Friday, November 28, 2008

Kazakhstan Joins the Flat Tax Bandwagon

February 25, 2008

By Alvin Rabushka

On February 1, 2006, the president of Kyrgyzstan signed into law a change in the country’s tax code that substituted a 10% flat tax on individual income in place of a graduated structure of rates between 10-20%. At that time the president of neighboring Kazakhstan said that his country would consider implementing a flat tax in 2007.

Kazakhstan enacted substantial changes in the country’s tax code on July 7, 2006, and December 11, 2006. Effective January 1, 2007, a 10% flat rate on taxable individual income replaced the country’s previous six-rate system of 5, 10, 15, 20, 30, and 40% depending on income. The lowest 5% rate applied to the first 69,600 Tenge (KZT) of income with the top 40% rate on income exceeding 348,000 KZT. ($1 = 120.5 KZT) The 10% flat tax exempts from taxation a personal allowance linked to the minimum wage level.

Other changes reduced the interest withholding rate for individuals to 10% and the domestic individual dividend withholding rate to 5%. Self-employed individuals using simplified tax returns are charged a 3% flat rate. Capital gains on government bonds and the sales of securities listed on a stock exchange are tax-exempt.

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