Time is working against lawmakers – an expert discusses the confusing situation regarding income tax deductions.

Tens of people are already lining up at the accounting departments of large enterprises and companies that employ between 2,000 to 3,000 staff members. Citizens are consulting accountants regarding claims for tax deductions. Experts note that this trend is expected to intensify by the end of the month. Meanwhile, the relevant authorities remain silent, as if this issue does not concern them.

"On the official page of the State Revenue Committee in social media, there is complete silence regarding the position of the authorized body on the new deductions for individual income tax. The public is increasingly learning about the opportunities to reduce the IIN through the Internet and media, and they are already beginning to bring documents to accounting departments, demanding the application of legitimate deductions," shared tax expert Rita Espenbetova with inbusiness.kz.

Previously, she had already explained that there is a possibility that the articles providing for these norms may be retroactively suspended from January 1, 2025.

This has happened before, and not just once, in terms of amendments to the country’s tax legislation, and there are responses from the authorized body indicating that such a suspension is planned.

The draft of the new Tax Code, which has been actively discussed by the professional community since spring 2024, does not include provisions for these deductions for individual income tax.

"Time is working against lawmakers. The more people become aware of their rights to new deductions, the harder it will be to explain to them why this norm worked yesterday but not today. This is increasingly becoming a social issue," emphasized the expert.

Moreover, according to her, there are nuances in the application of the deductions themselves. Since universal declaration for the entire adult population of the country is planned to be implemented from January 1, 2025, specific norms for IIN deductions have been developed considering that all adult citizens of Kazakhstan will submit an annual income and property declaration using form 270.00.

Let us remind you that the specific norms for deductions include the following:

1. For large families with four or more minor children as of January 1, 2025, a new tax deduction is provided. It can be claimed by both parents, not exceeding 282 times the amount of the monthly calculation indicator for the calendar year. To obtain it, supporting documents and a request for the application of the deduction in the established form must be submitted to the employer.
2. A new category "Other tax deductions" has been introduced, which includes:

• tax deduction for voluntary pension contributions made for oneself;
• tax deduction for education for those studying on a paid basis in preschool institutions, as well as for those receiving post-secondary, higher, or vocational education, within 118 times the amount of the monthly calculation indicator for the calendar year;
• tax deduction for medical services (excluding cosmetic procedures) within 118 times the amount of the monthly calculation indicator for the calendar year;
• tax deduction for rewards, including mortgage housing loans obtained from second-tier banks licensed by the National Bank, also within 118 times the amount of the monthly calculation indicator for the calendar year.

To receive "other tax deductions," it is necessary to submit a request to the employer in the established form, indicating the preliminary amount of deductions, which should not exceed 282 times the amount of the monthly calculation indicator. The tax agent reduces taxable income by the indicated amount without the need for supporting documents.

However, the total amount of preliminary deductions indicated by the individual in requests to all tax agents for the calendar year must be documented when submitting the income and property declaration (form 270.00) at the end of the year.

The maximum amount of the cumulative tax deduction for large families and other deductions, applied both by the tax agent and by the individual themselves, must not exceed 564 times the amount of the monthly calculation indicator. Originals of documents confirming the right to deductions must be kept by the individual for three years—the statute of limitations.

"When considering practical implementation, many questions arise. Given that some declarants in the fourth stage of universal declaration will be exempt from submitting declarations, it is unclear how established limits on deductions for individuals will be monitored. If a deduction is granted based on an individual's request without supporting documents, who will be held accountable in the event of a subsequent denial of the right to these deductions? How will compliance with the legality of deductions be monitored? The number of inquiries for consultations regarding new deductions is increasing daily, especially in large enterprises with staff numbers ranging from 3,000 to 5,000. With the month-end approaching, payroll needs to be processed, and imagine how challenging it is to handle requests from employees in such large workforces," Rita Espenbetova raises these questions.

Overall, there are indeed many questions; the norms, according to the expert, are not sufficiently elaborated, and everyone is awaiting the position of the authorized body, which seems to have found itself in a difficult situation due to the untimely processing of this issue.

Last week, we sent an official inquiry to the State Revenue Committee regarding the application of tax deductions and are awaiting a response.

Let us remind you that we previously reported that large families in Kazakhstan could "get rich" by up to 2.2 million tenge through tax deductions.