OPV for non-residents from the EAEU: how to pay.

Publication date 03/04/2021
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News The EAEU member states, in the interests of their citizens, have developed a unified approach to pension provision for resident workers of the Republic of Kazakhstan, the Russian Federation, Armenia, Belarus and Kyrgyzstan. By Law of the Republic of Kazakhstan No. 381-VI dated December 7, 2020, Kazakhstan ratified the Agreement on pension provision for workers of the EAEU member states. For workers, this means that EAEU citizens, even if they are not residents of the Republic of Kazakhstan, will have equal rights to pension benefits if they work in Kazakhstan. And for employers, this entailed the obligation to withhold and transfer OPV from the income of such employees. From what period this should be done and whether OPV from the income of non-residents from the EAEU can be deducted when calculating personal income tax, we will tell you further...

What is required from Kazakhstani employers?

In order not to violate current legislation and not receive fines for late transfer of OPV, Kazakh employers need to promptly:

compile lists of workers who are citizens of Russia, Kyrgyzstan, Armenia or Belarus, but do not have a residence permit in Kazakhstan (take into account both employment contracts and civil service agreements);
calculate and transfer OPV from the income of such employees to the UAPF, starting in January 2021.

Let us remind you that the CPV rate is 10% of the taxable object (income), but the taxable income for calculating the CPV cannot exceed 50 minimum wages.

At the same time, a foreign employee, a citizen of the EAEU member countries, is not required to specifically contact the UAPF to conclude a pension agreement. As soon as the employer makes the first contribution for him, an individual pension account in the UAPF will be opened for the employee automatically. There is no need to submit a separate application.

How tax reporting is submitted

According to tax legislation, every calendar month is considered a tax period. The main reporting document is Form 200.00 “Declaration of Individual Income Tax and Social Tax” (download here). If an enterprise has structural divisions, separate reports are compiled for them.

The declaration must be submitted 4 times a year, quarterly, no later than the 15th day of the 2nd month after the reporting period.

How to determine from what period to pay OPV or OPPV?

The agreement came into force on 01/01/2021. If, as of 01/01/2021, the employer has valid employment contracts or GPC agreements with foreign employees without a residence permit, citizens of the EAEU countries, he is obliged to begin withholding and transferring contributions from the employee’s income received for January 2021

Contributions must be transferred within the same time frame as for employees who are citizens of the Republic of Kazakhstan (by the 25th day of the month following the month of receipt of income). For income for January 2021, contributions must be transferred by 02/25/2021.

For violation of obligations to transfer OPV, the employer bears administrative responsibility (Article 91 of the Code of Administrative Offenses of the Republic of Kazakhstan):

in case of a primary violation - a warning;
in case of repeated violation, a fine of 20% of the amount of untransferred pension contributions.

If a foreigner employee from the EAEU entered into an employment contract (or GPC contract) during 2021, then the CPV must begin to be transferred from the month the contract was concluded. Thus, having concluded an agreement on 02/04/2021, it will be necessary to transfer OPV by 03/25/2021.

IPN, OPV and compulsory medical insurance from individuals according to the State Duma in 2021!

If an individual performs some work, provides services, or engages in other activities without hiring employees , then such a person has the right not to register as an individual entrepreneur. For work and services performed by such persons, the concepts of work under a contract and work under a contract for paid services are provided.

These types of contracts are civil law contracts (GPC)

Grounds for calculating and withholding personal income tax under GPC agreements

Clause 2 of Article 321 of the Tax Code of the Republic of Kazakhstan: The annual income of an individual includes all types of his income:

2) income from the sale of goods, performance of work, provision of services

, in addition to property income,
received by an individual who is not an individual entrepreneur, a person engaged in private practice.
Conclusion: Income from the PGPC is subject to IIT taxation at the source of payment

