New tax regulation will serve as safety cushion for self-employed Kazakhs

ASTANA – The New Year started with enforcing the Unified Cumulative Payment (UCP) programme for informally employed Kazakh citizens.

Photo credit: moneycontrol.com.

President Nursultan Nazarbayev signed the amendments to the Tax Code on Dec. 27. The law now directly addresses the problem of a significant number of Kazakhs who choose to avoid tax payments.

The UCP is now a single payment that combines four types of payments – individual income tax (10 percent), social insurance funds (20 percent), mandatory pension fund (30) and medical insurance (40).

The programme has simplified the registration process for the self-employed. People will automatically register their activities after a payment, while a payment suspension will result in terminating an individual’s activities. Registering or submitting additional tax reports will not be required.

The improved taxing system should not only speed up the process of registering the self-employed and collecting information about their incomes, but will ensure their social protection.

Individuals will be able to receive social benefits in cases of disability, job loss, wage-earner loss, pregnancy, child adoption and care for a child under age one, as well as a basic pension payment that will depend on the length of participation in the pension fund. Most importantly, they will gain access to unlimited amounts and types of medical services, with the right to choose a medical institution, said Minister of Labour and Social Protection Madina Abylkassymova at the Senate’s Dec. 20 plenary session.

The UCP has a fixed minimal fee of one monthly calculation index (MCI), or 2,525 tenge (US$6.70), for urban citizens and one-half MCI for villagers.

For 2019, applicants are considered eligible if they earn less than a sum equivalent to 1,175 MCI (2.97 million tenge or US$7,916.60) per year.

Payments will be extended to individuals who “perform work, provide services for other citizens, do not use the labour of employees or sell agricultural products of a personal part-time farm for consumption,” she said. The ministry estimated the UCP will affect approximately 500,000 people.

In addition, the term “self-employed” has been redefined and divided into “an employed person” and “an independent worker.” The new terms comply with the International Labour Organisation’s employee classifications.

According to the results of the third quarter of 2018, 8.7 million Kazakhs are classified as employed, divided between 6.6 million employees and 2.1 million self-employed.