On 9 September 2015 the Mazhilis of Parliament of the Republic of Kazakhstan approved at the first reading the draft law "On Introduction of Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Matters Concerning the Improvement of Special Economic Zones" aimed to improve position of the participants of special economic zones ("SEZ"), to increase investment prospects of and advancement of conditions of establishing and functioning of SEZ. The amendments are being introduced to the Tax Code, the Law "On Special Economic Zones in the Republic of Kazakhstan" and the Law "On architectural, urban planning and construction activities in the Republic of Kazakhstan".
Below we present an overview of key amendments which might be of interest to SEZ participants. Please note that this overview has been prepared on the basis of the draft law brought in the Mazhilis in November 2014, and, therefore, some of the provisions of the draft law may change during the consideration process.
The draft law provides that, in case the changes to the tax legislation concerning exclusion or change of the rates or coefficients applied when calculating the amount of land tax, property tax and land use fee, as well as the amount of decrease of the corporate income tax are made after the date of inclusion of an organization into the single registry of SEZ participants, such changes shall not apply to the SEZ participants until the expiry date of the agreement on performance of activities as a participant of SEZ, but no longer that the period of the statute of limitations starting from the date of introducing of such changes (5 years for tax liabilities).
Calculation of fee for use of land plots
The draft law intends to change the maximum period within which SEZ participants apply a zero coefficient when calculating the rate of fee for use of land plots. Instead of 10 years (from the date when rent of land plot begins) the term of application of a zero coefficient shall be limited by the term for which a SEZ has been established (usually, 25 years).
Currently, the Tax Code provides that turnover of sale of own-produced goods to organizations operating in the territory of Kazakhstan under subsoil use contracts, which provide for exemption from import VAT, is subject to a zero VAT rate. Draft law provides that the same exemption shall be applicable to sale of own-produced goods to organizations operating in Kazakhstan under the production share agreements.
Deprivation of status of the SEZ participant
A new concept brought by the draft law is an possibility to deprive an entity of its status of the SEZ participant in case of non-performance or improper performance of obligations under the agreement on performance of activities as a participant of SEZ. It Is assumed that a SEZ participant will be given an opportunity to remedy a breach within 60 calendar days. Should the breaches not be remedied, a governing body of SEZ has the right to unilaterally terminate the agreement on performance of activities as a participant of SEZ after 30 calendar days, followed by notification to relevant state authorities and the local executive body which shall consequently terminate a land rent agreement.
Construction of facilities in the territory of SEZ
It is proposed to allow application of the construction norms, regulations and standards of foreign countries, international and regional organizations and use of compliant construction materials and structures when designing, constructing, reconstructing and operating facilities in the territory of SEZ (apart from utility, residential, social and administrative facilities).
Change of SEZ borders
With the approval of the law, stakeholders will have the right to submit to Ministry for Investments and Development proposals to change the borders / area of SEZ on condition that such stakeholders provide relevant grounds for, and financial and economic calculations in respect of, such changes.
Single SEZ coordination centre
Draft law introduces a new concept of a Single coordination centre for development and promotion of SEZ. It is contemplated that the Single SEZ coordination centre will be Government determined organization, the functions of which will be development and improvement of investment prospects of SEZs, trust management of shares of the managing companies of SEZ and provision of consultancy services to the managing companies.