To start a small business, it is enough to register as an individual entrepreneur (IE).

The status of an individual entrepreneur entitles to legitimately conduct business and make a profit from it, provided that taxes are calculated and paid scrupulously.

Being an individual entrepreneur, a citizen can legally cooperate and establish partnerships with other companies and organizations. Also, potential customers tend to trust more to those businessmen who are officially registered.

The material contains information about conditions for registration of individual entrepreneurs, taxation regimes and online registration of individual entrepreneurs.

1. Conditions for registration of individual entrepreneurs

Individual entrepreneurship is carried out in the form of individual or joint entrepreneurship.

Individual entrepreneurship is carried out by one individual independently based on property belonging to him/her. Joint entrepreneurship is carried out by a group of individual entrepreneurs based on property owned on the right of common ownership.

One should register as an individual entrepreneur if:

• labor of employees on a permanent basis will be used;
• an annual income exceeding 12 times the minimum wage, i.e. 12 x 85,000 = KZT 1 020 000 (in 2024, the minimum wage is KZT 85.000) will be raised.

Otherwise, any activity will be considered illegal, and administrative responsibility may be imposed.

2. Taxation regimes for IE: standard regime

There are several taxation regimes and after selecting one of them, an individual entrepreneur is registered. Major tax regimes are listed below:

• Standard taxation regime.
• Special tax regimes for small business entities.

Under standard taxation regime, an individual entrepreneur submits an annual declaration on individual income tax (form 220.00) to the state revenue authorities at the place of location (residence) no later than March 31 of the year following the reporting tax period, except for the cases prescribed by the Constitutional Law of the Republic of Kazakhstan "On Elections in the Republic of Kazakhstan", Criminal Enforcement Code of the Republic of Kazakhstan and the Law of the Republic of Kazakhstan "On Corruption Control".

Also, according to the accrued income of employees, as well as calculated taxes for employees and for individual entrepreneurs, an individual entrepreneur operating under standard taxation regime submits a Declaration on personal income tax and social tax (form 200.00) on a quarterly basis. At the same time, an individual entrepreneur operating under standard taxation regime calculates, withholds and pays IIT on a monthly basis for employees and for oneself (for one`s favor).

Social tax for an individual entrepreneur operating under standard taxation regime is calculated based on the number of employees, and not on the amount of accrued wages and the payment of social tax is made at the expense of an individual entrepreneur. The amount of social tax payable to the budget is defined as the difference between the calculated social tax and the amount of social contributions calculated in accordance with the Social Code.

If the amount of calculated social contributions to the State Social Insurance Fund exceeds the amount of calculated social tax or their amounts are equal, the amount of social tax payable to the budget is considered equal to zero.

In case of registration as a VAT payer, an individual entrepreneur operating under standard taxation regime specified in subclause 1) of clause 1 of article 367 of the Tax code is obliged to submit the Declaration on the VAT (form 300.00) to the tax authority at the place of location for each tax period no later than the 15th day of the second month following the reporting tax period, unless otherwise provided in the article.

The obligation to submit a value-added tax declaration does not apply to the individuals specified in subclauses 2) and 3) of clause 1 of Article 367 of the Tax Code pursuant to which VAT registration is not applied.

If there are objects of taxation available, then tax reports on property tax and land tax are submitted as follows: calculation of current payments on land tax and property tax (form 701.01) and declaration on vehicle tax, land tax and property tax (form 700.00).

Under standard taxation regime, an individual entrepreneur submits the following documents to the state revenue authorities at the location of land plots and objects of taxation that are used (to be used) in business activities:

- calculation of current payments on Form 701.01 no later than February 15 of the current tax period for tax liabilities determined as of the beginning of the tax period.

Also, a taxpayer submits the following documents no later than 10 calendar days before the next (during the tax period) deadline for the payment of current payments:

• calculation of current payments: in case of tax liabilities occurrence during the tax period, with the exception of those arising after the last deadline for payment of current payments;
• additional calculation of current payments with the appropriate adjustment of the amount of such payments and their distribution in equal shares for the upcoming payment dates: if tax liabilities change during the tax period.

Also, the calculation of current payments or an additional calculation of current payments is provided for objects for which tax liabilities have arisen or changed as of the first day of the month of the next deadline for payment of current payments.

If tax liabilities arise after the last deadline for the payment of current payments, taxpayers do not submit the calculation of current payments:

• declaration no later than March 31 of the year following the reporting tax period.

3. Taxation regimes for individual entrepreneurs: special tax regimes

The Tax Code provides for the following special tax regimes:

The patent-based STR can be applied by an individual entrepreneur whose income does not exceed 3,528 MCI for a calendar year; who does not use the labor of employees; carries out activities in the form of personal entrepreneurship, and also carries out one or more of the 32 types of activities (taxi, leasing, etc.). The IIT rate is 1% for the income received during the tax period. It is allowed to provide tax reporting from one month to a year.

