Kazakhstan’s Cabinet of Ministers has proposed a differentiated value-added tax (VAT) structure, with rates ranging from 0% to 16% and an intermediate rate of 10%. This announcement was made by Vice Minister of National Economy Azamat Amrin. The proposal comes after President Kassym-Jomart Tokayev rejected an earlier plan to increase the VAT rate to 20%.
“We propose the following mechanism: a general VAT rate of 16%, full exemption from VAT for agricultural producers, and an intermediate rate of 10% for certain industries. Thus, the government’s proposed differentiation consists of 16%, 10%, and 0% rates,” Amrin said during a meeting with business representatives in Astana.
The government plans to determine which industries will qualify for the 10% VAT rate following consultations with the business community. Amrin also noted that agricultural VAT exemptions currently apply to peasant farms (family-labor associations), while larger legal entities in the sector pay about a third of all applicable taxes due to existing tax incentives. Now, the government is ready to abolish VAT for these larger agricultural enterprises as well to enhance the competitiveness of Kazakhstan’s agricultural products.
Budget Implications of the VAT Reform
Kazakhstan’s current general VAT rate stands at 12%. The government expects that raising it to 16% will generate an additional 4 – 5 trillion KZT ($7.8 billion – $9.7 billion) in annual tax revenues.
In late January 2025, Minister of National Economy Serik Zhumangarin estimated that revising the VAT rate could bring in an additional 5 – 7 trillion KZT ($9.7 billion – $13.6 billion). At that time, authorities were considering a VAT increase to 20%, but late last week, President Tokayev publicly opposed such a sharp tax hike.
Tokayev Calls for a Balanced Approach
“It is necessary to explore different options, taking into account the specifics of various economic sectors,” Tokayev said during a meeting with representatives of Kazakhstan’s largest businesses.
“I have not previously commented on this matter, as every word I say can be interpreted as a direct order due to my official status. However, I now want to make my position clear: the VAT rate should be differentiated. The rate proposed by the government was still too high,” the president stated.
Tokayev emphasized the need for a balanced approach that supports businesses while also increasing budget revenues. “The state needs optimal solutions that, on the one hand, create favorable conditions and do not hinder business, and on the other hand, bring order to the tax system and ensure sustainable budget growth,” he added.
Following the president’s remarks on Friday, February 7, the government revised its VAT reform plan, announcing the new differentiated rates on Monday, February 10.
VAT Reform as Part of Kazakhstan’s Broader Tax Overhaul
As The Times of Central Asia previously reported, the draft of Kazakhstan’s new Tax Code, which includes the VAT reform provisions, also proposes a differentiated corporate income tax (CIT) rate for banks. The aim is to encourage business lending by making it more financially attractive than consumer lending or investments in government securities.
