In Kazakhstan, it has been proposed to fully exempt from the individual income tax (IIT) citizens whose hopeless loans have been written off by banks due to the actions of fraudsters or a difficult life situation. The initiative was discussed at a meeting of the Project Office for the Implementation of the Tax Code, chaired by the Deputy Prime Minister – Minister of National Economy Serik Zhumangarin.
WHY A TAX ARISES AFTER A DEBT WRITE-OFF
Representatives of the Agency for Regulation and Development of the Financial Market (ARDFM) and the Association of Financiers of Kazakhstan proposed maintaining a full exemption from IIT when hopeless loans are written off, including loans taken out as a result of fraudulent activity.
Under the current Tax Code, a debt written off by a bank is recognised as the borrower's income. Therefore, after a loan is forgiven, a citizen may become liable to pay IIT. An exemption from the tax is already provided for in certain cases.
WHO IS PROPOSED TO BE EXEMPTED FROM IIT
At the meeting, Serik Zhumangarin supported exempting citizens who have lost the ability to service a loan through no fault of their own. This category is proposed to include people who have suffered from the actions of fraudsters, as well as borrowers who have found themselves in a genuinely difficult life situation.
At the same time, it is not proposed to extend the relief to any write-off of debt. According to the Deputy Prime Minister, if a bank writes off a commercial loan to optimise its own balance sheet and release provisions, the budget should not automatically lose tax revenue.
WHAT CRITERIA FOR A DIFFICULT SITUATION ARE BEING DISCUSSED
Authorised state bodies, together with the ARDFM, will need to determine an exhaustive list of criteria by which a borrower can be classified as being in a difficult life situation.
Among the possible grounds mentioned at the meeting were disability, loss of capacity to work, and a lack of assets and income. Specialists must also carry out calculations and prepare an agreed position by the next meeting.