Article 350 of the Tax Code of the Republic of Kazakhstan:

clause 1. Calculation, deduction and payment to the budget

individual income tax
are made at the source of payment by a tax agent
if such income is subject to payment (paid) by the specified tax agent

clause 2. Unless otherwise established by paragraph 3 of this article, the following persons paying income to a resident individual are recognized as tax agents

1) individual entrepreneur

2) a person engaged in private practice

3) entity,

including a non-resident operating in the Republic of Kazakhstan through a permanent establishment

Conclusion: Calculates, withholds and pays personal income tax to the budget for individuals working under the PGPC - tax agent, i.e. purchaser or service recipient

Clause 1 of Article 320 of the Tax Code of the Republic of Kazakhstan: Taxpayer income, with the exception of income specified in paragraph 2 of Article 320 (dividends), is taxed at a rate of 10 percent

Conclusion: Income from PGPC is taxed at a rate of 10%

Art. 351 Tax Code of the Republic of Kazakhstan:

clause 1. Calculation of individual income tax

on income subject to taxation at the source of payment,
is made by the tax agent when calculating income
subject to taxation

clause 2. Withholding of individual income tax is carried out by a tax agent

no later than the day of payment of income subject to taxation at the source of payment, unless otherwise provided by this Code

clause 3. The tax agent transfers personal income tax on income paid

no later than twenty-five calendar days after the end of the month in which the income was paid, at its location, unless otherwise provided by this article

Conclusion: IIT on income from DHPC is withheld at the time of payment of income and is subject to transfer before the 25th day of the month following the month of payment of such income

Clause 5 of Article 353 of the Tax Code of the Republic of Kazakhstan: Amount of taxable income from a tax agent

, including by types of income not specified in paragraphs 1, 2, 3 and 4 of this article, is determined in the following order:

sum of all income

, subject to taxation at the source of payment, not specified in paragraphs 1, 2, 3 and 4 of this article, received in the current tax period,

minus

adjustment amount

income in the current tax period, provided for in paragraph 1 of Article 341 of this Code,

minus

the amount of the standard deduction specified in subparagraphs 2) and 3)

paragraph 1 of article 346 of this Code

Conclusion: The standard deduction in the amount of 1 minimum wage (42,500 tenge) is not applied when calculating the personal income tax for the DGPC. Only standard deductions in the amount of 882 MCI are subject to application, in accordance with paragraphs 2 and 3 of paragraph 1 of Art. 346 Tax Code of the Republic of Kazakhstan

Grounds for calculating and withholding OPV under GPC agreements

clause 4-1 Art. 25 Law of the Republic of Kazakhstan “On pension provision in the Republic of Kazakhstan”:

For individuals receiving income under civil contracts

,
the subject of which is the performance of work (provision of services),
with the exception of the case provided for in subparagraph 5) of paragraph 2 of Article 24 of this Law,
mandatory pension contributions payable to the unified accumulative pension fund are established in the amount of 10 percent of the income received, but not more than 10 percent of 50 times the minimum wage
established for the corresponding financial year by the law on the republican budget

Conclusion: OPV is withheld from the income of an individual if services are provided/work is performed under a GPC agreement. The OPV rate is 10% with no lower limit, i.e. from actual income, but not higher than 10% of 50 times the minimum wage (212,500 tenge in 2021)

Grounds for calculating and deducting CSHI contributions under GPC agreements

clause 8 clause 2 Art. 14 Law of the Republic of Kazakhstan “On Compulsory Social Health Insurance”:

Payers of contributions are

individuals receiving income under civil law agreements concluded with a tax agent

in accordance with the legislation of the Republic of Kazakhstan (hereinafter referred to as individuals receiving income under civil contracts)

clause 4. Calculation (withholding) and transfer of contributions

individuals receiving income under civil law contracts
are transferred to the fund at the expense of the income of such individuals by tax agents
determined by the tax legislation of the Republic of Kazakhstan

