1. Tax Law #2 Zhanat Alimanov, assistant professor

2. Home assignment (2-3 per day)  Calculate tax burden of the company on Masha’s income: under (1) Labor Law, (2) Civil Law (not IE), & (3) Civil law (IE): 1. Salary is KZT 276,000 a month & free lunch (2,900 per lunch, 14 lunches a month) 2. Salary is KZT 347,000 a month & free delivery from work to home (cost of the delivery is 900 per day, 23 days). 3. Salary is KZT 174,000 a month & bonus 344,000 4. Salary is KZT 575,000 a month & business trip within KZ (19 nights, hotel 21,000 a night, food 3,500 a day) 5. Salary is KZT 3 mln. a month & gave clients 9 dinners (50,000) 6. Salary is KZT 547,000 a month & vacation (750,000) 7. Salary is KZT 570,000 a month & forgave the loan from the company in the amount of 300,000.

3. Example  Calculate tax burden of the company on Volodya’s income: under (1) Labor Law, (2) Civil Law (not IE), & (3) Civil law (IE). Salary is KZT 170,000 a month 1. Labor Law: PIT + Social Tax  PIT = Taxable income * 0.1= (Total Revenue – Deductions&Exemptions – Pension – Minimum Salary)*0.1= (170,000 - 0 – 17,000 (pension) – 19,966 (minimum salary))*0.1 = 13, 303.4  Social Tax = Taxable income*0.11 = (Total revenue – Pension)*0.11=(170,000-17,000)*0.11=16,830 2. Civil Law (not IE): PIT  PIT = Taxable income * 0.1= (Total Revenue – Deductions&Exemptions)*0.1= (170,000 - 0)*0.1 = 17,000 3. Civil Law (IE): no tax on company

4. Terms 1. Tax – налог 2. Revenue (Income) – Доход 3. Total Personal Revenue – Совокупный личный доход 4. Net Income – Чистый доход 5. Personal Income Tax – Индивидуальный подоходный налог

5. Plan I. Personal Income Tax & Social Tax 1. When company has to pay Personal Income Tax? How to calculate PIT & Social Tax Differences of taxation of Civil & Labour Contracts

6. How to calculate PIT & Social Tax Differences of taxation of Civil & Labour Contracts

7. Example 1 Masha is a student. She works on a part time basis for KPMD. Her salary is 49,000. She asked also free lunches there. They agreed. Each lunch is worth KZT700 (24 in month). How much will be company’s tax burden? (Labor Law & Civil Law (IE & not IE))?

8. Step 1: Calculate Total Personal Revenue (TPR) Total Personal Revenue Taxed at Source (art. 160) Company would pay PIT for Physical Person Not Taxed at Source (art. 177) Company would not pay PIT for Physical Person, he will pay PIT himself

9. Step 2: How much is Tax of the Company? Taxed at Source (art. 160 &158) LABOR Contract Total Revenue (Art. 160) PIT Minus Deductions & Exemptions (Art. 155 & 156) Minus Pension & Minimum Salary (art. 166) = Taxable Income * 0.1 (Art. 158) Social Tax Minus Deductions (art. 155) Minus Pension (75) (Art. 357 (2/6) = Taxable Income * 0.11 (art. 358) CIVIL Contract Total Revenue Art. 158 PIT Minus Deductions & Exemptions (Art. 155 (19-26) & 156) = Taxable Income * 0.1 (Art. 158)

10. Example LABOR LAW Total revenue (Art.163)=all money + in kind income = 35,000 + 800*24 = 54,200 1. PIT = Taxable Income * 0.1= Total Revenue – – (1) Deductions & Exemptions – (2) Pension & Minimum Salary)*0.1 = (54,200 – 0 –5,420 (pension) - 19,966 (minimum salary))*0.1 = 2,881.4 2. Social Tax = (Total Revenue – Deductions - Pension)*0.11 = (54,200-0-5,420)*0.11 = 5,365.8 TOTAL TAX = PIT + Social Tax = 2,881.4 + 5,365.8 = 8247.2

