Kazakhstan’s mining and metallurgy sector, a key contributor to the national budget, is under mounting pressure from systemic challenges including delayed VAT refunds, growing tax burdens, and inefficient fiscal redistribution. Industry leaders warn these issues threaten the viability of aging mines and thousands of jobs.
The sector, which contributes up to 2 trillion tenge in taxes annually, relies heavily on VAT refunds due to its export-focused operations. Although legislation allows for VAT returns on goods sold abroad at a zero rate, delays in processing and strict requirements tied to supplier compliance often result in significant cash flow disruptions.
According to the State Revenue Committee, 1.9 trillion tenge in VAT was refunded as of mid-June 2024, with 68% going to subsoil users. However, industry representatives, including the Republican Association of Mining and Metallurgical Enterprises (AGMP), report that even automatic refunds are frequently frozen, causing cash shortfalls and even technical defaults for some firms.
Kazakhmys, the only major mining company to publicly comment, noted that vague interpretations of risk management criteria — particularly supplier-related compliance down the supply chain — create legal uncertainty and contradict the principle of individual liability.
The situation is further exacerbated by the rising Mineral Extraction Tax (NDPI), which has increased by 50% for non-ferrous metals and 30% for ferrous ones since 2023. A new tax code also introduces possible further hikes if gold and silver prices reach specific thresholds. Experts say this approach, based on extraction rather than profitability, is unsustainable for mature deposits with falling ore grades and rising costs.
In response, Kazakhstan plans to introduce a royalty-based system starting in 2027 for new mining licenses. The rates will vary by processing stage — from 13% for raw ore to 7% for finished products. While this shift aligns with international norms, AGMP argues that royalty rates must be lowered and flexibility offered to existing operators to switch voluntarily from NDPI to royalties.
The industry also advocates for streamlined VAT administration, tax reductions for depleted deposits, and increased tax allocation to mining regions to support local development and maintain stability.
Despite mounting challenges, Kazakhstan’s mining sector continues to show resilience. In the first five months of 2025, metal ore production grew by 0.8% and metallurgical output rose by nearly 7%. Still, stakeholders caution that without prompt reforms, the sector’s competitiveness and long-term viability remain at risk.
