Kazakhstan Tax & English Ltd Companies

Kazakhstan Tax & English Ltd Companies

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I have got a client (Ltd company) that has landed a contract in Kazakhstan and the company he works for will be taking 10% off for Kazakhstan tax.

Can anyone help me out in respect of is this tax just lost?  Do we declare the 90% which he receives as turnover etc etc

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By thisistibi
13th Mar 2012 10:45

Double tax relief

Kazakhstan has a double tax treaty with the UK, so for normal services contracts the client should not have deducted the 10% local WHT.  

Credit relief will not be allowed in the UK as client has not sought to minimise his overseas tax so the conditions are not met.

You could claim a deduction against the overseas income in the CT return (i.e. so the net amount is taxable as suggested in your question) but it would be more beneficial to try and get the client to pay the UK Co gross in accordance with the double tax treaty.

For accounting purposes, turnover should include the gross amount, and the 10% withholding tax can be included in the tax line of the P&L or alternatively as an expense amount in arriving at profits before tax.

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Euan's picture
By Euan MacLennan
13th Mar 2012 10:47

Double tax relief

Why would you declare only 90% of the contract fee as turnover?  You should report 100% and deduct the Kazakhstan withholding tax from the UK corporation tax liability.

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By jm46
14th Mar 2012 10:08

I am a very small practice who sometimes comes up against strange (to me) new tasks.  Thank you both for your comments but it does sound to me like both of your ways are different????

More help would be greatly appreciated

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By thisistibi
14th Mar 2012 10:44

Conditions for credit relief

Euan has assumed you are eligible for credit relief without considering whether the conditions are met for such relief.  I have tried to explain why the conditions are unlikely to be met, and therefore an alternative way of claiming some relief (as a deduction).  You could ignore the conditions and claim credit relief anyway, but that could be considered negligent.

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