In Kazakhstan, transfer pricing (TP) reporting requirements continue to tighten. Legislation has already established a comprehensive three-tier reporting system: Local File, Master File, and Country-by-Country Report. For companies, this means one thing: preparation for audits must be systematic, documented, and timely.
In this article, we will examine the types of reports that exist, who is required to submit them, and what the state revenue authorities actually check.
Three levels of transfer pricing reporting
According to the Law of the Republic of Kazakhstan “On Transfer Pricing,” reporting consists of the following types:
- Local file;
- Master file;
- Country-by-country Report.
The reporting forms and the procedure for completing them are approved by the authorized body. Also, if incomplete information, errors, or inaccuracies are found, the transaction participant or international group participant is required to submit corrected reports. The deadlines established by law for the initial submission do not apply to corrections. Failure to submit reports or submission of reports containing inaccurate information shall entail liability in accordance with the legislation of the Republic of Kazakhstan.
1. Local File
Submitted by members of international groups no later than 12 months after the end of the financial year.
Who needs to prepare and submit a Local File: Taxpayers who meet all of the following conditions are required to prepare and submit a Local File to the tax authorities without being asked to do so:
- enter into controlled transactions during the reporting year;
- have revenues for the year preceding the reporting year exceeding 5 million MCI.
Reporting is also provided for transactions with related parties that are not members of international groups.
Local reporting includes transactions with a total amount of income (expenses) and/or liabilities in the reporting year of at least 250,000* MCI.
Local reporting is detailed information about specific transactions: terms, functions, risks, economic justification of prices. Thus, if a company enters into controlled transactions with related parties and its revenue for the financial year preceding the reporting year exceeds the threshold, it is required to submit local reporting within 12 months after the end of the year.
2. Master File
Reports for the reporting financial year are submitted by members of the international group (IG) at the request of the authorized body. The main reports are submitted within 30 calendar days of receiving the request, and the request cannot be made earlier than 12 months after the end of the financial year.
Who needs to submit these reports?
- the parent company of the MG is a resident of the Republic of Kazakhstan;
- an authorized member of the MG;
- a resident that is part of the MG but is not the parent company of the MG or an authorized member;
- a non-resident operating in the Republic of Kazakhstan through a permanent establishment, if the parent company or authorized member are not residents.
The provisions apply if all of the following conditions are met: revenue for the previous period according to the consolidated financial statements of the MG exceeds EUR 750 million; in the reporting year, the MG member conducted international business operations and transactions in the territory of the Republic of Kazakhstan that are directly related to international business operations:
- based on the saleable minerals extracted by the subsoil user who is one of the parties;
- one of the parties has tax privileges;
- one of the parties has a loss according to tax returns for the last two tax periods preceding the year of the transaction;
- the parties have different corporate income tax rates.
If a company is part of a group with revenue for the previous year above the threshold and engages in controlled transactions, it must be prepared to provide a Master File upon request. It should also be noted that if the group already has a Master File submitted in another country, it is permissible to submit a notarized copy of it (in some cases without notarization, if the reports are submitted to foreign competent authorities in electronic form).
3. Country-by-Country Report
The report is submitted by a member of an international group whose consolidated turnover for the previous year exceeded €750 million. According to the Transfer Pricing Act, the report must be submitted no later than 12 months after the end of the financial year, or no later than 12 months after receiving the request.
This report is provided:
- the parent company of the MGK that is a resident of the Republic of Kazakhstan,
- an authorized participant of the MG that is a resident of the Republic of Kazakhstan,
- upon request, a resident participant of the MG or a non-resident participant of the MG that has a permanent establishment in the territory of the Republic of Kazakhstan, if the foreign parent company does not provide CbCR or its jurisdiction does not exchange information.
In the latter case, the obligation to submit country-by-country reporting arises if the parent company of an international group has not submitted CbCR in its jurisdiction, or if the jurisdiction of the parent company does not automatically exchange information with Kazakhstan.
Forms of control by authorized authorities
Compliance with transfer pricing legislation is monitored by authorized bodies through:
- monitoring transactions (transactions on the List approved by Order of the Minister of Finance of the Republic of Kazakhstan);
- conducting audits;
- applying other procedures provided for by the legislation of the Republic of Kazakhstan.
Adjustments and liability
If a company discovers errors or incomplete data in reports that have already been submitted, it is required to submit a corrected version.
There are no legal deadlines for resubmitting reports. However, failure to submit reports or submission of inaccurate information is grounds for liability.
How are transfer pricing audits conducted in Kazakhstan?
Inspections are conducted in cases expressly specified by law:
Grounds for inspection:
- deviation of the transaction price from the market level;
- information from government authorities on the use of transfer prices;
- conducting a tax or customs audit if there are no sources of market information.
Audits are conducted in accordance with the procedure established by the Business Code, as well as tax and customs legislation.
The authorized body has the right to use transfer pricing reports for taxation purposes.
What companies should pay attention to
Since the Transfer Pricing Act introduced a three-tier model (Local File, Master File, CbCR), it is important for businesses to:
✅ Prepare Local File in a timely manner
If the company’s revenue for the previous year exceeds the threshold and there are controlled transactions, local reports must be submitted within 12 months after the end of the year.
✅ Track the revenue of the entire group
If MG exceeds the threshold, prepare the Master File and CbCR in advance, even if they have not yet been requested.
✅ Verify the jurisdiction of the parent company
If the parent company is a non-resident and the jurisdiction does not exchange information or allows abuse, the CbCR obligation may fall on companies in Kazakhstan.
✅ Record justification of market prices
This is the main criterion for initiating audits.
Preparing for transfer pricing audits is not a reaction to a request from the competent authority, but an ongoing process. The law specifies in detail what exactly and when a company must provide, and also establishes a system for data exchange at the MTC level.
Companies that prepare their Local File in advance and monitor the requirements for the Master File and cross-border reporting significantly reduce the risk of tax claims and penalties.
Taxpayers who are not required to submit Local Files to tax authorities on an annual basis prepare this reporting in order to justify the compliance of transfer prices with market levels. According to the Transfer Pricing Law, companies are required to maintain economic justification for prices, which means keeping such documentation. In the event of an audit, the documentation will be provided by the taxpayer to the regulatory authorities in order to defend their position.
Send message
Please describe your situation and we will find an optimal solution for your business.
info@konsugroup.com