Kazakhstan Bond Market Proposed Tax Changes Aim to Attract $3 Billion in Foreign Investment

Kazakhstan is preparing tax changes to make it easier for foreign investors to trade bonds issued by quasi-state entities through international depository systems. The authorities estimate potential foreign investment in the market at around $3 billion. The problem currently arises after the securities have been purchased. If a foreign investor sells the bonds on a Kazakh stock exchange, capital gains are exempt from tax. But if the same securities are sold outside a local exchange, that exemption does not apply. For international investors, this is an important distinction. Kazakhstan wants to make quasi-state sector bonds accessible through Euroclear and Clearstream, international central securities depositories and settlement systems through which major banks and funds hold and trade securities from different countries. Transactions within these systems can take place without going through a Kazakh stock exchange. National Bank Deputy Governor Aliya Moldabekova said capital gains from non-residents’ sales of quasi-public sector bonds on the Kazakhstan Stock Exchange were exempt from tax. However, the legislation did not provide the same treatment when those securities were subsequently sold outside Kazakhstani stock exchanges. The authorities propose eliminating this discrepancy by extending the tax exemption to relevant off-exchange transactions. The approach was backed on September 7 by the government’s Project Office for the implementation of the Tax Code. The Ministry of National Economy and the Ministry of Finance will now work on the necessary legislative amendments. This is a sizable market. There are currently around 17.6 trillion tenge, or roughly $39 billion, in outstanding tenge-denominated bonds issued by Kazakhstan’s quasi-public sector entities. The government estimates potential demand from non-residents at around 1.4 trillion tenge, or about $3 billion. The calculation is based on the average 8.1% share held by non-residents in Kazakhstan’s government securities market during the first eight months of 2026. It is a benchmark rather than a forecast of actual capital inflows. Expanding access to quasi-state company bonds is part of a broader overhaul of Kazakhstan’s domestic debt market. In April, the National Bank announced that Euroclear had begun a project to make Kazakhstan’s government bonds eligible for settlement through its international system. A direct link with Euroclear is planned for 2027, while an international link with Clearstream is already operating. A primary dealer system for government securities also began operating on May 4. Five banks were appointed to support demand and provide two-way quotes for selected securities on the secondary market. The National Bank expects the system to broaden the investor base and help create conditions for Kazakhstan’s government bonds eventually to be included in global debt benchmarks, including the JPMorgan GBI-EM Index. Major Kazakh borrowers, meanwhile, are already looking beyond the domestic market for financing. In August, KazMunayGas raised 3.5 billion yuan, around $490 million, through a yuan-denominated bond offering. The final issue was nearly three times the size of the company’s first yuan bond offering a year earlier.