Art. 28. Contributions

employees, including state and civil servants, as well as
individuals receiving income under civil contracts , subject to payment to the fund, are set in the amount:
from January 1, 2021 - 1 percent of the object

calculation of contributions

Objects of calculation of contributions

employees, including state and civil servants, as well as
individuals receiving income under civil contracts, is their income
calculated in accordance with Article 29 of this Law

clause 2. Art. 29. Income of an individual under civil law contracts is all accrued income under these contracts

, with the exception of income established by paragraph 4 of this article

clause 4. Article 29: Deductions and (or) contributions to the fund are not withheld from the following payments and income:

1) income specified in paragraph 2 of Article 319 of the Code

Republic of Kazakhstan “On taxes and other obligatory payments to the budget”

2) income specified in paragraph 1 of Article 341

Code of the Republic of Kazakhstan “On taxes and other obligatory payments to the budget” (Tax Code),
with the exception of income specified in subparagraphs 10), 12) and 13) of paragraph 1 of Article 341
of the Code of the Republic of Kazakhstan “On taxes and other obligatory payments to the budget”

3) income specified in subparagraph 10) of Article 654

Code of the Republic of Kazakhstan “On taxes and other obligatory payments to the budget”

4) payments from grant funds

in (
except for
payments in the form of wages to employees and
payment for work (services) to individuals under civil contracts
)

5) compensation payments upon termination of an employment contract in cases of termination of the employer’s activities

- an individual or liquidation of an employer - a legal entity, reduction in the number or staff of employees in the amounts established by the legislation of the Republic of Kazakhstan

Clause 3 Article 29: Monthly income accepted for calculating contributions

, must be calculated based on the sum of all types of income of an individual and
must not exceed 10 times the minimum wage
established for the corresponding financial year by the law on the republican budget

Conclusion: CSHI contributions in the amount of 1% are withheld from the income of an individual working under a GPC agreement. The maximum monthly limit on CSHI contributions in 2021 is 4,250 tenge

IN PROJECT! WE ARE WAITING FOR CHANGES!

In 2021, individuals working under GPC agreements are planned to be provided with a deduction for OPV and a deduction for contributions to compulsory medical insurance when calculating personal income tax.

Is it possible to apply the OPV deduction when calculating the personal income tax of non-EAEU residents?

According to clause 3 of Article 655 of the Tax Code of the Republic of Kazakhstan, the calculation of personal income tax from the income of non-resident individuals is carried out without the use of tax deductions. This applies to the following income of a non-resident individual:

from activities under employment contracts with employers;
from activities in the form of material benefits received from the employer;
allowances paid to the employee by the employer in connection with residence in the Republic of Kazakhstan;
pension payments.

Consequently, when calculating personal income tax on the income of foreign workers, citizens of the EAEU, without a residence permit in Kazakhstan, the deduction for OPV is not applied.

What is the object of this type of taxation?

For all entities listed in the previous paragraph, with the exception of legal entities, the object of the SN is the number of people who work on the staff of the enterprise during the reporting period. This number also includes social tax payers themselves.

As for legal entities, the object of taxation for them are expenses that are paid to employees and are considered as income on their part.

In this case, the following types of income are not taken into account:

payments made from funds received under grants;
contributions for compulsory medical insurance (will come into force in 2021);
OPV of employees;
income referred to in Clause 1 341 of the Tax Code of the Republic of Kazakhstan, with the exception of paragraphs. 10 (download here).

Changes made to the tax legislation of the Republic of Kazakhstan in 2018 affected compensation payments paid to citizens in the event of termination of an employment contract, as well as for unused days of annual leave.

From 2021 they are also subject to social taxation.

According to the law of the Republic of Kazakhstan, if an object subject to SN is less than 1 minimum wage, the tax should be calculated from 1 minimum wage.

How will the pension be exported?

Since foreign workers without a residence permit will now receive in hand an amount less than before the entry into force of the Agreement, they may have questions about what will happen to the amounts withheld? What will happen to the contributions transferred to the UAPF if an employee moves from Kazakhstan to another EAEU member state or to a country outside the EAEU before retirement?

