With the growth of international trade, Kazakhstani companies are increasingly acting as intermediaries in transactions between foreign suppliers and buyers. One common business model is transit, whereby goods are purchased from a foreign supplier and sold to a foreign buyer without actually being imported into the Republic of Kazakhstan.
When does VAT arise in transit trade?
The main question in such transactions is whether VAT arises in Kazakhstan.
According to Article 459 of the Tax Code of the Republic of Kazakhstan, the place of sale of goods is recognized as the Republic of Kazakhstan if:
- The beginning of the transportation of goods is the Republic of Kazakhstan
- The goods are transferred to the recipient on the territory of the Republic of Kazakhstan.
When is the sale of goods not subject to VAT in Kazakhstan?
If goods are shipped outside of Kazakhstan and delivered to the buyer outside of Kazakhstan, the Republic of Kazakhstan is not recognized as the place of sale. In this case, the turnover is considered non-taxable for VAT.
Thus:
— VAT of 16% is not charged on sales;
— import VAT does not arise;
— there is no obligation to pay VAT to the budget of the Republic of Kazakhstan for such a supply.
How is income from transit trade taxed?
Regarding corporate income tax, sales revenue is included in the state income tax. Corporate income tax is paid in accordance with the standard procedure.
What documents confirm the transit transaction?
During a desk audit, they usually request confirmation that the goods were not actually located in Kazakhstan:
— Contract with the supplier;
— Contract with the buyer;
— invoices;
— CMR, bills of lading, air waybills, transport invoices;
— documents on the transfer of ownership;
— bank payments and SWIFT;
— currency control documents.
If at least some of the documents are missing, the tax authority may attempt to reclassify the transaction and request additional clarifications on VAT and CIT.
Are customs procedures required for transit shipments?
Such transactions do not require import or export customs clearance, as the goods do not cross the border of the Republic of Kazakhstan. Customs procedures will be completed in the countries through which the goods are actually transported.
Although the goods do not enter the territory of the Republic of Kazakhstan, from an accounting perspective, the LLC purchases the goods and then sells them to the buyer, so the transactions are reflected as a regular sale.
Posting of goods
Dt 1330 "Goods"
Kt 3310 "Short-term accounts payable to suppliers"
Reflection of sales of goods
On the date of transfer of ownership to the buyer, the following is sold:
Dt 1210 "Current accounts receivable from customers"
Kt 6010 "Income from sales of products and provision of services"
Write-off of cost of goods sold
Write-off of cost of goods sold:
Dt 7010 Cost of goods sold"
Kt 1330 "Goods"
The main mistake in accounting for transit trade
In practice, many accountants mistakenly fail to record goods on the balance sheet because they are not delivered to Kazakhstan. This is incorrect. If the contract transfers ownership of the goods to the limited liability company (LLC), the goods must be recognized as company assets regardless of their location. Otherwise, tax authorities may question the validity of the transaction and the validity of income recognition.
Need help with accounting and taxes in Kazakhstan?
Transit transactions require proper documentation, accounting for transactions, and confirmation of tax positions. EGSAT can help you with accounting and tax support for your company.
Get a consultation from an EGSAT specialist on accounting support in Kazakhstan.
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