Tax benefits for investors in Kazakhstan: who qualifies for exemptions and what they will be exempt from.

Kazakhstan is actively developing initiatives to attract investments, creating conditions to stimulate economic growth, modernize infrastructure, and diversify the economy. What foreign and local investors can expect in terms of tax incentives was explored by the correspondent from inbusiness.kz.

Senate Deputy of the Republic of Kazakhstan, member of the Finance and Budget Committee, Nuriya Niyazova, noted that significant efforts are being made to attract investors to Kazakhstan.

"We have many projects planned for 2025. Projects initiated in 2023-2024 are also expected to be completed, and to claim that the policy has slowed down is, I think, incompetent: work is ongoing, and I believe the results from this work, the figures, and the projects themselves will be announced soon, and we will see a multiplicative effect from their implementation. These include infrastructure projects, as well as projects in education, healthcare, and more," she stated.

At the same time, the deputy emphasized that Kazakhstan employs a wide range of tools to support investors and has established a comprehensive package of preferences. Moreover, the parliamentarian added that these preferences have been differentiated to delineate support measures based on the volume of investments, the type of projects, the region of implementation, and the investor's own contribution and conditions.

"I believe that the existing tools are sufficient. However, an individual approach to each investor is necessary in every case to develop the direction the investor is willing to enter in our republic," the senator concluded.

Meanwhile, the director of the methodology department of the State Revenue Committee, Oraz Abdrakhmanov, announced changes in this area.

"The draft of the new Tax Code includes measures to stimulate investments. Investment tax preferences are proposed for the acquisition or construction of buildings, structures, machinery, equipment, and software. A similar deduction is suggested for expenses related to reconstruction, modernization, capital, and current repairs. To stimulate investments in science, 'super-deductions' of 300% are proposed for expenses related to financing scientific developments. Incentives for raw material processing will also be provided regarding VAT," he noted.

However, the expert states that the existing mechanisms are sufficient for the implementation of various projects.

What Investors Can Expect

In response to the publication's inquiry, the State Revenue Committee reported that the current legislation provides several mechanisms aimed at reducing the tax burden.

"First and foremost, we are talking about investment tax preferences outlined in Articles 274-276 of the Tax Code. This allows taxpayers to independently apply investment tax preferences, enabling them to fully deduct the cost of preference objects that are put into operation for the first time in the Republic of Kazakhstan and/or subsequent expenses for reconstruction, modernization, either as a one-time expense or over three years from the date of commissioning of the preference objects," Oraz Abdrakhmanov noted.

The law also provides for tax benefits for organizations operating in the territories of 14 special economic zones:

• 100% reduction: corporate income tax, land tax, property tax, and fees for the use of land plots;
• exemption from VAT on the sale of goods produced and sold during priority activities in the SEZ (since 2021);
• sales within the SEZ of goods that are fully consumed during operations are subject to VAT at a zero rate (for suppliers);
• management companies of SEZs and industrial zones reduce the amounts of land tax, property tax, and fees for the use of land plots by 100%;
• a differentiated approach (to be implemented from January 1, 2024) to tax benefits in the SEZ based on the principle "the more the investment, the more the benefits," applies to SEZ participants who enter into agreements for activities after January 1, 2024.

Organizations entering into investment agreements (investments from 7.5 million MRP) are granted the following tax preferences:

• 100% reduction of corporate income tax on income from activities specified in the investment agreement (10 years);
• zero coefficient for calculating land tax (10 years);
• 0% rate for property tax calculation (8 years);
• exemption from VAT on turnover from the sale of goods, works, and services when conducting activities in the SEZ (paragraphs 39, 43-1, and 47 of Article 394 of the Tax Code);
• reduction of tax liabilities by no more than twenty percent after ten years of applying preferences for the specified taxes, based on actual expenses incurred during the implementation of the investment project with an investment volume of at least fifteen million MRP;
• stability of granted tax preferences for the entire duration of the agreement.

In turn, organizations implementing priority investment projects are granted several tax preferences. For creating new productions (investments of 2 million, 1 million, and 200 thousand MRP), the following is provided:

• 100% reduction of the calculated corporate income tax (10 years);
• application of a zero coefficient to land tax rates (10 years);
• property tax calculated at a 0% rate on the tax base (8 years).

In contrast, for the expansion and/or modernization of existing productions (investments of 5 million MRP), a 100% reduction of the calculated corporate income tax is provided for three years.

A legal entity in Kazakhstan implementing an investment project is granted the following types of investment preferences:

• exemption from customs duties on the import of technological equipment, components, and spare parts, raw materials, and/or materials;
• exemption from value-added tax on the import of raw materials and/or materials;
• state natural grants.

"Investment preferences are granted to a legal entity in Kazakhstan, a participant of the SEZ, or an owner of a free warehouse, or one who has entered into an agreement for the industrial assembly of motor vehicles," stated the director of the methodology department of the State Revenue Committee.

Thus, the law provides for exemptions from:

1) customs duties on the import of technological equipment, components, and spare parts, raw materials, and/or materials, as well as raw materials and/or materials that are part of finished products manufactured in the SEZ or free warehouse;

2) VAT on the import of raw materials and/or materials that are part of vehicles and/or agricultural machinery placed under the customs procedure of a free warehouse by a legal entity that is:

• a manufacturer of vehicles that has entered into an agreement for the industrial assembly of motor vehicles with the authorized body in the field of state support for industrial-innovative activities;
• a manufacturer of agricultural machinery;

3) VAT on the import of goods that are part of finished products manufactured in the special economic zone or free warehouse, subject to established conditions.

In summary, Kazakhstan continues to deliberately enhance its investment climate by offering new tax incentives and support measures. These steps create conditions for attracting capital into key sectors of the economy and stimulate the development of infrastructure, science, and production, opening up prospects for long-term growth and sustainable development.