11. Example CIVIL LAW (Not IE) Total revenue (Art.168)=all money + in kind income = 35,000 + 800*24 = 54,200 1. PIT = Taxable Income * 0.1= Total Revenue – – (1) Deductions & Exemptions)*0.1 = (54,200 – 0) *0.1 = 5,420 TOTAL TAX = PIT = 5,420

12. Example CIVIL LAW (IE) “0” taxes on company

13. Example 2 Alex’s salary is KZT 1 mln. He went on a business trip for 12 days to Paris. He stayed at the Carlton hotel there for 12 nights. The cost per night was KZT 0.5 mln. At the end, he received bonus from the company in the amount of KZT 1 mln. and a vacation in Hawaii (5 mln. worth). Also, company renovated his house (0.7 mln). How much will be tax burden of the company on Alex’s income?

14. Step 1: Calculate Total Personal Revenue (TPR) Total Personal Revenue Taxed at Source (art. 160) Company would pay PIT for Physical Person Not Taxed at Source (art. 177) Company would not pay PIT for Physical Person, he will pay PIT himself

15. Step 2: How much is Tax of the Company? Taxed at Source (art. 160 &158) LABOR Contract Total Revenue (Art. 160) PIT Minus Deductions & Exemptions (Art. 155 & 156) Minus Pension & Minimum Salary (art. 166) = Taxable Income * 0.1 (Art. 158) Social Tax Minus Deductions (art. 155) Minus Pension (75) (Art. 357 (2/6) = Taxable Income * 0.11 (art. 358) CIVIL Contract Total Revenue Art. 158 PIT Minus Deductions & Exemptions (Art. 155 (19-26) & 156) = Taxable Income * 0.1 (Art. 158)

16. 1. Total revenue 1. Total revenue = all income (in money or in kind, art. 163) = = Salary + Bonus + Hawaii + Renovation + Hotel stay = = 1 mln.(salary) + 1 mln.(bonus) + 5mln.(Hawaii) + 0.7 mln.(Renovation) + 0.5 mln.*12 (hotel stay) = 13,700 000 Monthly payment indicator = KZT 1,731

17. 2. Deductions & Exemptions (art. 155, par. 3 & 156) Deductions & Exemptions (art. 155 & 156) = = business trip (art. 155 (3/4) = 8*1852*12 days (business trip) = =177,792 Monthly payment indicator = KZT 1,731

18. 3. Maximum Pension Maximum Pension = = (75 * 19,966)*0.1 = =149,745 Monthly payment indicator = KZT 1,731

19. 4. PIT (Labor Law) PIT = Taxable income *0.1 = (Total Revenue – Deductions & Exemptions – Pension – Minimum Salary)*0.1 = =(13,700,000 (total revenue) –177,792 (deductions & exemptions) – 149,745(pension) – 19,966(minimum salary))*0.1= =1 335 249.7 Monthly payment indicator = KZT 1,731

20. 4. Social Tax (Labor Law) ST = Taxable income *0.11 = (Total Revenue – Deductions - Pension)*0.11 = =(13,700,000 (total revenue) – 177,792(deductions) – 149,745(pension))*0.11= = 1 470 970.93 Monthly payment indicator = KZT 1,731

21. 4. Tax burden (Labor Law) Tax Burden of the Company = PIT + Social Tax = = 1 335 249.7 + 1 470 970. 93 = = 2 806 220.63 Monthly payment indicator = KZT 1,731

22. 1. Tax burden (Civil Law, not IE) 1. Total revenue = all income (in money or in kind, art. 163) = = Salary + Bonus + Hawaii + Renovation + Hotel stay = = 1 mln.(salary) + 1 mln.(bonus) + 5mln.(Hawaii) + 0.7 mln.(Renovation) + 0.5 mln.*12 (hotel stay) = (13 700 000 – 0 (deductions)) * 0.1 = 1 370 000 Monthly payment indicator = KZT 1,731

23. 1. Tax burden (Civil Law, IE) = 0 Monthly payment indicator = KZT 1,731