Aluminum   $ 2.1505 kg        |         Cobalt   $ 33.420 kg        |         Copper   $ 8.2940 kg        |         Gallium   $ 222.80 kg        |         Gold   $ 61736.51 kg        |         Indium   $ 284.50 kg        |         Iridium   $ 144678.36 kg        |         Iron Ore   $ 0.1083 kg        |         Lead   $ 2.1718 kg        |         Lithium   $ 29.821 kg        |         Molybdenum   $ 58.750 kg        |         Neodymium   $ 82.608 kg        |         Nickel   $ 20.616 kg        |         Palladium   $ 40303.53 kg        |         Platinum   $ 30972.89 kg        |         Rhodium   $ 131818.06 kg        |         Ruthenium   $ 14950.10 kg        |         Silver   $ 778.87 kg        |         Steel Rebar   $ 0.5063 kg        |         Tellurium   $ 73.354 kg        |         Tin   $ 25.497 kg        |         Uranium   $ 128.42 kg        |         Zinc   $ 2.3825 kg        |         

Any investor (local or foreign) treats the stability of the state tax policy as a level indicator of the favourable investment climate. All countries have been struggling for investment for a long time yet. If earlier investors waited in line to invest in countries rich in natural resources, now the governments and presidents of these countries are actively fighting to attract investment to their country.

In this summary, we would like to give an example of how inconsistent tax policy can be in Kazakhstan. This is indeed a very important issue. Investors no longer need low tax rates or other benefits and preferences. They now only want stability and predictability. The issue of state actions predictability is very important. After all, a truly high-quality investor comes with a project not for a year or two, but for 5-10-20 years or more. In such circumstances, the financial model of any investment project is calculated on the assumption that the state will act consistently and predictably towards the investor.

Imagine you have rented an apartment for a long period. Given that your rental contract is long-term and you expect the landlord to act consistently, you have decided to make expensive repairs at your own expense. In fact, you incurred capital expenditures. Further, suppose that the landlord decides to increase the rent by 50% after half a year of rent. Would you ever feel confident about such a landlord again?

On 8 June 2022, the Mazhilis of the Parliament of the Republic of Kazakhstan passed amendments to the Tax Code of the Republic of Kazakhstan in first reading. The amendments provide for a number of rules that, if passed, could lead investors to conclude that Kazakhstan has volatile and frequently changing taxation. Let us give three examples from the said draft law, which for some reason was called ‘urgent’ on the Government backstage. Although everything related to changes in taxation, by default, cannot be developed and adopted urgently.

  1. Increase in the Rates of the Mineral Extraction Tax for Solid Minerals (‘MET’)

The idea of increasing the MET rates was first voiced by the Minister of National Economy at a meeting of the Supreme Council for Reforms chaired by the President. The Minister proposed to increase the MET rates by 30%. In the initial drafts, the increase in the MET rates was in the same amount as announced at the meeting of the Supreme Council for Reforms – by 30%. Later, however, the Ministry of National Economy further increased the rates by 50%.

First, a 50% tax rate increase will be considered by current and potential investors as a ‘dramatic’ change. Besides, when this is done urgently within 2-3 months and without a detailed analysis of the consequences, this objectively makes investors who expect consistency and predictability from Kazakhstan feel concern.

Back in September 2021, the President encouraged to attract investment actively in exploration and search for new deposits. Then six months later, the Government of Kazakhstan is taking absolutely opposite steps, having put such investments at risk. The practice of other mining countries over the past 5-7 years shows that the first reaction of the heads of mining companies to the increase in royalty and MET rates is the withdrawal by investors of funds from the financing of exploration.

Second, a comparative analysis of the MET rates in the so-called ‘mining’ countries shows that the 50% increase in the MET rates proposed in Kazakhstan will make the rates to be the highest. For instance, the MET rates for gold are: in Uzbekistan – 7%, in Russia – 6%, in Kyrgyzstan – 5%, in Mongolia – 5%, in Zambia – 6%, in Australia – 2.5-5%. In Kazakhstan, the proposed MET rate on gold is 7.5%. Most of the gold deposits are located in the north and east of Kazakhstan, where the active mining season is often limited to 6-8 months.  We simply will not be able to compete for investment with other countries with such an increase. A similar picture is for other exchange-traded metals (copper, zinc, nickel and others) – the increased MET rates proposed in Kazakhstan will significantly exceed the MET rates and royalties applied in competing mining countries.

Third, the most surprising thing is the amendments grounding announced by the Government in the Mazhilis of the Parliament: (1) an increase in prices for exchange-traded metals in 2018-2022; (2) partial replenishment of the republican budget deficit by 300 bln tenge.

As to the growth in prices for exchange-traded metals, it should be noted that the MET tax base initially assumes the application of MET rates to the cost of mined minerals, which is calculated from the average exchange price. They apply the daily average price quotes for the tax period according to the London Metal Exchange or the London Precious Metals Market Association. Therefore, the higher the price of metals, the higher the tax base for MET and the higher the amount of MET payable. In other words, the MET calculation mechanism already takes into account the possibility of an increase or decrease in metal prices.

As to the statement about the partial replenishment of the budget deficit by 300 bln tenge, we would also like to understand how much investment Kazakhstan will lose by introducing likely the highest MET rates for exchange metals in the world? The damage from the decrease in investment in exploration and expansion of production may exceed the momentary replenishment of the budget by 300 bln tenge.

