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Application of 10-year loss carry forward period — Orbitax Tax News & Alerts

Based on the interpretation of the newly established Tax Advisory Council, the newly introduced 10-year period for the carry-forward of losses only applies to losses incurred after 1 January 2009. Based on this interpretation, losses incurred prior to this date may be carried over for only up to 3 years (7 years for sub-surface users). Thus, the new rule will not benefit companies that are not in a position to make sufficient profits to utilize losses incurred in prior years.

It should be noted that, based on the new Tax Code which entered into effect from 1 January 2009, losses from the sale of securities and operations with certain financial instruments can be set-off only against income arising from the sale of securities and operations with financial instruments respectively.

Exemption of capital gains on sale of shares

The new Tax Code which entered into force from 1 January 2009 introduced a tax exemption for capital gains from sales of shares under certain conditions. Capital gains derived by both resident and non-resident companies from the sale of shares in Kazakhstani companies (including indirect shareholdings in the case of non-residents) are exempt from tax where at least 50% of the value of the authorized (share) capital or shares (unit shares) of the companies or consortium are not derived from assets of a sub-surface user. This new provision presents an opportunity to carry out corporate group restructuring or dispose of Kazakhstani companies in a tax-efficient manner.

Note. A budget deficit is expected in 2009 (50% reduction of tax revenues forecast), and it is thus uncertain whether this exemption will continue to be available in 2010.