Investment Projects: New Opportunities for Obtaining Tax Incentives. IV Investors' Voice Magazine: Winter Spotlight On Tax And Legal Reform

At the current stage of development of Kazakhstan, raising investment capital for non-resource industry is crucial for economic growth and general national development. In this respect, close attention is paid to national industrialization, namely, the emergence of novel industries, production regions, and goods branded, 'made in Kazakhstan'. To this end, the first special economic zones (SEZs) appeared in 1996, and since 2003, various measures have been introduced to promote investment activities in the form of material investment incentives and State support for projects to create new industries in prioritized economy sectors.

2018 has so far been marked by significant legislative changes, which, among other things, affected investment projects and SEZ taxation. The innovations are undoubtedly favourable as they provide additional opportunities for State support for projects that had been left unaddressed earlier owing to statutory limitations. Evaluation of the novelties in practice is a matter of time and ability of the authorities and business to work side by side.

In this article, we would like to offer an overview of current State measures to support investors with a focus on the changes in legislation in 2018 specifically. In the meantime, the article does not cover State measures to stimulate growth to specific industries, such as agriculture, subsoil use or finance.

What the investor can obtain?

The State offers the following investment incentives and support measures to investors:

  1. Import incentive in the form of customs duties and VAT exemptions when importing technological equipment and spare parts thereto as well as raw materials and materials for the end products;

  2. State in-kind grants in the form of land plots, buildings, structures and other property (up to 30% of investment);

  3. Tax incentives in the form of corporate income tax, property tax and land tax exemptions;

  4. Investment grants by reimbursement of actual expenses (not exceeding 30%); and

  5. Accelerated tax depreciation of industrial buildings and structures, machinery and equipment.

For State aid, the investor must either launch an investment project or become a SEZ participant. Subject to certain conditions, accelerated tax depreciation can be applied in the absence of an investment contract.

Types of investment projects

The Business Code determines three major groups of investment projects, each of which has a specific set of requirements and incentives (please see the infographics).

Special investment projects are carried out by SEZ participants, owners of a free warehouse or under contracts for industrial assembly of motor vehicles. For investment incentives, a legal entity must be carrying out a priority activity. Investors implementing special investment projects are given import incentives in the form of import duties and...

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