Kazakhstanis with problem loans have received encouraging news: the country is proposing to change the rules for paying individual income tax (IIT) when loan debt is forgiven. Full tax exemption is planned for victims of credit fraud and borrowers in difficult life situations, reports infohub.kz.
The issue was discussed at a meeting of the project office for the implementation of the Tax Code, chaired by Minister of National Economy Serik Zhumangarin. Currently, a debt written off by a bank is in certain cases considered income of an individual, which may entail the obligation to pay IIT. The tax exemption applies only in certain situations.
The Agency for Regulation and Development of the Financial Market (ARDFM), together with the Association of Financiers of Kazakhstan, proposed to maintain the full exemption of citizens from IIT when writing off bad loans, including loans taken out by fraudsters.
However, not everyone will receive the exemption. Zhumangarin proposed to distinguish between cases where a person was objectively unable to pay the loan and situations where the bank independently decides to write off the debt based on its commercial interests. According to the minister, victims of fraud and citizens who find themselves in truly difficult life circumstances should be fully exempt from IIT after debt write-off.
At the same time, it is not proposed to automatically extend such a benefit to any loan forgiveness. If a bank writes off a commercial loan to optimize its own balance sheet and release provisions, the state budget, according to Zhumangarin, should not automatically lose tax revenue.
Now, state bodies together with the ARDFM will have to carry out calculations and determine an exhaustive list of circumstances that will be considered a difficult life situation. Possible criteria include disability, loss of ability to work, lack of property and income.
The meeting also considered the taxation of discounts on debt securities. According to the general definition of the Tax Code, a discount is considered remuneration. However, when a security is redeemed, it is actually treated as an increase in value, although no sale of the asset occurs. As a result, income that is economically the same may have different tax consequences.
To eliminate this conflict, it is proposed to keep the discount on redemption as part of the remuneration on debt securities. The Ministry of National Economy expects that this will unify the taxation of income from coupons and discounts and ensure equal conditions for investors on Kazakhstani exchanges.