In 2026, all pawnshop income cannot be treated as exempt from VAT solely because it is related to the granting of a loan: Article 517 of the Tax Code of the Republic of Kazakhstan regulates the determination of the amount of taxable turnover when exporting goods and does not establish an exemption for interest on secured loans (Article 517 of the Tax Code of the Republic of Kazakhstan). Therefore, interest, the sale of unredeemed items, and other transactions must be classified separately under the relevant provisions of the Tax Code.
Why Interest on a Secured Loan Is Usually Not Subject to VAT
Interest on a loan and the sale of pledged property are transactions of a different nature. Merely describing a receipt as interest or remuneration does not confirm its exemption from VAT. To apply an exemption, there must be a direct provision of the Tax Code that classifies the relevant pawnshop transaction as exempt turnover.
For an accountant, this means:
- the amount of interest under a secured loan agreement should be accounted for separately from receipts for goods and additional services;
- repayment of the principal should be separated from interest and other payments made by the borrower in the agreement and accounting records;
- default charges, late-payment interest, and penalties must be recorded separately and classified based on the grounds for the payment rather than combined with interest on the loan.
Article 517 of the Tax Code of the Republic of Kazakhstan refers to a loan in the form of goods only in relation to determining the amount of taxable turnover when exporting goods. If the agreement does not specify the value of the transferred goods, the article consistently provides for the use of the value stated in the shipping documents or, if it is unavailable, the value according to accounting records (Article 517 of the Tax Code of the Republic of Kazakhstan). This special provision does not confirm that interest earned by an ordinary pawnshop is exempt from VAT.
Which Pawnshop Income May Be Subject to VAT
Each receipt must be matched to a specific transaction: granting a loan, receiving interest, selling property, or providing a separate service. Combining all receipts under the general heading of “pawnshop income” does not allow their status to be correctly determined for VAT purposes.
Sale of unredeemed pledged property. The accountant must establish who acts as the seller of the item, the grounds on which it is sold, who is entitled to the proceeds, and what portion of the proceeds is used to settle the borrower’s obligation. A situation in which the property is sold by the pawnshop in its own name requires particular attention. Article 517 of the Tax Code of the Republic of Kazakhstan contains rules for determining the amount of taxable turnover only for exports of goods; this article cannot be applied to an ordinary sale of an item within Kazakhstan as grounds for exemption (Article 517 of the Tax Code of the Republic of Kazakhstan).
Paid additional services. Separately paid appraisal, storage, document processing, and other services should be recorded separately from the principal and interest on the loan. Their tax status is determined according to the nature of the specific service and the applicable provision of the Tax Code. The mere fact that a service is provided by a pawnshop does not automatically allow the tax treatment applicable to a loan to be extended to that service.
Rental and other non-financial income. Income from rentals, the sale of own assets, and agency and intermediary services should also be classified separately. For each transaction, the subject matter of the agreement, the party selling the goods or services, the value, and the source documents must be identified.
Does a Pawnshop Need to Register for VAT?
A decision on VAT registration cannot be made based solely on the total amount of a pawnshop’s cash receipts. Receipts must first be separated by type of transaction, and their tax status must be determined under the provisions of the Tax Code. Loans granted and repaid, interest, proceeds from the sale of property, and fees for separate services must be recorded separately in the accounts.
If a pawnshop regularly sells unredeemed items or provides paid services, the accountant should maintain a cumulative record of the indicator used for VAT registration. Receipts cannot be mechanically included in or excluded from the calculation based solely on how they are described: the nature of the transaction and the applicable provision of the Code serve as the basis.
Separate Accounting and Credit for “Input” VAT
If a pawnshop carries out transactions subject to different VAT treatments, its documents and accounting records must make it possible to determine the activity to which each purchase relates. This is particularly important for expenses simultaneously related to granting loans, selling property, and providing additional services.
- direct-purpose purchases should be linked to the transaction for which they were made;
- overhead expenses for rent, communications, security, and software should be identified separately in order to apply the procedure established by the Tax Code for claiming VAT as a credit;
- source documents must make it possible to confirm the purpose of the purchase and its connection with the relevant activity.
The analytical accounting procedure must be established in the accounting policy. At the same time, Article 517 of the Tax Code of the Republic of Kazakhstan, which concerns the amount of taxable turnover upon export, does not regulate the allocation of a pawnshop’s input VAT and cannot be used as grounds for choosing a method for such allocation (Article 517 of the Tax Code of the Republic of Kazakhstan).
What a Pawnshop Accountant Should Do in 2026
A brief practical checklist:
- Prepare a list of the pawnshop’s transactions: granting and repayment of loans, accrual and receipt of interest, default charges, sale of pledged property, additional services, rentals, and sale of own assets.
- Determine the grounds for each receipt using the agreement and source documents, without combining the principal, interest, and service fees.
- Separate the amounts in agreements if the borrower pays interest, default charges, and the cost of additional services at the same time.
- Specify in the accounting policy the analytical accounting by type of transaction and the procedure for documenting the sale of unredeemed property.
- Configure the accounting system so that the agreement, type of transaction, date, value, and source document can be identified for each amount.
- Monitor the VAT registration indicator based on properly classified transactions rather than the total amount received in bank accounts and in cash.
Provisions concerning other taxes should not be used instead of VAT provisions. For example, Article 351 of the Tax Code of the Republic of Kazakhstan regulates corporate income tax withheld at source on certain types of income, including interest, but does not in itself determine the status of a transaction for VAT purposes (Article 351 of the Tax Code of the Republic of Kazakhstan). Similarly, the special rule in Article 517 of the Tax Code of the Republic of Kazakhstan concerning exports of goods does not replace a provision establishing an exemption of a specific pawnshop transaction from VAT (Article 517 of the Tax Code of the Republic of Kazakhstan).
Frequently Asked Questions
Is a pawnshop’s interest on a loan subject to VAT? — The application of an exemption must be based on a direct provision of the Tax Code concerning the relevant financial transaction. Article 517 of the Tax Code of the Republic of Kazakhstan does not establish such an exemption: it concerns the determination of the amount of taxable turnover when exporting goods (Article 517 of the Tax Code of the Republic of Kazakhstan).
Must VAT be charged when an unredeemed item is sold? — The sale must be considered separately from the loan and interest. Its classification depends on the seller, the grounds for the sale, ownership of the property, and the purpose of the proceeds. The rule in Article 517 of the Tax Code of the Republic of Kazakhstan applies to exports and does not in itself determine the consequences of a domestic sale of a pledged item (Article 517 of the Tax Code of the Republic of Kazakhstan).
Is the amount of loans granted included in the VAT registration indicator? — Monetary amounts must be separated according to their economic and contractual grounds. The granting of a loan, repayment of the principal, interest, and payment for goods or services cannot be accounted for as a single type of receipt.
Can a pawnshop claim all input VAT as a credit? — The amount of the credit must be determined under the provisions of the Tax Code applicable to the pawnshop’s purchases and transactions. Article 517 of the Tax Code of the Republic of Kazakhstan does not regulate the crediting of input VAT because it establishes the procedure for determining the amount of taxable turnover when exporting goods (Article 517 of the Tax Code of the Republic of Kazakhstan).
What is important to consider in 2026? — For each transaction, the provision of the Tax Code specifically regulating VAT should be applied. Provisions on corporate income tax withheld at source cannot be applied to VAT: Article 351 of the Tax Code of the Republic of Kazakhstan concerns the taxation of corporate income at the source of payment rather than the determination of taxable turnover for VAT purposes (Article 351 of the Tax Code of the Republic of Kazakhstan).