IE under the Simplified Taxation System in Kazakhstan in 2024

One of the most straightforward, easy, and convenient ways to run a business for an individual entrepreneur is an IE under the simplified taxation system (STS). Simply put, in this case, the business operates on a simplified tax regime. This mode minimizes the number of administrative procedures and simplifies the preparation of reporting documentation. Importantly, the entrepreneur can manage the business independently without hiring an accountant. Let's take a closer look at the nuances of the simplified taxation system.

Who is eligible for the Simplified Declaration?

Entrepreneurs can use the simplified system if their business simultaneously meets the following criteria:

1. Number of Employees

The total number of employees must not exceed 30 people, including the entrepreneur.

2. Presence of Branches

The company must not have branches located in other settlements.

3. Income For Six Months

The specific turnover of an individual entrepreneur who plans to operate under the simplified system depends on whether the entrepreneur uses the TIS (three-component integrated system). The TIS includes working with a POS terminal, an online cash register, and the ERP system for inventory accounting.

If the entrepreneur does not use TIS, the IE’s six-month turnover should be less than 24,038 MCIs to run a business under the simplified taxation system. Thus, the maximum income for six months should not exceed KZT 88,748,296 (as of 1 January 2024, the monthly calculation index reached KZT 3,692).

If the entrepreneur uses TIS, the six-month turnover should be below 94,086 MCIs (24,038 MCIs + 70,048 MCIs). In monetary terms, this amounts to KZT 347,365,512.

4. Market Segment

The IE under the simplified taxation system in 2024 can engage in any activity. However, there are several exceptions where STS is not possible. These include:

1. Activities related to excisable goods (production, storage, or wholesale)
2. Sale of petroleum products (e.g., diesel fuel or gasoline)
3. Draw of lottery tickets
4. Subsoil use (except for licensed activities)
5. Handling of glassware (collection or acceptance)
6. Metal-related activities (procurement, storage, processing, sale)
7. Marketing or consulting services
8. Auditing, accounting
9. Insurance services 
10. Activities in the field of justice and law
11. Retail lease and sublease
12. Finance lease
13. Hotel services (if two or more taxpayers operate in one hotel)
14. Services under Agency Contracts

Please note that to work under the simplified taxation system, you must meet all the listed criteria simultaneously. If the entrepreneur does not meet at least one of the criteria, such entrepreneur switches to the general taxation regime.

What Taxes Does an Individual Entrepreneur Pay Under the Simplified Taxation System?

To understand what taxes an individual entrepreneur will pay under the simplified taxation system in Kazakhstan in 2024, it is necessary to know if they have hired employees. Let's consider both situations in detail: when the entrepreneur works alone or hires employees.

Taxes Under the Simplified Taxation System for an IE Without Employees in 2024

A businessman who does not hire additional staff makes tax payments to the budget and mandatory contributions for himself/herself.

Budget payments include individual income tax (IIT) and social tax. Each tax accounts for 1.5% of profit. In total - 3% of income. Payments to the budget are made twice a year, i.e. every six months: by August 25 of the current year and by February 25 of the following year.

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The entrepreneur pays for himself/herself:

1. Mandatory Pension Contribution (MPC) – 10% of monthly earnings.
2. Social Security Contribution – 3.5% of the salary.
3. Health Insurance Payments (MSHIC) – 5% of 1.4 Minimum Wage (this amounts to KZT 5,950 in 2024).

Note that the entrepreneur can set his/her own salary under the simplified taxation system in 2024. The legislation regulates the salary cap only. For mandatory pension contributions, it ranges from 1 to 50 Minimum Wages per month (as of 1 January 2024, the Minimum Wage is KZT 85,000), and for social contributions – from 1 to 7 Minimum Wages per month.

These payments are made monthly. Contributions must be made by the 25th day of the month following the reporting month.

Moreover, it is important to remember a few nuances:

1. If the entrepreneur is on maternity leave but does not officially suspend his/her work and continues to earn income, the MPC and social security contributions must be made (minimum of one Minimum Wage).
2. If the entrepreneur has not suspended his/her activity but is not making a profit, the entrepreneur still needs to submit reports.
3. Even if you suspend your activity and do not submit tax reports, you must still pay Mandatory Social Health Insurance Contributions monthly (5% of 1.4 Minimum Wage).

Taxes for IEs Having Hired Employees Under the Simplified Taxation System in 2024

If the entrepreneur hires specialists, the entrepreneur also makes the aforementioned payments (in his/her favor and to the budget). Additionally, the entrepreneur must make contributions for each of his/her employees:

1. 10% - IIT
2. 10% - MPC
3. 3.5% - social security contributions
4. 3% - MSHI (mandatory health insurance)
5. 2% - MSHIC (health insurance contributions)

The percentages are calculated from the salary of hired specialists. The status of the employee (pensioner, disabled, foreigner, etc.) should also be taken into account.

