Tax Preferences

Pursuant to article 290, Entrepreneurial Code of the Republic of Kazakhstan, the tax preferences shall be granted to the legal entities of the Republic of Kazakhstan in manner and order established by the tax laws of the Republic of Kazakhstan.

The tax preferences scheme for investment projects comprises of as follows:

1) Tax relief under the investment priority project:

• Reduction of corporate income tax (CIT) by 100%;
• Land tax at zero rate;
• Property tax at zero rate to taxable base.

2) Tax relief for investment project:

• VAT exemption for import of raw and materials under the investment contract;

3) Tax relief for special investment project:

• VAT exemption for import of raw and materials and (or) materials under the special investment project as per the procedures set out in the Tax Code of the Republic of Kazakhstan.

The effective period of any tax preference is prescribed in the investment contract but no longer than the period, which is specifically set in the Tax Code.

The pre-term termination of the investment contract triggers rescission of tax preferences as per the procedures set in the Entrepreneurial Code.

INVESTMENT PRIORITY CONTRACT

By virtue of article 712, Tax Code, organization, engaged in investment priority project on building new production plants and (or) expansion, renewal of existing productions plants may:

1) reduce CIT by 100%, on incomes, generated through carrying priority business activity, indicated in the investment contract and calculated as per the article the article 302, the Tax Code.

Incomes of organization, engaged in investment priority project, generated through non-priority business activities, shall be taxable with CIT under the general procedures.

In order to calculate tax obligations on priority business activities, carried under the investment priority project, an organization, engaged in investment priority projects, should keep a separate tax record files on object of taxation and or objects, connected with taxation.

In case, when an investment project on expansion and/or renewal of existing production plant provides for commissioning of fixed assets, manufacturing goods, on a phase-basis, the separate tax record must be kept pertaining to each fixed asset, manufacturing goods, pursuant to the tax policies.

Organization, engaged in investment priority project, cannot apply other provisions of the Tax Code on reduction of CIT by 100%.

2) determine depreciation charges for the value balances of groups (subgroups) by applying depreciation rates of at least 50 percent of the depreciation rate limits specified in clause 2 of Article 271 of the Tax Code to such value balances of groups (subgroups) at the end of the tax period.

Effective period

Building new production plants

The effective period of CIT relief under the investment priority project on building new production plants (fabrics, plant, shop) is from :

1. 1 January of the  year, when the investment contract for the investment priority contract is signed
2. to the expiry of ten consecutive years, which must be calculated from January 1 of the year following the year when the investment contract is signed.

Expansion and renewal of existing production plants

The effective period for CIT relief under the investment priority project on expansion and renewal of existing production plants (reconstruction, renovation and modernisation) is effective from:

1. 1 January of the  year, following the year, when the last fixed asset is commissioned under the investment priority project;
2. to the expiry of three consecutive years, which must be calculated from January 1 of the year following the year when the last fixed asset is commissioned under the investment priority project.

The effective period for CIT relief under the investment priority project on expansion and renewal of existing production plants (reconstruction, renovation and modernisation) with commissioning of fixed assets, manufacturing goods, on a phase-basis under an investment contract on investment priority project is effective from:

1)      1 January of the year, following the year, when the fixed asset, manufacturing goods, is commissioned under the investment priority project;

2)      to the expiry of three consecutive years, which must be calculated from January 1 of the year following the year when the fixed asset, manufacturing goods, is commissioned under the investment priority project.

The effective period should be applied in relation of each fixed asset, manufacturing goods and indicated in the investment contract on implementation of investment priority project on expansion and/or renewal of existing production plants.

LAND TAX

Organization engaged in investment priority project on building new production plants may apply zero rate of relevant land tax rates in relation of the land plots, used for the investment priority project.  

The land tax relief for investment priority project is effective from the 1^st day of the month, when the contract for the investment priority project signed through the expiry of ten consecutive years calculated from January 1 of the year following the year, when the investment contract on the investment priority project on building new production plants is signed.

The land tax relief provisions shall not be applicable when the land plot whole or partially with all erections and building on it or without them is given to rent or to use for any purposes other than the investment contract.

PROPERTY TAX

The property tax relief, i.e. property tax at zero rate to taxable base, is applicable by organization engaged in the investment priority project on building new production plants, in relation of items first commissioned into operation in the territory of the Republic of Kazakhstan.

Subject to the provisions on property tax relief in the investment contract for the investment priority project, the property tax relief, as set out above, is applicable:

• in relation of assets which are accounted as part of fixed assets pursuant to the international financial reporting standards and Kazakhstan laws on accounting and financial reporting and prescribed in the work program to be attached to the investment contract signed under the investment laws of the Republic of Kazakhstan.

The effective period is

• from the 1^st day of the month, when the first asset is accounted in the fixed assets as per the international standards of international reports and Kazakhstan laws on accounting and financial reporting
• through the date of expiry of eight consecutive years calculated January 1 of the year following the year, when the first asset was accounted as part of fixed assets as per the international financial reporting standards and Kazakhstani laws on accounting and financial reporting.

These provisions are not applicable, when the items taxed with property tax are rented out or provided for use and/or trust management.

The CIT, land and property tax relief provision are subject to availability of specific provisions in the investment contract as to the:

• CIT reduction by 100% calculated as per the article 302;
• Land tax at zero rate;
• Property tax at zero rate to the taxable base.