Taxation of SMEs

JOB CREATION

ECONOMIC GROWTH

DYNAMISM

importance

SME

SME 95 % 99 %= to

various criteria of size…

TURNOVER

# OF EMPLOYESS

CAPITAL BASE

PROFITS

IMPORT/EXPORT

employee numbers are not the sole defining criterion

…non-subsidiary, independent firms which employ less than a given number of employees.

World Bank (2004)

EU (Commission Recommendation

2003/361/EC)

Micro10 or fewer employees,

assets no more than USD100,000

10 or fewer employees and balance sheet total of no more than EUR 2m

Small

10 to 50 employees, turnover and assets

between US$100, 000 and US$ 3 m

10 to 50 employees, and annual turnover and/or balance sheet total of

less than EUR 10m

Medium

50 to 300 employees; turnover and assets

between US$3 to 15 m.

20-250 employees and turnover and/or annual

balance sheet of EUR 10-50m

The World Bank and the European Commission define:

Characteristics MICRO SMALL MEDIUMNumber of taxpayers

Very numerous Many Moderate

Type of taxpayers

Individuals, family owned businesses

Family owned business with some employees; highly specialized self-

employers

Legal entities with several employees,

partnerships

Ownership structure

Owner, employee(s) and manager are one

and the same

Owner(s) are generally the

manager

Owner is usually different from

managers

Type of transactions

Mainly cash; high informality

Cash/bank; some informality

Bank; much more formality

Place of business

Frequently non-fixed

Fixed (but may be volatile)

Fixed

Business administration

Non-professional (family-run)

Some professional assistance

Regular professional advice

Accounting Standards

No or few records; very limited

understanding

Some records, limited to partial

compliance; limited understanding

Partial to good compliance and record keeping

Market reach Local Local/regionalNational/

International

Life-span of business

Very dynamic; rapid creation and

dissolution

Dynamic; may disappear, stay

small of grow

More stable (consolidated)

business activities

Characteristics of Micro, Small, and Medium Enterprises

THE CODE No. 99-IV OF 10TH DECEMBER 2008 OF THE REPUBLIC OF KAZAKHSTAN CONCERNING TAXES AND OTHER OBLIGATORY PAYMENTS TO THE BUDGET as of Jan, 01, 2012

standard

Chapter 61

TAX CODE

§ 1

§ 2

§ 3 The Special Tax Regime on the Basis of a Simplified Declaration

The Special Tax Regime on the Basis of a Patent

General provision

SME Taxation

THE SPECIAL TAX REGIME FOR SMALL BUSINESS ENTITIES

Individual

income

SocialCorporate

income

Article 427: simplified procedure for the assessment and payment of..

1. the general established procedure;

2. the special tax regime on the basis of a patent;

3. the special tax regime on the basis of a simplified declaration.

standard

Article 428, p. 3

legal entities having affiliates, representations

affiliates, representations of legal persons

taxpayers having other separate structural units and (or) taxable items in different populated areas

legal persons in which the share participation of other legal persons is more than 25 percent

legal persons whose foundation party is also a foundation party of another legal person, using a special tax regime

Article 428, p. 4

Excisable good

Legal

Lotteries

Subsurface use

Ferrous metals

Glass container

Oil products Consulting

Accounting

Financial

Excisable good 1

Oil products 2

Lotteries3

Subsurface use4

Glass container5

Ferrous metals6

Consulting7

Accounting8

Financial9

Legal10

components

14

5scom

§ 2 The Special Tax Regime on the Basis of a Patent

do not use employed manpower;

carry on business in the form of personal entrepreneurship;

income of which for the tax period does not exceed the 200-times minimal amount of wages established by the law concerning the republic's budget and that is in effect on the 1st January of the appropriate financial year

Computation of the price of a patent shall be carried out by way of applying a rate of 2 per cent to taxable item. The price of a patent shall be paid to the budget as follows:

Computation of the Price of a Patent

Tax FormulaIndividual income

in an amount of ½ of the patent price

Social

in amount of ½ of the patent price, less social assessments computed in

accordance with the law of the Republic of Kazakhstan “Concerning Obligatory

Social Insurance”.

§ 3. The Special Tax Regime on the Basis of a Simplified Declaration

in the case of individual entrepreneurs: maximum average payroll number of employees for a tax period is twenty-five persons, including the individual entrepreneur himself; maximum income for a tax period is 10 000,0 thousand tenge;

in the case of legal persons: maximum average payroll number of employees for a tax period is fifty persons; maximum income for a tax period is 25 000,0 thousand tenge.

Calendar quarter shall be recognised as tax period.

Assessment of taxes on the basis of a simplified declaration shall be carried out by the taxpayer independently by way of applying to a taxable item of the rate in amount of 3 percent for the reporting tax period.

Total taxes assessed for a tax period in accordance with paragraph 1 of this Article shall be subject to adjustment towards reduction by amount of 1.5 per cent of total tax per each employee, based upon the average payroll number of employees, where the average monthly wages of employees upon the results of the reporting period reached not less than 2-times for individual entrepreneurs, not less than 2.5-times for legal persons, minimum wage

Assessment of Taxes in Accordance with the Simplified Declaration

PAYMENT OF TAX

1. DeliveryTax payment allocationIn that respect, personal (corporate) income tax shall be subject to payment in an amount of ½ of the assessed amount of tax on the basis of a simplified declaration, social tax in an amount of ½ of the amount of tax assessed on the basis of a simplified declaration, less total social assessments to the State Fund for Social Insurance.