Brief review of the Kazakh Law on Transfer Pricing: Three-Tier Documentation Requirements

published on 4 August 2020 | reading time approx. 2,5 minutes

Public relations arising from transfer pricing in Kazakhstan are regulated by the Law of the Republic of Kazakhstan No. 67-IV “On Transfer Pricing” dated 5 July 2008 (the “TP Law”).

Unlike the OECD model, local transfer pricing rules apply to international (cross-border) and, in certain circumstances, domestic transactions involving cross-border business transactions. At that, such transactions include, among other, purchase and sale transactions, as well as transactions related to the performance of work or provision of services, when one of the parties is a non-resident operating in Kazakhstan without establishing a permanent establishment.
 
According to the TP Law, participants of the above-mentioned transactions must submit information and documents confirming the validity of the applied transaction price (“TP Documentation”) at the request of the authorized bodies within 90 calendar days.
 

Three-tiered documentation requirements

In line with the OECD's Action Plan on Base Erosion and Profit Shifting (13 BEPS), the government of Kazakhstan has introduced “three-tiered” transfer pricing documentation in 2017 (i.e. local file, master file and Country-by-Country report).
 

Notification on participation in an multinational enterprise (“MNE”)

Parent company of MNE, an authorized member of an international group (in the event that transfer pricing reports are to be submitted by an authorized member of an international group), as well as members of an international group carrying out business activities in Kazakhstan (if there is an obligation to submit at least one of the three-tier documentation in Kazakhstan) must submit a notification on participation in MNE no later than 1 September of the year following the reporting financial year.
 

Local File

The requirements to prepare and submit local file apply to a member of MNE who, in the reporting financial year, entered into transactions that fall under the control of transfer pricing regulations (i.e. international business transactions or related transactions), and whose revenue in accordance with its financial reporting for the financial year preceding the reporting financial year is at least 13,89 billion KZ Tenge, what is approx. 30 million Euro (five million times the monthly calculation index “MCI”).
 

Master File

According to the TP Law, the Master File for the reporting financial year is submitted by a member of MNE to the authorized body at its request no later than 12 months from the day the member of the international group receives a request for such reporting.
 
In this case, the obligation to submit the Master File is considered fulfilled if a member of MNE submits a notarized copy of the Master File of the parent company of MNE that is a non-resident, or an authorized member of MNE (if the parent company of MNE has given such a member the authority to submit main reporting), containing information similar to information on Master File.
 
The requirements to prepare and submit Master File also apply to a member of MNE who, in the reporting financial year, made transactions that fall under the control of transfer pricing regulations in Kazakhstan, and the amount of revenue from the consolidated financial statements of the international group for the financial year immediately preceding the reporting financial year is at least 750 million Euro or other amount established by the legislation of the foreign state, the resident of which is the parent company of the international group.
 

Country-by-Country Reporting (“CbC Report”)

Requirements for submission of CbC reporting apply to the parent company of MNE (resident of the Republic of Kazakhstan) or an authorized member of an international group (if the parent company of an international group has given such a member the authority to submit CbC reporting), or another member of an international group who is entrusted with the obligation to submit CbC reporting at the request of the authorized body if the amount of revenue from the consolidated financial statements of the MNE for the financial year immediately preceding the reporting financial year is at least 750 million Euro or another amount established by the legislation of a foreign state, the resident of which is the parent company international group.