Kazakhstan’s leading aluminium producer, the Kazakhstan Electrolysis Plant (KEZ), part of the Eurasian Resources Group (ERG), has been hit with substantial tax adjustments amounting to billions of tenge. This follows a thematic inspection by the Kazakh tax authorities concerning transfer pricing practices for transactions conducted between 2018 and 2021. The tax authorities concluded their investigation in February 2024, resulting in a demand for additional tax payments totalling 2.448 billion tenge, excluding penalties and interest. The company has contested these findings through the judicial system, but initial court decisions did not favour KEZ.
As of February 2026, KEZ paid the additional taxes, alongside penalties and fines totalling approximately 5.5 billion tenge, which included 2.4 billion tenge in additional taxes, 1.4 billion tenge in penalties, and 1.7 billion tenge in fines. Despite these payments, KEZ maintains that its transfer pricing policies comply with Kazakh legislation and OECD guidelines, prompting further appeals in higher courts. A subsequent ruling from the cassation court supported KEZ’s position, declaring the tax authority’s notification illegal and ordering the return of the paid amounts.
Transfer pricing in Kazakhstan typically involves setting prices for goods and services in international transactions that differ from market rates, often leading to profit redistribution to more favourable tax jurisdictions. This practice poses significant risks, particularly in sectors like aluminium production, where costs can vary greatly due to transportation and additional expenses.
The KEZ produces approximately 265,000 tonnes of primary aluminium annually, sourced from bauxite mined in Kazakhstan’s Kostanay region. In 2024, ERG exported 180,000 tonnes of aluminium to the European Union and Turkey. For the fiscal year 2025, KEZ reported revenues nearing 360 billion tenge, with a profit of 79.4 billion tenge.
In June 2025, ERG announced plans to issue three-year securities from KEZ worth up to $100 million, backed by the Development Bank of Kazakhstan. The company has also engaged in significant lending activities, providing short-term loans totalling over $313,000 in 2025. Additionally, KEZ has been active in debt operations, securing various credit lines and refinancing existing debts, indicating a robust financial strategy amidst regulatory challenges.
The financial report underscores KEZ’s commitment to maintaining liquidity and generating sufficient cash flow to support its operations and obligations, even as it navigates the complexities of tax compliance and international trade dynamics.