According to the ratified agreement, the pension rights that the employee acquired while working in Kazakhstan will remain with him when moving to another country within the EAEU. Having earned length of service and accumulated OPV in Kazakhstan, the employee will be able to take this into account when retiring. This concept is called “pension export”. Even if a retired employee returns to his country of citizenship (for example, Russia) for permanent residence, the calculated amount of the pension earned in Kazakhstan will be paid to him there. Kazakhstan will act as the payer. In this case, the pension amount will also be calculated in accordance with the pension legislation of Kazakhstan. When moving to another country within the EAEU, the pension will remain in the same amount. When carrying out various indexations in accordance with Kazakh pension legislation, they will also apply to the foreigner’s pension.

If a labor migrant earned a pension in several EAEU countries (for example, a Russian citizen worked in both Kazakhstan and Kyrgyzstan), then he will receive a pension from each country in the amount calculated in accordance with its legislation.

When moving to a country outside the EAEU, an employee will be able to receive his savings from the Unified Pension Fund when he reaches retirement age.

In the event of the death of a foreign employee before retirement, his pension savings will be inherited by his heirs. In this case, the rules of inheritance law will be applied in accordance with the Civil Code of the Republic of Kazakhstan.

Thus, from 01/01/2021, due to the withholding of OPV and the impossibility of attributing this amount to deduction under the personal income tax, foreign workers from the EAEU countries, without a residence permit in Kazakhstan, will receive less. However, in return they receive a guaranteed pension for the period of their working activity in Kazakhstan.

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How are payments and calculations made?

Social tax is calculated as follows:

the tax rate is multiplied by the taxable item

An economic entity is obliged to pay to the state treasury the difference between the calculations received and social contributions, which are stated in the law “On Compulsory Social Insurance”.

If the calculation results in a negative figure, the company does not transfer anything to the state treasury.

It is important not only to correctly calculate the amount, but also to meet the deadlines. Transfers are made no later than the 25th day of the month, which follows immediately after the end of the reporting period specified by the legislation of the Republic of Kazakhstan.

If calculations are made by a separate structural unit of a large company, payment must be made at the location of the structural unit.

Legal entities can use one of 2 methods of accruing SN:

According to the SNR, when a simplified declaration is drawn up.
According to the standard generally accepted scheme.

Individual entrepreneurs can also act according to one of 2 schemes provided for them:

With a simplified declaration under the SNR.
Taxes are calculated according to standard calculations provided for individual entrepreneurs.

The second method makes it possible to use MCI coefficients (if the organization is registered as an individual).

For calculations, you can use an online calculator, which will make it easier to choose the best option.

Mandatory pension contributions (CPC)

The amount of OPV is 10% of the monthly income accepted for calculating mandatory pension contributions, the minimum wage established for the corresponding financial year by the law on the republican budget.

Those. in 2021, the maximum object for calculating OPV = 42,500 tenge * 50 = 2,125,000 tenge. The maximum amount of OPV is 212,500 per month.

The law does not establish a minimum income limit for calculating OPV.

Thus, in short, the formula for calculating OPV is as follows:

OPV = employee income for the purposes of calculating OPV * 10%

More information about the rules for calculating OPV can be found in:

— Law of the Republic of Kazakhstan On pension provision in the Republic of Kazakhstan June 21, 2013 No. 105-V.

— Resolution of the Government of the Republic of Kazakhstan dated October 18, 2013 No. 1116 On approval of the Rules and terms for calculation, withholding (accrual) and transfer of mandatory pension contributions, mandatory professional pension contributions to the unified accumulative pension fund and penalties for them.

