SEZ or IZ: Which site to choose?

SEZ

IZ

Concept

SEZ is a part of the territory of the Republic of Kazakhstan with precisely defined boundaries, in which a special legal regime of a special economic zone is in effect for carrying out activities in accordance with this Law.

IZ – a territory provided with engineering and communications infrastructure, provided to private entrepreneurship entities for the placement and operation of business facilities, including in the field of industry, the agro-industrial complex, the tourism industry, transport logistics, waste management, in the manner established by the legislation of the Republic of Kazakhstan.

Purposes of creation

The SEZ is created for the purpose of accelerated development of modern high-performance, competitive production, formation of a qualitatively new level of service provision, attraction of investments, introduction of new technologies in economic sectors and regions, as well as increasing employment of the population. The SEZ, the boundaries of which fully or partially coincide with sections of the customs border of the EAEU, is also created for the purpose of developing border trade and the economy of adjacent border territories, development of transport infrastructure, tourism and cultural interaction of the border territories of the Republic of Kazakhstan.

The IZ is created for the purpose of providing infrastructure support for the development of entrepreneurship in the regions.

IZ are divided into public and private.

State IZs, in turn, are divided into the following types:

FROM republican significance;

OF regional significance;

small IZ.

Among private IZs, a special IZ is distinguished - a type of private IZ, on the territory of which the direct application of international building codes and regulations, as well as international regional standards and standards of foreign states, created by individuals and (or) non-governmental legal entities, is permitted.

Validity period

up to 25 years
(by decision of the Government of the Republic of Kazakhstan, the term may be extended)
For participants of the SEZ who have concluded a special investment agreement, which provides for investments in the amount of at least
15 million MCI, the term of operation of the special legal regime of the SEZ, the rights and obligations of the participants of the SEZ are retained for the term of the special investment agreement.

OF republican and regional significance – not less than 20 years (the term may be extended by decision of the local executive authority)

Participants

A participant in a SEZ is a legal entity that carries out priority types of activities on the territory of a SEZ and is included in the unified register of participants in special economic zones.

Participants in a SEZ, the boundaries of which fully or partially coincide with sections of the customs border of the EAEU, may be individual entrepreneurs carrying out priority types of activities on the territory of the specified SEZ.

IZ participant – individual entrepreneur, legal entity, who places and operates business facilities on the territory of the IZ in the manner established by the legislation of the Republic of Kazakhstan, with whom the management company of the industrial zone has concluded an agreement on the implementation of activities.

Activities

List of priority activities for each SEZ
(Order of the Minister of Industry and Construction of the Republic of Kazakhstan dated February 22, 2024 No. 72)

There is no list of priority activities

Restrictions

FEZ participants cannot be:

1) subsoil users;

2) organizations producing excisable goods, with the exception of organizations engaged in the production, assembly (completion) of excisable goods provided for in subparagraph 6) of Article 462 of the Tax Code of the Republic of Kazakhstan (motor vehicles);

3) organizations and individual entrepreneurs using special tax regimes;

4) organizations using investment tax preferences - for unfinished contracts concluded with the authorized state investment body before January 1, 2009;

5) organizations implementing (having implemented) an investment priority project and an investment strategic project in accordance with the legislation of the Republic of Kazakhstan on investments;

6) organizations operating in the gambling business.

In relation to the SEZ, the boundaries of which fully or partially coincide with sections of the customs border of the EAEU, foreign individuals and legal entities cannot be participants in the SEZ.

The following types of activities are prohibited on the territory of the special IZ :

1) production that does not meet environmental requirements and occupational safety conditions;

2) production of weapons and ammunition (cartridges), trade in weapons and ammunition (cartridges);

3) production of nuclear materials and sources of ionizing radiation, trade in nuclear materials and sources of ionizing radiation;

4) production of cement, cement clinker, coal products, lime and gypsum;

5) processing, decomposition, incineration, gasification, chemical treatment, final and (or) temporary storage and (or) underground burial of all types of waste;

6) the placement of oil refineries, nuclear power plants, nuclear installations, radiation sources, points and installations intended for the storage, disposal and processing of spent nuclear fuel, radioactive substances and waste, as well as other radioactive waste.

Benefits and preferences

The “one-stop shop” principle is applied when providing government and other services

• Tax preferences (for participants) *
• VAT – 0% (for goods sold in the territory of the SEZ)
• CIT – 0% (on income from the sale of goods and services when carrying out priority types of activities)
• Individual tax – 0% (for individual entrepreneurs in the territory of the SEZ, the boundaries of which fully or partially coincide with sections of the customs border of the EAEU)
• Land tax – 0%
• Exemption from payment for the use of a land plot (LP) (until the end of the lease term, but not longer than the term of the SEZ)
• Property tax – 0%
• Social tax – 0% (only for SEZ “Park of Innovative Technologies”)
• Stability of rates and coefficients applied in calculating corporate income tax, individual income tax, land tax, property tax and land use fees, in the event of amendments and additions to tax legislation, during the term of the agreement, but not more than 10 years from the date of entry into force of the first such amendment and (or) addition.
• Customs preferences
  Exemption from customs duties on imports (customs procedure of free customs zone)
• Land plot with infrastructure
• Provision of free land for the entire period of existence of the SEZ
• Accessible infrastructure
• Priority right to purchase land
• Simplified procedure for hiring foreign workers
  Hiring foreign workers outside quotas and without permits for the period of construction and installation work and 1 year after the commissioning of the facility for projects worth more than 1 million MCI.
• Available infrastructure facilities on the territory of the SEZ
• Railway
• Highway
• Water supply
• Gas supply
• Heat supply
• Sewerage
• Electricity supply
• Tax preferences for SEZ Management Companies:
• Land tax – 0%
• Property tax – 0%
• Exemption from land use fees

• Tax preferences only for Management Companies IZ:
• Land tax – 0%
• Property tax – 0%
• Exemption from land use fees
• Stability of concluded contracts on the implementation of activities for IZ participants in accordance with their terms
• Provision of land plots (LP)
• Provision of ready-made engineering and communications infrastructure
• Possibility of long-term lease or purchase of land plots at cadastral value
• No industry restrictions
• Possibility of concluding an investment contract with the Investment Committee of the Ministry of Foreign Affairs of the Republic of Kazakhstan and receiving investment preferences ( except for the state in-kind grant ): tax preferences; exemption from customs duties; simplified procedure for attracting foreign labor for an investment priority project.

* the period of application of tax preferences (exemption from land tax, property tax, land use fees, corporate income tax, individual income tax, social tax) by SEZ participants depends on the project category:

• category A (project cost up to 3 million MCI) - within 7 years;
• category B (project cost from 3 million MCI to 14.5 million MCI) - within 15 years;
• Category C (project cost from 14.5 million MCI) - for 25 years.

At the same time, SEZ participants operating in the industries of food production, textiles, clothing, leather and related products, computer production, electronic and optical equipment, and electrical equipment production are assigned category B with a project cost from 1 million MCI to 14.5 million MCI.

Abolition

Upon expiration of the period for which this SEZ was created.

An IZ of republican or regional significance is abolished upon expiration of the period for which the given IZ was created.