers have made to the digital platforms or e-commerce marketplaces on which respective revenue authorities are conducting the tax investigation.
VAT on Foreign E-Commerce Marketplaces and Platforms
Non-resident digital service providers and e-commerce sellers are responsible for conditional VAT registration in Kazakhstan when they make cross-border B2C supplies, where a local consumer is identified as the buyer or recipient of the e-service.
State Revenue Authority will compare the transactional data reported through VAT returns (and connected tax remittances) with actual payments made by local consumers to the indicated foreign marketplaces or digital platforms.
Kazakhstan E-Commerce Framework
if the State Revenue Authorities identify discrepancies between the reported tax and the tax that should have been reported based on the actual payments received on the underlying transactions, the tax authorities will notify the responsible party of the violation of the Tax Code and the urgent necessity to rectify the situation.
If the foreign digital service provider or e-commerce vendor “refuses” to do so, the revenue authorities have the right to notify the responsible Ministry of this situation, where the responsible Ministry has the right to block the access domain of the digital platform or e-marketplace which refuses to rectify the violation.
The blocking of the foreign digital platform Kazakhstan domain isn’t of a permanent nature; it could be restored only after the foreign operator has rectified the situation.
If a foreign person engages in cross-border B2C supplies of goods or provides electronic services, it is required to register conditionally for VAT, under Article 102 of the Tax Code.
Registered Foreign E-Service Providers or E-Marketplaces
There are currently 133 foreign e-commerce and e-services taxable persons registered in Kazakhstan under the scheme known as the “Google tax.”
These include, among others: Apple, Amazon, Alibaba Tmall and Taobao, AliExpress, Adobe, Canva, Chess, eBay, Google, Meta with Facebook and Instagram, Microsoft, Netflix, Nintendo, Ozon, OpenAI LLC, Temu, TikTok.
Tax Audit
The principal aim of the audit isn’t to block domain access of the responsible e-commerce operators/vendors or e-services providers/platforms, but to rectify the situation. The rectification should:
- Increase the number of taxable persons that should be registered for VAT in Kazakhstan for their B2C cross-border supplies
- Report and remit the underreported VAT
- Increase State Revenue from cross-border VAT
- Reduce discrepancies between rules and requirements enacted for local e-commerce or e-service vendors and foreign vendors (primarily the ones that aren’t registered and they should be; or the ones that underreport the VAT)