For information, entrepreneurs working under the simplified tax system are exempt from social tax for employees. As in the first case, payments for specialists are made every month (by the 25th day of the month following the reporting month).

Additionally, as an employer, the entrepreneur must pay employees their sick leaves, vacation or compensation if the employee does not use his/her vacation.

VAT Payment for Individual Entrepreneurs Under the Simplified Taxation System

Whether an entrepreneur should pay VAT is determined by the entrepreneur’s annual income. Thus, an entrepreneur must register for VAT under the simplified system in 2024 if the taxable turnover from the sale of goods, works, or services per year exceeds:

1. 20,000 MCIs - for IEs not using TIS. In 2024, this is equivalent to KZT 73,840,000.
2. 144,184 MCIs (20,000 MCIs + 124,184 MCIs) – if TIS is used. This amounts to KZT 532,327,328 in 2024.

If the turnover is exceeded, the entrepreneur must independently submit a tax application (electronically or on paper) within 10 business days from the end of the month in which the excess occurred.

If the entrepreneur registers for VAT, he/she is issued a VAT payer certificate. From this moment, the entrepreneur must submit a VAT declaration on a quarterly basis and pay tax at a rate of 12%.

How to Operate an IE Under the Simplified Taxation System in Kazakhstan?

This can be done in any convenient way: independently, with the help of an outsourced accountant, or an in-house accountant. Each option has its pros and cons. For example, hiring an in-house accountant is not always economically feasible (especially for small businesses). Therefore, small businesses often use outsourced accounting services.

Independent accounting involves thoroughly studying all aspects and considering many nuances. For example, let's consider how an entrepreneur can receive income and what documents they need to prepare:

1. Cash. To work with cash, an online cash register is required – a receipt must be issued to the client for each purchase.
2. Payment by bank card. An online cash register is also required in this case.
3. Transactions via the app (for example, Homebank or Kaspi). An online cash register is required here as well.
4. Transfer to the IE’s bank account. If you are paid for goods, you need to prepare an invoice, a delivery note, and electronic invoice (E-invoice). And if clients pay for services in this way, you need to issue an invoice, draw up a paper or electronic certificate of work performed (ECWP) and prepare an electronic invoice.

Is an IE under the simplified taxation system obliged to issue E-Invoices in 2024? From 1 April 2021, this document must be issued if the amount per contract with legal entities or IEs (except those using the simplified taxation system, patent) exceeds 1,000 MCIs, i.e. KZT 3,692,000.

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But that’s not all. Entrepreneurs must issue E-invoices if:

1. they are VAT payers.
2. they sell goods imported from other countries.
3. they do not pay VAT but sell goods recorded in the “Virtual Warehouse” module of the E-invoice system.
4. they provide international cargo transportation services (regardless of whether they pay VAT).

Please note that entrepreneurs from the above categories must issue E-invoices even if the contract value does not reach 1,000 MCIs.

What Reporting Do Entrepreneurs Prepare Under the Simplified Taxation System?

IEs operating under the simplified taxation system must complete Form 910.00 once every six months:

1. Based on the results of the first half of the year, the document is submitted within the period from July 1 to August 15. Also, by August 25, profit tax of 3% is to be paid.
2. For the second half of the year, the report is submitted from January 1. The deadline is February 15 of the year following the reporting year. Additionally, a 3% tax must be paid by February 25.

The form is submitted online, which saves time.

Are There Any Benefits for Individual Entrepreneurs?

The Tax Code of Kazakhstan provides benefits for entrepreneurs working under the simplified taxation system. However, these benefits apply only to those who hire specialists.

An individual entrepreneur can reduce the tax he/she pays for each employee by 1.5%. This is possible only if the employee’s salary is 25 MCIs (KZT 92,300) or exceeds this amount.

The benefit can be applied when filling out Form 910.00. The amount payable will be calculated automatically.

Note that the entrepreneur can not only rely on benefits but must also remember their obligations, including timely tax payment. Various violations are penalized with a warning (for the first time). For the second and subsequent violations, the entrepreneur faces a fine. And the amount is significant – from 15 to 50 MCIs.

The simplified tax system attracts entrepreneurs with its simplicity and clarity, allowing them to manage their accounting independently and avoid costly third-party services. However, it is crucial to be aware of all the nuances and understand the legal norms even under the simplified system. This will enable transparent and efficient business operations, taking advantage of benefits and avoiding warnings and fines.