Kazakh government introduces alternative tax on underground use

ASTANA – The Kazakh government has introduced an alternative tax on the use of the subsoil which gives users of the subsoil an additional opportunity to meet their tax obligations. The tax burden is transferred immediately upon collection of the income.

“In order to stimulate the development of offshore and ultra-deep hydrocarbon fields, an alternative tax on the use of the subsoil has been introduced,” said Shafkat Kudabayev, head of the specialized division of the Revenue Committee of the State of the Ministry of Finance, during a briefing on the taxation of users of the subsoil. .

According to him, this tax is not additional, but represents an opportunity for users of the subsoil to alternately fulfill their own tax obligations to pay: mining tax, payment on reimbursement of historical costs, tax on excess profits. and rent tax on oil exports.

“The alternative tax on the use of the subsoil is similar to the corporation tax, except for the remuneration and the exchange difference. These amounts, unlike corporation tax, are not deducted. That is why by introducing the alternative tax on the use of the subsoil, the focus of the tax burden is transferred immediately at the time of revenue collection, ”explained Kudabayev.

He also said that one of the key conditions for the application of the new tax is that a choice be made by the user of the basement once and before the end of the contract without the right to modify.

“If a taxpayer makes such a choice, he is also obliged to inform the tax authorities,” Kudabayev stressed.

At the same time, the alternative tax on the use of the subsoil only works for each individual contract for the use of the subsoil and only for the volumes of oil produced and sold under such a contract. The calculation of the alternative tax on the use of the subsoil is carried out using the world price of oil, ”he said.

A new code on the use of subsoil was introduced on July 1, which simplified the operation of companies investing in the development of Kazakh fields. Since July 1, companies have added the possibility of receiving all authorization documents within 15 days. In addition, companies can carry out exploration work on new sites without going through the auction process. Experts have called this law revolutionary because it positively affects the country’s investment environment. The Kazakh government also intends to attract investment in the deposits, including extraction of mineral resources and geological exploration.