Four, a simple increase in the MET rate is unlikely to lead to a proportional increase in MET revenues. The profitability of developing a large number of mining projects will be in question. Therefore, some deposits will simply not be developed, because they will not overcome the 50% increased tax burden for MET For larger projects, the volume of solid minerals mined will decrease. For instance, if it is now profitable for a gold mining company to extract ore with a gold grade of 0.5 grams per ton, then with a 50% increase in the MET rate, this edge will increase from 0.5 to 0.7 or higher. Thus, the amount of reserves of economically viable solid minerals in Kazakhstan would decrease. The issue of rational use of mineral resources will become even more relevant. With an increased MET rate, mining enterprises will not be able to fully ensure the full and integrated use of subsoil resources.


  1. Cancellation of Tax Relief on Dividends for Enterprises Engaged in Advanced Processing of Solid Minerals

This benefit was introduced from 1 January 2018. In September 2017, during the presentation of the draft of the new Tax Code in the Parliament, the Ministry of National Economy indicated that “to stimulate the processing of raw materials, it is proposed to exempt dividends from CIT and increase in shares of a subsoil user, provided that more than 35% of the extracted raw materials are processed.” The purpose of the amendments was clear – instead of exporting the mined minerals, subsoil users were invited to invest in production facilities for the advanced processing of mined mineral raw materials. Moreover, the requirement for the volume of processed raw materials increased on annual basis: from 2018 – 35%, from 2019 – 40%, from 2020 – 50%, and from 2022 – 70%.

Over the 5 years of the existence of this rule, significant investments were made in the construction of plants for the subsequent (after primary) processing of mineral raw materials mined by subsoil users. Obviously, when forming the financial model of such investment projects, local and foreign investors took into account the exemption from dividends tax and income tax on the increase in the value of shares in a subsoil user. The unilateral cancellation of this exemption after the launch of its final phase (from 1 January 2022, the maximum requirement for advanced processing of more than 70% of the mined mineral raw materials came into force) looks illogical and inconsistent. Moreover, such an initiative puts at risk not only investments already made in advanced processing, but also future possible investments in new projects.

In justification of such a benefit cancellation, the Government represented by the Ministry of National Economy states as follows: to stimulate the attraction of investments, benefits were introduced to exempt dividends from taxation, but this measure does not show the desired effect. Thus, to reduce the risk of capital withdrawal, it is proposed to abolish the tax exemption for dividends with the establishment of a single rate.

Unfortunately, no one has assessed to what extent this benefit had a positive effect, how many recycling facilities were put into operation over the past 5 years, how much revenue the budget would receive from the benefit abolition, and how much revenue it would lose, if some new projects for recycling plants construction would not be implemented. Only this will explain how justified such an initiative of the Government is.

Instead of a zero tax rate on dividends, the Ministry of National Economy proposed a single 10% tax rate on dividends (the standard rate is 15%). Please note that the 10% tax rate on dividends does not look like a preference that encourage advanced processing, since for most countries with which Kazakhstan has agreements to avoid double taxation, the tax rate on dividends is 5% by virtue of these agreements. Therefore, the establishment of a single rate of 10% will only contribute in the structuring of the subsoil user’s holding companies in foreign jurisdictions.


  1. Cancellation of Tax Relief on Dividends for the Whole Business

Since 2018, there have been rules, according to which, if a company is owned for a period of more than three years and is not associated with subsoil use, dividends and the increase in the value of shares upon their sale were exempt from income tax. The norm stimulated the structuring of business at the local level, making maximum use of Kazakhstani legal entities. Many local investors, who previously owned foreign holding companies, liquidated these structures and transferred the holdings completely to the jurisdiction of Kazakhstan.

Now the tax on dividends is introduced at the level of 10% if the company has been owned for more than 3 years and it is not associated with subsoil use. However, as noted above, it will be easier to structure one’s participation in a Kazakh company through a foreign legal entity registered in a state with which Kazakhstan has a tax convention.  This scheme will allow to apply a 5% tax rate on dividends by virtue of an international treaty.

It is hoped We hope that in the Senate of the Parliament the so-called ‘urgent’ draft law on amendments to the Tax Code will receive a truly proper consideration and study This will help to exclude or somewhere to reduce poorly substantiated proposals of the Government. Many of these amendments, even if cancelled in a year or two, will still affect the opinion of investors about Kazakhstan as a predictable or unpredictable investment jurisdiction.

The above examples show a lack of cross-sectoral coordination, haste and inconsistency. In order to avoid instability in tax policy in the future, it is proposed to consider at least the following initiatives:

  • any significant changes in taxation must undergo a detailed approval procedure similar to the regulatory impact assessment (RIA) procedure, with such a requirement fixed in the Business Code of the Republic of Kazakhstan. Atameken and all other engaged business entities should be able to actively participate in such an assessment. The taxation RIA shall be carried out before and after the introduction of significant tax changes and shall be a prerequisite for increasing taxation. Following the RIA results and depending on the effectiveness of tax amendments, they may not be adopted, or can be cancelled or revised. Tax amendments, in particular, can be cancelled in case of failure to achieve the goals that were announced when they were introduced;
  • any tax changes in a particular industry cannot be developed and adopted without the involvement of the relevant competent authority of such an industry. This, for example, means that an increase in taxation of the mining sector shall not be initiated without the involvement of the Ministry of Industry and Infrastructure Development of the Republic of Kazakhstan. Similarly, changes in the taxation of the agricultural sector shall not be adopted without the active participation of the Ministry of Agriculture, etc. It is the sectoral ministries that most of all understand the problems/risks/nuances of a particular industry and can help avoid the negative implications of some initiatives proposed in the pursuit of momentary replenishment to the budget.