In accordance with the Law investors may get the following preferences by entering into contract with the designated authority:

 

(1) Investment tax preferences, including:

 

(a) Corporate income tax preferences for up to 10 years (exempting newly established companies and entitling operating companies to deduct cost of fixed assets acquired to implement investment project);

(b) Property tax preference for up to 5 years; and

(c) Land tax preference for up to 5 years.

 

(2) Exempting equipment and its components to be brought in to implement investment project from customs duties;

 

(3) Public grants in kind (land, buildings, structures, machines and equipment, computing machines, measuring and controlling devices and equipment, heavy vehicles (excluding cars), operating tools may be given as public grants in kind).     

 

Contract made with the Committee is a basis for applying for tax and customs preferences. Therefore if suppose a company brings in equipment under contract it will be exempted from customs duty. Besides, based on the contract the company will be exempted from some taxes. To do so a copy of the contract would have to be submitted to the respective tax agency.  

 

As to investors operating in the oil and gas sector, a completely different tax regime, laws on minerals and mineral extraction, product sharing agreement apply to them.

 

The Committee on Investment was established eight years ago. It has been working very successfully. Over 500 investment contracts have been made. 257 totalling to 2.6 bn US Dollars investment projects are now under implementation. Implementation of 177 investment projects is complete now. 104 contracts have been cancelled because investors did not meet their obligations. Growth of rates of contracts for preferences broken down by year is impressive. 84 investment contracts worth 811.2 mn US Dollars were made in 2004 versus 64 investment contracts worth 338.4 mn US dollars made in 2003. In the eleven months of 2005 51 contracts worth almost 1.5 bn US Dollars have been made. As you see, 2005 has already surpassed 2004 in terms of investment and the number of applications filed to us is now increasing drastically. Therefore we expect that by the end of the year both the number of contracts and amount of investment in fixed assets will increase.        

 

The largest investment contracts made in 2005, for which investment preferences have been already given, include: 

 

1. Project for building and operating a plant to produce primary aluminium in Pavlodar City. Investment in fixed assets – $703.5 mn;

2. Project for building and operating Ust-Kamenogorsk – Charskaya railway. Cost -  $159.9 mn;

3. Project for building and operating Moinak Hydraulic Power Plant; cost of the project is $250.8 mn;

4. Project for establishing a facility to process grain and produced native gluten, fodder yeast, biological addition agent (ethanol), and carbonic acid; invest in fixed assets amounting to $71.4 mn; and

5. Project for rehabilitating weaving and dye-trimming factory to produce cotton fabric with investment amounting to $35.8 mn;

 

Requirements for Contracts for Investment Preferences

 

First and the largest is to be on the list of priority sectors. Secondly, investment is to be made in fixed assets but not in working capital. Application to be filed to the Committee must state sector company operates in, its financial capacity and describe project briefly. Besides, a business plan is to be enclosed. To make sure preferences are not given to insolvent companies, investors must prove their financial solvency.      

 

If a company plans to finance the project on its own, it must provide the company’s balance sheet. If project is financed by borrowed money, investor is to enclose a copy of the loan agreement to the application. If project includes civil works and assembling works, copy of estimate costs is to be submitted.

 

Documents are supposed to be reviewed within a month. Then using a special scale it will be decided within what time preferences will be valid. It all depends on amounts: more is invested more significant preferences for longer time are given.        

 

Committee on Investments, Ministry of Industry and Trade of the Republic of Kazakhstan