Answer ... Generally, Kazakh mining companies are subject to corporate income tax, withholding tax and value added tax. Mining companies are also subject to the following subsoil use taxes:
- signature bonus;
- payment on compensation of historical costs (PCHC);
- mineral extraction tax (MET);
- a fee for land plot use; and
- an environmental fee.
Mining companies may also be subject to other taxes and obligatory payments, such as licence fees and vehicle tax.
Signature bonus: The signature bonus is a lump-sum payment to be paid upon the acquisition of a subsoil use right (SUR) for a particular contract territory (subsoil plot). A signature bonus must also be paid where the contract territory (subsoil plot) is increased.
Where the SUR is obtained on the basis of a subsoil use contract (SUC), the bonus shall be paid according to the following rates:
- 280 monthly calculated indicators (MCIs) (approximately $1,820) for exploration SUCs; and
- at least 500 MCIs (approximately $3,250) for production SUCs or combined exploration and production SUCs.
The above rates also apply to exploration or mining licences issued upon results of an auction.
Where the SUR is obtained on the basis of a subsoil use licence (SUL), the bonus shall be paid at the following rates (except where a licence is issued as the result of an auction):
- 100 MCIs (approximately $650) for exploration licences;
- 50 MCIs (approximately $325) for mining licences; and
- 2,000 MCIs (approximately $13,000) for geological survey licences.
PCHC: PCHC is a fixed payment to compensate the state for costs incurred in conducting the geological survey and developing infrastructure in the respective contract territory (subsoil plot) prior to execution of the SUC or obtainment of the SUL. The PCHC rate is determined by the respective state authorities.
PCHC shall be paid to the budget in the following forms:
- as PCHC in the amount determined under the confidentiality agreement minus the payment on the acquisition of state-owned geological information; and
- as payment on the acquisition of state-owned geological information in the amount determined under the confidentiality agreement.
PCHC is not applicable to the mining companies that have an SUL for the territory which was not used for subsoil use purposes prior to 1 January 2018.
MET: MET is levied on the physical volume of minerals (ie, the taxable volume of extinguished reserves) extracted by a mining company. MET must be paid separately for each type of extracted mineral, at rates which vary from 0% to 18.5%.
The MET tax base is determined on the basis of the value of the taxable volume of the extinguished reserves calculated in the following order:
- on the basis of the average stock exchange price in respect of minerals that have official price quotations on the London Metal Exchange or the London Bullion Market Association;
- on the basis of the weighted average sale price in respect of all other minerals which are to be sold; and
- on the basis of the actual mining costs and primary processing (enrichment), increased by 20% in respect of all other minerals which are to be transferred for further processing and/or utilisation for own production needs.
Fee for land plot use (rent payments): Mining companies that have an exploration or mining licence must pay a fee for land plot use. The rate depends on the period of use and the type of licence. Thus, the fee for land plot use under an exploration licence is levied for each block in the following amounts:
- 15 MCIs (approximately $98) where the duration of the licence is between one month and 36 months;
- 23 MCIs (approximately $150) where the duration of the licence is between 37 months and 60 months;
- 32 MCIs (approximately $208) where the duration of the licence is between 61 months and 84 months; and
- 60 MCIs (approximately $390) where the duration of the licence is more than 85 months.
The fee for land plot use under a mining licence is levied in the amount of 450 MCIs (approximately $2,925) for each square kilometre.
Environmental fee: An environmental fee is payable by mining companies for the actual volume of environmental emissions and the disposal of manufacturing waste. Environmental fees are levied in the following order:
The fees for the disposal of waste from mining and quarrying industries are as follows:
- overburden rocks – 0.002 MCI (approximately $0.013) per tonne;
- host rocks – 0.013 MCI (approximately $0.08) per tonne;
- rock refuse – 0.010 MCI (approximately $0.065) per tonne; and
- slag and slime – 0.019 MCI (approximately $0.12) per tonne.
- The fee for the disposal of ash and ash waste formed in the course of metallurgical processing of ore, concentrates, agglomerates and pellets containing minerals, as well as production of alloys and metals, is 0.330 MCI (approximately $2.1) per tonne.
If the amount of the environmental fee is less than 100 MCIs (approximately $650), a mining company is entitled to obtain an emission certificate from the Ministry of Energy. The emission certificate allows for environmental emissions to be made within the specified limits at a flat rate.
Corporate income tax: Taxable income of the mining company is subject to corporate income tax at the rate of 20%. The taxable income is determined as the difference between the aggregate annual income and the statutory deductions, including depreciation and adjustments. The deductions generally include all expenses relating to the business activities which are aimed at income generation and supported through documentation. Expenses incurred prior to production and upon commercial discovery are excluded from the aggregate annual income of the mining company as depreciations in the amount of up to 25% from the accrued expenses. Such expenses generally include the expenses of the geological survey, exploration, preparation works, general administrative expenses, signature bonus payment, acquisition of fixed assets and other deductible expenses.
Withholding tax: Withholding tax obligations arise in case of payment of income that is recognised as income from Kazakh sources to a non-resident with no permanent establishment in Kazakhstan.
Withholding tax shall be withheld at the following rates.
Types of income
General tax rate
Interest, dividends, capital gain and royalty
Insurance premiums under risks insurance agreements
Insurance premiums under risks reinsurance agreements
Income from international transportation services
Income of persons registered in tax havens
At present, Kazakhstan has signed 54 double tax treaties with foreign countries. Most of these treaties either include an exemption from Kazakh withholding tax or allow for a reduction in this rate to between 5% and 10% where the treaty provisions and certain documentary support requirements (eg, certificate of residence) are met.
VAT: Mining companies that are registered as VAT payers must charge VAT on their taxable turnover and fulfil obligations on the calculation and declaration of such tax. Taxable turnover is recognised as any sale of goods, works or services as well as taxable imports to Kazakhstan, excluding exempted turnover and cases when the place of supply of goods, works or services is not in Kazakhstan.
Mining companies are obliged to register for VAT if their turnover during a calendar year exceeds 30,000 MCIs (approximately $195,000). Even if a mining company does not have to register for VAT, it may do so voluntarily by applying to the tax authorities.
The rate of VAT on sales turnover and import VAT is 12%.
Zero-rate VAT is charged on exports. The sale and import of certain types of goods (and works or services) can be fully exempted from VAT.
In addition, mining companies may be subject to reverse-charge VAT at the rate of 12% in case of receipt of works or services from a non-resident that is not registered as a VAT payer in Kazakhstan, provided that such works or services are deemed to be supplied in Kazakhstan under the ‘place of supply’ rules.
VAT paid for goods, works and services purchased by the mining company, including reverse-charge VAT and import VAT paid at customs (input VAT), may generally be offset against VAT charged by the mining company to its customers (output VAT) when determining its own VAT liability. However, an offset is not available for VAT incurred due to supply which is either exempt from VAT or deemed to be supplied outside Kazakhstan.