Excerpts from all legal acts in one way or another related to the 90% income adjustment:

Rules and terms for calculation, deduction (accrual) and transfer of compulsory pension contributions, compulsory professional pension contributions to the unified accumulative pension fund and penalties for them:

6. Mandatory pension contributions to the UAPF are not withheld from payments and income:

3) specified in paragraph 1 of Article 341 of the Tax Code, with the exception of those established by subparagraphs 12), 26), 27), 48) of paragraph 1 of Article 341 of the Tax Code, as well as subparagraphs 42), 43) of paragraph 1 of Article 341 of the Tax Code (in terms of lost earnings (income).

At the same time, mandatory pension contributions to the UAPF are not withheld from the income provided for in paragraph six of subparagraph 17) of paragraph 1 of Article 341 of the Tax Code.

Rules for making mandatory professional pension contributions

9. When making mandatory professional pension contributions, the following types of payments specified in:

….

2) paragraph 1 of Article 341 of the Tax Code.

Rules and terms for calculating and transferring social contributions to the State Social Insurance Fund and penalties for them

5. Social contributions to the Fund are not paid from income established:

….

2) paragraph 1 of Article 341 of the Tax Code, with the exception of income specified in subparagraphs 9), 10), 12), 14), paragraph six of subparagraph 17), subparagraphs 19), 20), 21), 27) of paragraph 1 of Article 341 Tax Code;

LAW OF THE REPUBLIC OF KAZAKHSTAN On compulsory social health insurance

(with changes and additions as of 01/19/2019

Article 29. Income accepted for calculating deductions and (or) contributions

4. Deductions and (or) contributions to the fund are not withheld from the following payments and income:

….

2) income specified in paragraph 1 of Article 341 of the Code of the Republic of Kazakhstan “On taxes and other obligatory payments to the budget” (Tax Code), with the exception of income specified in subparagraphs 10), 12) and 13) of paragraph 1 of Article 341 of the Code of the Republic of Kazakhstan “On taxes and other obligatory payments to the budget” (Tax Code);

Tax Code of the Republic of Kazakhstan. Article 484. Object of taxation.

3. The following are excluded from the object of taxation:

3) income established in paragraph 1 of Article 341 of this Code, with the exception of income established in subparagraph 10) of paragraph 1 of Article 341 of this Code, as well as income established in subparagraph 53) of paragraph 1 of Article 341 of this Code in terms of income of employees who are citizens of the Republic of Kazakhstan;

At the same time, it should be taken into account that changes are coming in a number of these regulations.

An answer to this topic has been published on the Blog platform of the Minister of National Economy: https://dialog.egov.kz/blogs/all-questions/529742#answers. The response states that: “On the issue of calculating social contributions, pension contributions, as well as mandatory professional pension contributions. Currently, the Ministry of Labor and Social Protection of the Population has developed a draft resolution of the Government of the Republic of Kazakhstan “On introducing amendments and additions to some decisions of the Government of the Republic of Kazakhstan,” which is in agreement with interested government agencies. This project amends the Decrees of the Government of the Republic of Kazakhstan dated June 21, 2004 No. 683 “On approval of the Rules and terms for the calculation and transfer of social contributions to the State Social Insurance Fund and penalties for them” and October 18, 2013 No. 1116 “On approval of the Rules and terms calculations, deductions (accruals) and transfers of mandatory pension contributions, mandatory professional pension contributions to the unified accumulative pension fund and penalties for them,” which provide for amendments regarding the fact that social contributions to the Fund are paid, and mandatory pension contributions and mandatory professional pension contributions are withheld from income established by subparagraph 49) of paragraph 1 of Article 341 of the Tax Code, and from 2021 by subparagraph 52) of paragraph 1 of Article 341 of the Tax Code. On the issue of calculating compulsory social health insurance According to Article 5 of the Law of the Republic of Kazakhstan dated November 16, 2015 “On compulsory social health insurance”, the right to medical care in the compulsory social health insurance system is given to persons for whom deductions and (or) contributions to the fund were paid, as well as exempt from paying contributions to the fund in accordance with paragraph 7 of Article 28 of this Law. Persons for whom deductions and (or) contributions to the fund have not been received, or who have not paid contributions to the fund, are provided with a guaranteed volume of free medical care in accordance with the Code of the Republic of Kazakhstan “On the health of the people and the healthcare system.” Thus, the amount of medical payments does not depend on the amount of contributions to health insurance. On the issue of calculating social tax There are no plans to make changes to Article 484 of the Tax Code regarding the calculation of social tax. At the same time, I inform you that the Ministry of National Economy of the Republic of Kazakhstan plans to consider the issue of establishing a unified base for calculating social payments and social tax. Currently, the composition of a working group to improve tax legislation is being formed, within the framework of which this issue will be considered.

