Monitoring mobile transfers in Kazakhstan: new limits are on the way.
Kazakhstani entrepreneurs are reluctant to pay taxes—this leads business owners to intentionally underreport their income or accept payments for goods and services through mobile transfers. Currently, identifying violators is only possible by checking the number of incoming transactions. However, in the near future, the Ministry of Finance plans to tighten control, including considering proposals from Majilis deputy Azat Peruashev, as reported by inbusiness.kz.
Officials from the Committee of State Revenues (KGD) consistently emphasize that fewer entrepreneurs in Kazakhstan are reporting their actual income. These alarming statistics have become one of the justifications for increasing oversight of mobile transfers.
Trust but Verify
It's worth noting that the current sole criterion for checks is receiving funds from 100 or more different senders monthly for three consecutive months. At the beginning of January, the KGD announced plans to enhance control, stating that in addition to the number of transfers, they will also monitor the volume—set at 255,000 tenge, or 3 minimum wage amounts (MWA).
In response to an official inquiry from inbusiness.kz, the KGD indicated that checks on mobile transfers for entrepreneurs will only begin in 2025, with results expected to be available in 2026. However, representatives from the agency have previously stated multiple times about widespread underreporting of income and tax evasion. This raises questions: if no checks have been conducted yet, what data supports claims of extensive violations?
The KGD explains that desk audits are already in progress: notifications for correcting violations are sent upon detecting suspicious transfers. If an entrepreneur disagrees, they have the right to provide explanations within 30 working days. If violations are confirmed, the individual must register as a sole proprietor, and registered entrepreneurs are required to submit additional tax reports.
"According to the analysis conducted for the first half of 2024, a significant number of individual entrepreneurs do not reflect their actual income in their declarations. Out of 1,308,000 taxpayers who submitted tax returns, 484,000, or 28.0%, filed 'zero' declarations, while 529,000, or 31%, reported income below 5 million tenge. The number of sole proprietors reporting income below 5 million has decreased by 4.7% compared to the first half of 2023 (from 81.7% to 77%)," the KGD stated.
During a plenary session of the Majilis of the RK parliament on January 15, deputy Azat Peruashev criticized the existing criteria for monitoring mobile transfers, stating that they are introduced in a "highly uncomfortable" manner for businesses. In particular, he suggested raising the monitoring threshold from the proposed 255,000 tenge to 1 million tenge per month.
In turn, the committee explains that the monitoring criterion of 255,000 tenge per month was calculated based on the minimum wage (MWA). According to the law, individuals whose annual income exceeds 12 times the MWA must register as sole proprietors. The agency believes this criterion will filter out individuals engaged in irregular entrepreneurial activities who are not required to register as sole proprietors.
Legal Payments or Risk of Closure?
The review of the criteria for monitoring mobile transfers is ongoing. Final decisions will be made after consultations with the National Bank and consideration of the deputies' proposals.
"These proposals are currently under discussion with the National Bank of the Republic of Kazakhstan. Additionally, the proposal from the Ak Zhol Democratic Party to monitor mobile payments starting from an amount of 1 million tenge per month is being considered by the Ministry of Finance of the Republic of Kazakhstan," the response to the inquiry stated.
According to the KGD, over the past three years, the number of POS terminals in the country has increased fivefold, and the number of sole proprietors accepting cashless payments has risen more than sevenfold. The Ministry of Finance is confident that this indicates a shift in businesses towards legal transactions.
However, according to Azat Peruashev, in the first quarter of 2024, the volume of mobile payments decreased by 30%. Many entrepreneurs with sole proprietorships express concerns on social media that the new rules will lead to mass business closures. The KGD asserts that such risks are minimal, as preferential tax regimes with low rates (1-4%) have been established for entrepreneurs.
"Regarding the risks of mass closures of small and medium businesses, it is important to note that the new rules create not only requirements but also opportunities. Honest individual entrepreneurs, compared to dishonest ones, receive social guarantees, including medical services, pensions, and benefits, thanks to mandatory contributions," the KGD emphasized.
In any case, Kazakhstani entrepreneurs will need to adapt to potential changes. The question remains whether the new measures will strike a balance between effectively combating the shadow economy and maintaining comfortable conditions for SMEs, or if they will create new loopholes that entrepreneurs can exploit.