Tax - The Times Of Central Asia

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Tax

Kazakhstan’s Mining Association Proposes Reforming Mineral Extraction Tax

Aibar Dautov, head of Kazakhstan's Mining Industry Association, has called for reforms to the procedure for calculating the mineral extraction tax (MET) to boost budget revenues from oil and solid minerals. Speaking at the Astana Open Dialogue during discussions on the new tax code, Dautov noted that Kazakhstan currently employs ten different MET rates for crude oil taxation. These rates are determined based on two key factors: the price of oil at the time of sale and the annual production volume at a given field. The current tax structure is divided into the following production thresholds: 5% tax for annual production up to 250,000 tons 7% for 500,000 tons 8% for 1 million tons 9% for 2 million tons 10% for 3 million tons 11% for 4 million tons 12% for 5 million tons 13% for 7 million tons 15% for production up to 10 million tons 18% for production exceeding 10 million tons Dautov criticized this system as unfair to other sectors of the economy. “We believe the criterion of annual production volume should not exist at all. This differentiation has been in place for many years, but for some reason, it hasn’t been removed or acknowledged as a tax benefit. The Ministry of National Economy continues to support its inclusion in the new Tax Code. It’s unclear why this grading still exists—it should be eliminated and considered a relic,” Dautov stated. The complexity is even greater for solid minerals, according to Dautov, as their MET calculation currently involves 38 different tax rates for various types of minerals. The Times of Central Asia previously reported that Kazakhstan's Ministry of Industry and Construction has proposed replacing the current MET system with royalties. Under this system, taxes would be calculated based on the volume of sold products rather than the volume extracted. This change is scheduled to take effect on January 1, 2026, under new subsoil use contracts, while existing contracts will remain taxed under the current rates.

Finance

Why Kazakhstan Wants to Change Subsoil User Taxation

Kazakhstan is considering a significant change in the taxation of subsoil users, with Minister of Industry and Construction Kanat Sharlapayev proposing the introduction of royalties to replace the current mineral extraction tax (MET) for licenses issued from January 1, 2026. According to Sharlapayev, this shift would attract more investors to Kazakhstan and encourage the domestic processing of raw materials. Why Investors Are Dissatisfied with MET The MET, introduced in 2008, is levied on subsoil users for every type of mineral, hydrocarbon, underground water, and therapeutic mud extracted in Kazakhstan. Each resource is taxed at a separate rate, calculated based on the volume of extracted raw materials rather than their actual sale or revenue. This has caused dissatisfaction among both local and foreign subsoil users. Over the years, discussions have intensified about replacing MET with royalties, which would calculate taxes based on the volume of products sold or profits earned. Sharlapayev stated during a recent government meeting that experts from the World Bank have recommended this change to make Kazakhstan’s mining sector more attractive to investors. “Globally, the most popular taxation model in the mining and metallurgical sector is based on the volume of products sold or profits earned. Kazakhstan, however, uses the mineral extraction tax. Introducing royalties tied to the sales value of minerals would be more transparent and familiar to international mining players,” Sharlapayev explained. Sharlapayev also emphasized that replacing MET with royalties would incentivize domestic production by imposing lower taxes on minerals processed within Kazakhstan compared to those exported without processing. He urged Prime Minister Olzhas Bektenov to instruct the Ministry of Finance and the Ministry of National Economy to include royalty provisions in the new Tax Code, expected to take effect in 2026. However, these changes would only apply to licenses issued from January 1, 2026. Concerns Over the Transition The Ministry of Finance has expressed reservations about the proposed shift, citing potential revenue losses. In September, Zhanybek Nurzhanov, Deputy Chairman of the State Revenue Committee, warned that transitioning to royalties could cost the state budget hundreds of billions of tenge. “We can switch to royalties only if there are no losses for the budget. If we simply introduce royalties and reduce business payments, it raises a serious question—how do we offset nearly half a trillion tenge in lost tax revenue?” Nurzhanov said. Additionally, Nurzhanov pointed out that determining the true value of exported raw materials would require the establishment of specialized laboratories, imposing financial burdens on both businesses and the state. This, coupled with the complexities of administering royalties, could deter subsoil users. Kazakh economist Galymzhan Aitkazin echoed these concerns, noting that MET’s fixed rates provide predictability for both businesses and the government, while royalties—tied to revenue or market prices—introduce variability. “The simplicity of flat MET rates allows companies to plan effectively and helps the government forecast revenues. By contrast, royalties linked to revenue or market prices could lead to payment variability, complicating financial planning for both parties,” Aitkazin explained. He also emphasized that MET’s straightforward...

