Economy Ministry offers to introduce new tax preferences for sub-surface users

ASTANA. KAZINFORM The Ministry of National Economy offers new tax preferences for sub-surface users. Minister Kuandyk Bishimbayev has said today in the Majilis while presenting a bill "On amendments to some legislative acts of the Republic of Kazakhstan on taxation and customs administration", Kazinform correspondent reports.

“As per the bill, sub-surface users will be exempted from corporate income tax when their financial investment debt is amortized given that there is no commercial discovery [of a mineral deposit - editor]. An entire package of amendments in this bill is related to sub-surface use and is aimed at eliminating the measures of the Tax Code hindering the development of extracting and processing companies,” Bishimbayev said.

JSC KazMunayGas implements a number of sub-surface using projects by attracting strategic partners. In order to be KazMunayGas’ strategic partner, an enterprise must cover a share of the Kazakh company’s expenses at the stage geological exploration.  KazMunayGas returns all the expenses to the strategic partner given that there is a commercial discovery and net cash flow on the project. In case if sub-surface user does not discover  a deposit, KazMunayGas will not pay back the expenses. KazMunayGas’ debt is written off, which means that it gets income from debt amortization. In this case, this income must be imposed 20% corporate income tax as per the Tax Code of Kazakhstan.

For this reason, the Ministry offers not to levy corporate income tax on such types of income.

The bill, in general, aims at retaining entrepreneurship activity in agriculture and activation of the country’s economy.