LETTER OF THE TAX COMMITTEE OF THE MINISTRY OF FINANCE OF THE REPUBLIC OF KAZAKHSTAN

of November 20, 2003 No. NK-UM-08-2-17/9232

Concerning the taxation of the income of the nonresidents performing activities in the Republic of Kazakhstan through permanent organization

The nonresident company (resident of the Russian Federation) signed the contract with the resident company for performance of works. For the purpose of execution of conditions on the contract in RK and tax payments and other obligatory payments in the budget in the territory of RK by the nonresident company created branch.

According to Art. 7 of the Convention between the Government of RK and the Government of the Russian Federation on avoidance of double taxation and prevention of tax avoidance on the income and the capital (further - the Convention) if the company of the Contracting State performs or performed business activity in other Contracting State through the permanent organization located there, then its profit can be assessed with tax in other State, but only in that part which belongs:

1) to such permanent organization;

2) sale in this other State of goods or products which match with goods or products which are on sale through permanent organization;

3) other business activity performed in this other State which in character matches with the business activity performed through such permanent organization.

At the same time, according to Art. 5 of the Convention, the term "permanent organization (representation)" means the permanent place of activities through which the company of one Contracting State fully or partially performs business activity in other Contracting State.

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