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Kazakhstan Updates Transfer Pricing Legislation

6th April 2022

When a country goes through the process of updating its transfer pricing legislation, it’s a sign that transfer pricing compliance is climbing high on the priority list, usually resulting in more scrutiny and compliance burdens for multinational companies. Kazakhstan is one of the latest countries to tighten its transfer pricing belt. Back in September 2021, Kazakhstan’s Ministry of Finance moved to update its transfer pricing regulations by releasing new transfer pricing draft amendments, and now until April 8, they’re up for public consultation.  

Currently, Kazakhstan’s transfer pricing local file applies to “members of a multinational group”—a little vague, don’t you think? The draft laws move to specify that the submission of the local file will be required for taxpayers that meet a certain annual threshold (roughly €31 million) and are engaged in related-party transactions with entities outside of Kazakhstan. Granted, this means a smaller group of taxpayers will have to submit documentation, but there’s also the possibility of bigger payouts. Another change: The related-party definition has been expanded to include limited-risk intermediaries that aren’t legally related parties, but who operate as though they are. Kazakhstan is also shrinking the official arm’s length range from the full range to the interquartile range, making the arm’s length window smaller—a tough pill for taxpayers to swallow. But new updates to the transfer pricing methods should give taxpayers some breathing room: Kazakhstan has had a method hierarchy in place, favoring the comparable uncontrolled price method, then cost-plus method, then resale price method, the transactional net margin method, and the last resort profit split method. The new amendments move to do away with the ordering in favor of the OECD’s most appropriate method. The public can weigh in until the end of the week, but from where we sit, it looks like Kazakhstan’s Ministry of Finance is positioning itself for low-hanging fruit with high reward.