Tourism Economy Strategy Legislation Social Tax

Kyrgyzstan to Introduce Tourist Tax for Foreign Visitors

Kyrgyzstan's capital Bishkek plans to introduce a tourist tax for foreign visitors staying in the city. The Kabar news agency reported that according to the draft resolution submitted by the mayor's office for public discussion, visitors will be charged 50 KGS (approximately 0.59 dollars) for every day spent in the Bishkek's hotels, hostels, campsites, guest houses, and holiday lets. The fee is not included in the cost of accommodation. Instead, operators will be obliged to advise their guests of the charges and collect the fee when they register their stay. Following the requirements of the Kyrgyz Republic's tax legislation, cash register machines are mandatory in all types of accommodation and the fee, paid in Kyrgyzstan's national currency, will be accepted either in cash or by bank card.

International Cooperation Tax International trade

Uzbekistan and Turkey Enhance Strategic Partnership

On June 3, Ankara hosted a symposium on "Uzbek-Turkish Strategic Relations – Comprehensive Perspectives for the Future". Aimed to forge conceptual strategies to enhance the partnership between Uzbekistan and Turkey, the event was attended by First Deputy Minister of Investment, Industry and Trade of Uzbekistan Nozimjon Kholmuradov and officials from the Administration of the President of Turkey, heads of various ministries and agencies, as well as prominent political scientists and experts from both nations. Presentations highlighted the impressive momentum in trade, economic, and investment cooperation between Uzbekistan and Turkey. Over the last five years, bilateral trade has surged 1.3-fold, the number of enterprises funded with Turkish capital in Uzbekistan has tripled to 1,898, and the inflow of foreign direct investment (FDI) from Turkey has increased ten-fold. In 2023, 260 new Uzbek-Turkish ventures were established, elevating Turkey to third place in the number of joint ventures in Uzbekistan. The frequency of regular flights connecting the two countries has also grown 2.5-fold to 90 flights per week. Initiatives by Uzbekistan to further refine its investment climate include a steady six percent annual economic growth, a nine percent reduction in inflation, the drafting of an updated "Law on Investments" in alignment with WTO standards and the deployment of an efficient management system for special economic zones (SEZs). In addition, plans are in place to trim tax rates and the number of taxes, launch an ambitious new privatization program and IPO for shares of major companies, and establish a Tashkent International Arbitration Center.

Kyrgyzstan Economy Tax Foreign debt Poverty Employment

Kyrgyzstan: Tax revenues declining, unemployment and poverty persist

BISHKEK (TCA) — Kyrgyzstan has ensured macroeconomic and social stability and achieved GDP growth in the first four months of 2019, the Kyrgyz Economy Ministry reported. The GDP growth was 5.3%, and excluding enterprises developing the Kumtor gold field — 1.4%. Continue reading

Kyrgyzstan Investments Kumtor Mining Tax

Kyrgyzstan: Subsoil users concerned about possible tax burden increase

BISHKEK (TCA) — The International Business Council based in Bishkek, mining enterprises and associations of the mining industry of Kyrgyzstan appealed to President Sooronbai Jeenbekov with a request to assist in solving problems in the subsoil use sector. The appeal is related to the recent decision of the Security Council on measures in the subsoil use. Continue reading