New Investment Climate

1. BACKGROUND

   As is known, during the 27th session of the Foreign Investors' Council held on 12 June 2014, the President of Kazakhstan Mr. Nursultan Nazarbayev announced the establishment of a unilateral visa-free regime for citizens of 10 countries, which most actively invest in Kazakhstan, specifically for the UK, Germany, Italy, Malaysia, the Netherlands, the UAE, the Republic of Korea, the USA, France and Japan1.

   At the same date the President signed the Law for Introducing Amendments to Various Legislative Acts on Issues Relating to the Improvement of the Investment Climate (the "Law"), which enters into force from 24 June 2014.

   The Law made significant amendments to the Kazakhstan Law on Investments dated 8 January 2003 (the "Investments Law") and the Kazakhstan Tax Code dated 10 December 2008 (the "Tax Code"). Minor amendments were also introduced to the laws on employment, on concessions, on migration and on natural monopolies and regulated markets.

2. GREEN LIGHT FOR PRIORITY INVESTMENT PROJECTS

   2.1. Preferences

   Kazakhstan has established a highly preferential regime for those investment projects classified as "priority investment projects" (the "Project(s)"). The primary criterion for a Project is investment of not less than approx. USD 20 million in one of the areas specified by the Government.

   An investor which has concluded an investment contract for a Project with the authorized body (currently - Investments Committee under the Ministry of Industry and New Technologies (the "Investments Committee")2), may enjoy the following advantages (as specifically set out in an investment contract):

   exemption from corporate income tax (20 %) for up to 10 years; exemption from land tax for up to 10 years; exemption from property tax for up to 8 years from the date when fixed assets (e.g., a plant) are commissioned (only for those assets which were commissioned for the first time); reimbursement of up to 30 percent of actual expenses on construction works and purchase of equipment (so-called "investment subsidy"3) on the basis of documentary evidence after full commissioning. To apply for an investment subsidy, an applicant must also provide a feasibility study approved by the state expertise. The Government will approve the rules on granting investment subsidies; exemption from the need to obtain work permits for foreign workers of the legal entity holding the investment contract, its contractors and subcontractors in the area of research...