The number of individual entrepreneurs working in Kazakhstan's construction sector is shrinking. According to market participants, their numbers have fallen by about 11% over the year, reports infohub.kz.
Industry representatives attribute this trend to changes in tax legislation. It has become less advantageous for large construction companies to engage contractors operating under the simplified tax regime. This includes painters, finishers and other small contractors. Previously, they could work with major developers as individual entrepreneurs.
Since the start of the year, the terms of such cooperation have changed. Developers can no longer deduct, as before, expenses for services from contractors on the simplified regime when calculating corporate income tax. According to Vyacheslav Lazarev, deputy president of the Union of Builders of the Republic of Kazakhstan, the share of contractors on the simplified regime within construction companies' structures may range from 15% to 50%.
"Those who worked under the simplified regime may make up 15% to 50% of construction companies' structures. If 30% of such sole proprietors existed, that means an overall cost increase of 10%, plus another 4% from VAT. In total, at least 10-15% in cost increases just from the Tax Code changes," Lazarev said.
Thus, according to the industry representative's estimate, the tax changes could raise the cost of construction work by 10-15%. The additional expenses may ultimately be reflected in the price per square meter.
One possible solution cited by market participants is creating a separate special tax regime for individual entrepreneurs working in construction.
It is expected that such a mechanism would allow small businesses to continue working with large construction companies, and developers to deduct the relevant expenses when calculating corporate income tax. However, real estate expert Alexander Pak doubts that such a measure alone would lead to lower housing prices.
"Of course, it will reduce the tax burden on business, but the share of these deductions in it is small. Suppose this tax regime is introduced and the developer can deduct these expenses, but that will not lead to a lower price per square meter," the expert noted.
At the same time, in his assessment, the change in tax conditions could potentially restrain further growth in developers' costs.
Meanwhile, housing prices in Kazakhstan continue to rise. According to data cited by the TV channel, since the start of the year the average price per square meter has increased by more than 13%. Experts expect further price growth until the end of the year, at least in line with inflation.