Mobile app-based STR can be applied by an individual entrepreneur whose income does not exceed 3.528 MCI for a calendar year; who does not use the labor of employees; carries out activities in the form of personal entrepreneurship, and also carries out one or more of the 32 types of activities (taxi, leasing, etc.). The IIT rate is 1% for the income received during the tax period. Tax reporting is not provided. The calculation of the amount of personal income tax and social payments is made through a special mobile application on a monthly basis no later than the 15th of the month following the reporting month and are payable no later than the 25th of the month following the reporting month.

STR based on a simplified declaration. This type of STR may be applied by taxpayers whose average number of employees for the tax period does not exceed 30 people and income for the tax period does not exceed 24.038 MCI. The IIT/CIT rate is 3% from income (excluding expenses). Tax reporting is provided once every six months.

STR based on a fixed deduction. This type is applied by taxpayers, whose average number of employees is no more than 50 people during the tax period. Income for the tax period does not exceed 144.184 MCI. The IIT/CIT rate is 10% from income (minus deductions, with documentary support).

Entities applying this regime are not payers of social tax and VAT, regardless of the size of turnover.

Pursuant to Clause 4 of Article 696-3 of the Code of the Republic of Kazakhstan "On Taxes and Other Mandatory Payments to the Budget (Tax Code)" (hereinafter - Tax Code), calculation of corporate or individual income tax, except for taxes withheld at the source of payment, when applying a special retail tax regime, is carried out by a taxpayer independently by applying the tax rates for the reporting tax period in the amount of:

4% from income received (to be received) during the tax period in the Republic of Kazakhstan and abroad;

8% from income received from the sale of goods, performance of works, provision of services to taxpayers who apply the provisions of Clause 3-2 of Article 242 of the Tax Code on allocation of expenses to deductions for calculating corporate or individual income tax (hereinafter – CIT/IIT).

Thus, if a taxpayer applying the STR of retail tax issues an electronic invoice to a buyer for the purpose of confirming the deduction of expenses, such income is subject to taxation using the CIT/IIT rate of 8%.

In other cases, when issuing an invoice (not for the purpose of confirming deduction costs by a buyer), such income is subject to taxation using the CIT/IIT rate of 4%.

For the agricultural sector, the Tax Code provides for the following special tax regimes: STR for peasant or farm holdings (payers of a single land tax). The regime applies to agricultural activities. Calculation of the single land tax is carried out by applying the rate of 0.5 percent to the income received from agricultural activities. For application of the regime, there is a restriction on the area of the land plot. The single land tax payers whose activities are covered by the regime are not payers of the IIT (with the exception of the IIT withheld at the source of payment), VAT regardless of turnover, land tax and fees for the use of land plots, vehicle tax, property tax, social tax and fees for emissions into the environment. It is allowed to carry out other types of activities with separate accounting.

STR for agricultural producers and agricultural cooperatives. Taxpayers applying this regime are granted the right to apply 70% benefit on the calculated amounts: IIT/CIT, except taxes withheld at the source of payment, social tax, property tax and vehicle tax. The benefit for reducing the calculated VAT amounts by 70% has been replaced with an alternative incentive measure in the form of an additional VAT offset.

Foreign legal entities, foreigners and stateless individuals are not entitled to apply this regime.

4. Registration of an individual entrepreneur

To register as an individual entrepreneur, it is enough to notify a tax authority on the beginning of entrepreneurial activities by submitting a notification on the beginning of activities as an individual entrepreneur.

The notification can be submitted in the following ways:

• online: via e-Licensing Portal of the Republic of Kazakhstan;
• in paper: via Service Delivery Centers or "Government for Citizens" Public Corporation;
• through the mobile application of second-tier banks;
• through "E-Salyq business" mobile app.

The service is delivered free-of-charge. A tax authority registers an individual entrepreneurship within 1 working day.

Note that not only citizens of the Republic of Kazakhstan and kandas can carry out individual entrepreneurship activities, but also citizens of the Russian Federation, the Kyrgyz Republic, the Republic of Belarus, the Republic of Tajikistan, the Republic of Armenia permanently residing on the territory of the Republic of Kazakhstan.

Registration of individual entrepreneurship online

To send a notification on the beginning of business activities, you should register on the e-Licensing portal (elicense.kz). To do this, you need to get a digital signature. After registration, one needs to click "Notification on the beginning of activities as an individual entrepreneur" service.

Click "Request Online" button, after which you will be asked to choose a licensor, i.e. the tax authority to which you will be assigned.

Then fill out an application, specify the name of individual entrepreneurship, address, type of activity (CCEA) and select one of the tax regimes. Then, sign an application using your digital signature.

You can track the status of a submitted application in your personal account in the "My Applications" section. You can find out about obtaining a permit in the "My permits" section, on receipt of the notification in the "My notifications" section. This is how the IE registration procedure is carried out online.