! The same is written about in the project itself, the link to which is below. https://www.enbek.gov.kz/ru/node/358112

From this answer it follows that changes are planned to be adopted only in terms of OPV, OPPV and CO. The calculation of Social Tax, as well as compulsory medical insurance, will not be affected by these changes. Consequently, income when determining the object of taxation with social tax and compulsory medical insurance will be subject to adjustment in accordance with paragraph 49, paragraph 1, article 341 of the Tax Code of the Republic of Kazakhstan.

Deadlines for paying taxes and payments. See notes

Payment of IIT, OPV, SN, SO, OSMS, OPPV in accordance with current legislation is made no later than the 25th day of the month following the tax period (month of income accrual), at the location of the taxpayer.

Those. if you need to pay taxes and payments for February 2019, you must do this before March 25, 2021 at the location (registration) of your LLP, individual entrepreneur, etc.

Deadlines for submitting reports.

The deadline for submitting reports on IPN, OPV, SN, SO, OSMS, OPPV (form 200) in accordance with current legislation is no later than the 15th day of the second month following the reporting tax quarter at the taxpayer’s location.

Mandatory professional pension contributions (OPPC)

— 5% of the employee’s monthly income, accepted for calculating mandatory professional pension contributions.

If harmful working conditions are excluded, confirmed by the results of certification of production facilities, the employer does not pay mandatory professional pension contributions.

OPPV = income accepted for calculating OPPV * 5%.

More details about the rules for calculating OPPV are set out in:

— Law of the Republic of Kazakhstan On pension provision in the Republic of Kazakhstan June 21, 2013 No. 105-V.

— Resolution of the Government of the Republic of Kazakhstan dated March 26, 2014 No. 255 On approval of the Rules for making mandatory professional pension contributions

Contributions for compulsory health insurance (OSMS) – 1.5%

The amount of compulsory medical insurance deductions is 1.5% of the employer’s expenses paid to the employee in the form of income, with the exception of income from which compulsory medical insurance deductions are not paid in accordance with clause 4 of article 29. Law of the Republic of Kazakhstan On Compulsory Social Health Insurance.

The monthly object accepted for calculating deductions should not exceed 10 times the minimum wage established for the corresponding financial year by the law on the republican budget. That is, for 2021 - 425,000 tenge.

The monthly income accepted for calculating contributions must be calculated based on the sum of all types of income of an individual and must not exceed 10 times the minimum wage established for the corresponding financial year by the law on the republican budget.

The legislation does not establish a minimum limit for the object of calculation of compulsory medical insurance.

OPV is not excluded when determining the object of calculation of the compulsory medical insurance.

When paying contributions from an amount of income equal to 10 times the minimum wage established for the corresponding financial year by the law on the republican budget, payment of contributions from other income of an individual is not required if there is a document confirming the payment of such contributions.

Such a document is a certificate of the amounts of income received, calculated and paid contributions, issued by the employer and (or) tax agent.

Compulsory medical insurance deductions = accrued income used to calculate compulsory medical insurance* 1.5%

More information about the calculation of OSMS is written in:

— Law of the Republic of Kazakhstan on compulsory social health insurance dated November 16, 2015 No. 405-V.

— Order of the Minister of Health of the Republic of Kazakhstan dated June 30, 2021 No. 478 On approval of the Rules and terms for calculation (withholding) and transfer of deductions and (or) contributions.