Taxation of subsurface users in Kazakhstan
Kazakhstan oil and gas tax guide 2014
Subsurface use legislation
Two major laws in Kazakhstan govern the economic terms established in a subsurface use contract. They are the Subsurface Use Law which contains the basic legal framework for granting, using and assigning or terminating rights to be a subsurface user and the Tax Code.
The taxes applicable to subsurface users are as follows:
Stability of the tax regime
The tax regimes of the small number of PSAs are stable provided that they have undergone a “tax expert evaluation” — essentially a review by the tax authorities to ensure that the tax terms in the PSA comply with the law in force at the time the PSA became effective.
The tax regimes of EPT contracts are not stabilized except for cases where such contracts are approved by the President of the Republic of Kazakhstan. Stabilized contracts can be changed by mutual agreement between the parties.
The tax regime of a subsurface use contract applies to activities that are carried out within the framework of the contract and that meet the definition of subsurface use in the Subsurface Use Law. The Tax Code implies that the tax boundary occurs after the extraction and primary processing stages, i.e., initial stabilization.
The Tax Code contains detailed requirements for tax policy and a set of tax registers that provide the bridge from the underlying accounting records to the tax returns. Accounting records are maintained in accordance with the Law On Accounting and Financial Reporting, under which most companies should prepare financial statements under IFRS.
Legislation governing the establishment of tax terms in a subsurface use contract
The Tax Code states that it alone may establish provisions concerning the payment of taxes and levies relating to subsurface operations in Kazakhstan.
Separate agreements with the government should not do so.
More information on the taxes applicable to subsurface users is available in our guide.