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Property relations between persons engaged in trustee entrepreneurial activities

Property relations between persons engaged in trustee entrepreneurial activities.

Regarding checkout fiduciary

Property relations between persons engaged in business activities regulated by Chapter 44 of the Civil Code of the Republic of Kazakhstan (hereinafter – Civil Code of RK) on the basis of the property trust management contract.

Thus, the power of attorney issued by a natural person, the owner of real estate trustee is not an instrument for the full grounds of trust property relations.

  According to paragraph 2 of Article 886 of the Civil Code of RK the property trust management contract shall provide:
      1) the subject and period of the trust management contract;
      2) the composition of the property, transferred to the trust;
      3) an indication of the beneficiary;
      4) the timing and form of reporting of the trustee;
      5) an indication to the person, who shall be receiving the property, in the event of termination of the contract of property trust management.
      For certain of contracts legislation may provide other essential terms.
      The contract may provide for other conditions, including the amount and forms of remuneration.

The property trust management contract shall be in writing form basing on the Article 887 of the Civil Code of RK.

Signing the lease contract

In paragraphs 1 and 3 of Article 544 of the Civil Code of RK the lease contract for a period exceeding one year, and if at least one of the parties of the contract is a legal entity regardless of the length, must be concluded in writing. The lease contract between the citizens for up to one year may be concluded orally.

Entrepreneurial Activities of Citizens

The duty of an individual to register as an individual entrepreneur ((hereinafter – IE)

Paragraph 4.1 of Article 19 of the Civil Code of the Republic of Kazakhstan establishes an individual person who does not employ workers on a permanent basis, may not be registered as an individual entrepreneur in case of obtaining the following income provided for by tax legislation of the Republic of Kazakhstan:

      1) imposed at a source of payment;
      2) property income;
      3) other income.

Under subparagraph 3 of paragraph 1 of Article 180 of the Tax Code of the Republic of Kazakhstan (hereinafter - the Tax Code) income received by an individual, non-IE, from the rental of property to persons who are not tax agents in the territory of the Republic of Kazakhstan is the property income and is subject to individual income tax (hereinafter - PIT), not taxable from the source of payment.

Individual taxpayer for the tax period independently calculate PIT by applying the tax rate of 10 % established by paragraph 1 of Article 158 of the Tax Code of the Republic of Kazakhstan to the taxable income not subject to the income taxable from the source of payment. A natural person who has received property income has to fill and submit tax return as stipulated in subparagraph 3, paragraph 1 of Article 185 of the Tax Code of the Republic of Kazakhstan, in the period until 31 March following the reporting period in accordance with paragraph 1 of Article 186 of the Tax Code of the Republic of Kazakhstan and pay PIT to the budget at the place of registration not later than 10 days after submission of the PIT return.

However, the deal is structured via trustee, who is a tax agent under subparagraph 31 of paragraph 1 of Article 12 of the Tax Code of the Republic of Kazakhstan, with the duty to calculate, withhold and remit taxes withheld at the source of payment of the income of an individual from a tax agent under subparagraph 2 of Article 160 of the Tax Code of the Republic of Kazakhstan.

Income of an individual from the tax agent IE

In establishing trust property management, trustee - IE undertakes to manage of the property transferred into his possession, use and disposal, unless otherwise provided by the property contract or legislation in the interests of the beneficiary (owner).

The tax agent has an obligation to withhold PIT from the income – paid to the owner taxable at the source of payment, resulting from the management of the property by the trustee for the benefit of the founder (owner).

Article 161 of the Tax Code of the Republic of Kazakhstan regulates the procedure to calculate, withhold and pay PIT:

1. Calculation of the PIT shall be performed by a tax agent on the income which is taxable at the source of payment in the taxable income calculating.
 2. Withholding of the PIT shall be performed by a tax agent no later than the date of the income payment, taxable at the source of payment, unless otherwise provided by this Code.
 3. A tax agent shall perform transfer of the PIT for the paid income no later than 25 (twenty five) calendar days after the end of the month, in which the income payment was made, at its location, unless otherwise provided by this paragraph.

In accordance with paragraph 1 of Article 162 of the Tax Code of the Republic of Kazakhstan the PIT and the social tax return shall be submitted to the tax bodies at the location of the tax payment no later than the 15th of the second month, following the accounting quarter, or in the manner prescribed for small businesses.

In order to optimize taxation and tax risks for individuals – owners, basing on the above information and provisions of legislation if the RK, taking into account the situation according to the documents provided for analysis (Power of Attorney and the Lease contract ) suggesting the following:

1. An individual who received property income for 2013 must pass PIT declaration no later than March 31, 2014 and pay 10% PIT from the property the income, received from leasing property to the persons who are not the tax agents not later than 10 days after the date of PIT return.

2 . Suggest to recognize deal with IE - invalid.