Kazakhstan's Leader, Toqaev, discusses tax reform: Prohibiting Kazakhstan from evolving into a robust tax haven.
Revised Article:
President Kassym-Jomart Tokayev aims to revamp the tax system in Kazakhstan, focusing on fostering business growth, simplifying tax policies, and enhancing the investment environment. This transformation is expected to be carried out through strategic incentives and reforms.
Tokayev recognizes the current Tax Code as a cumbersome, complex mess of numerous changes, sub-laws, and exceptions that both entrepreneurs and civil servants grapple with. During a public meeting in Shymkent, he emphasized the need for a more straightforward, reliable, and fair tax policy.
The proposed new Tax Code is intended to strike a balance between private and public interests. It's designed to motivate businesses to pay taxes honestly, and the additional revenue generated is expected to bolster the development budget and fund new schools, hospitals, and social infrastructure.
The new Tax Code introduces targeted incentives for local manufacturers and exporters with significant added value, aiming to stimulate domestic production and improve export capacity. It also establishes a new royalty regime to encourage the processing of raw materials within the country, benefiting Kazakhstan's position in the global supply chain for crucial minerals.
Tax compliance is expected to become simpler and more accessible with the consolidation of seven special tax regimes into three easier-to-manage regimes. Self-employed individuals without the need for registration as an entrepreneur can now enjoy a 4% tax rate, and a simplified declaration regime is available for businesses with annual incomes up to approximately 2.36 billion tenge. Furthermore, peasant and farming households are set to replace the unified land tax with an individual income tax under this reform.
Corporate tax rates also see adjustments, with varying percentages for general taxpayers, banks, the gambling sector, manufacturing, and agriculture. Additionally, the draft Tax Code introduces a 5% withholding tax on dividends paid to non-resident investors and removes previous dividend exemptions linked to shareholding duration and securities from the Kazakhstan Stock Exchange. It also unveils a 300% super deduction for research and development (R&D) expenses to encourage innovation.
Digitalization and streamlining tax administration are integral aspects of the Tax Code's design, utilizing digital platforms to boost ease of doing business, investment services, and tax filings. To additionally protect investor rights, a "prosecutorial filter" mechanism has been implemented, preventing government bodies from taking legal action against investors without approval from the Prosecutor General’s Office.
The proposed reforms target several areas to enhance the business and investment environment. By incentivizing local manufacturing and exporters, the reforms promote diversification and value addition in the economy, potentially leading to increased employment and long-term investments.
The new royalty regime supports the mining industry, crucial to Kazakhstan’s industrial strategy, by encouraging in-country resource processing. By attracting international investors, the clear legal protections and simpler tax system aim to create a stable and attractive investment environment.
Simplified tax compliance, legal stability, and incentives for innovation should elevate Kazakhstan's competitiveness and attractiveness as a reform-oriented, investor-friendly destination. The new Tax Code is slated to be adopted by July 2025 and take effect from January 1, 2026, allowing time for public awareness and administrative preparation.
- The proposed Tax Code is part of Kazakhstan's policy-and-legislation efforts, aiming to simplify tax policies and foster business growth, which falls under the broader category of general-news related to politics and economic revitalization.
- The new Tax Code, with its focus on digitalization, streamlining tax administration, and simplified tax compliance, is expected to make a significant impact on Kazakhstan's investment environment, making headlines in general-news and politics discussions, as well as affairs related to policy-and-legislation.
