This Client Update covers the key amendments to the laws of the Republic of Kazakhstan ("RK") and various legal developments introduced in July and August 2016.
NOVELTIES IN LEGISLATION
The laws covered by the present Client Update relate to both
public and private sectors. Some of them may be of interest to you
as they may affect your business activity in Kazakhstan.
We would like to draw your attention to the following legal acts.
Convention with the Kingdom of Saudi Arabia On Avoidance of Double Taxation and Prevention of Tax Evasion on Income Tax
On 1 July 2016, the President of the RK ratified the Convention between the Government of the Republic of Kazakhstan and the Government of the Kingdom of Saudi Arabia on Avoidance of Double Taxation and Prevention of Tax Evasion on Income Tax.
The Protocol to the Convention was signed on 7 June 2011 in Astana.
Importation and circulation of goods on the customs territory of the EAEC
On 12 August 2016, the Eurasian Intergovernmental Council adopted the Resolution № 5 "On Certain Issues of Importation and Circulation of Goods on the Customs Territory of the Eurasian Economic Union Due to Accession of the Republic of Kazakhstan to the World Trade Organization".
The Resolution recognizes a hard copy of an electronic invoice registered in the national accounting system of the RK as a consignment document in case goods move from the territory of the RK to the territory of other EAEC member- states provided such goods are included into the list of goods with lower import duties compared to the rates of EAEC Unified customs tariffs except for the conditionally released goods.
A hard copy of an electronic invoice must be sealed by territorial tax authority of the RK.
Moratorium of certain provisions of the land laws
On 18 August 2016, the President of the RK signed the Decree № 308 "On Introduction of Amendments into Decree of the President of the Republic of Kazakhstan dated 6 May 2016 № 248 "On Moratorium on Application of Certain Provisions of the Land Legislation".
Moratorium has been prolonged for 5 years till 31 December 2021.
Moratorium applies to the following statutory provisions:
- temporary land use right for a period of up to 25 years for repatriates, foreigners, stateless persons, foreign legal entities, as well as legal entities more than fifty percent of shares in the authorized capital of which are owned by foreigners, stateless persons, foreign legal entities;
- granting individuals and legal entities with ownership right to agricultural land owned by the state.
The Decree came into force on 18 August 2016.
On Payments and Payment Systems
On 26 July 2016, the President of the RK signed the Law No. 11-VІ "On Payments and Payment Systems".
The Law substitutes the Law of the RK No. 237-I "On Payments and Money Transfers" dated 29 June 1998. The Law introduces the following changes and novelties:
- more detailed description of the rights and obligations of the banks when performing operations with clients' bank accounts;
- payments made by legal entities and individual entrepreneurs in favor of other legal entities or individual entrepreneurs in excess of 1,000 MCI must be made only by means of a bank transfer;
- payments made by individuals and legal entities under business transactions in excess of 20,000 MCI must be made only by means of a bank transfer.
The Law introduces definition of an escrow account as a current or deposit account opened by the client in the name and for the benefit of a third party who is restricted to perform any bank operations with the account unless certain conditions set by the client are duly met.
The Law regulates payment systems, criteria for determining importance of payment systems, operators and participants of payment systems, minimum requirements for operators of systemically important payment systems, inter-bank money transfer system, interbank clearing system, regulation and supervision of payment systems.
The Law came into force on 10 September 2016.
Registrar of grain receipts
On 5 August 2016, the Prime-Minister of the RK signed the Resolution № 452 "On Determination of Registrar of Grain Receipts". The Resolution makes Informational-Accounting Center JSC the registrar of grain receipts. The registrar creates and manages a register of grain receipts holders. Pursuant to Article 13-1 of the Law № 143-II "On Grain" dated 19 January 2001, the registrar's functions include:
- forming, maintaining and storing register data in the information system;
- setting up a client's personal account;
- registering certain personal account operations;
- providing information to government authorities having the right to receive data from information system in accordance with the laws of the RK;
- rendering paid electronic services to users of electronic information systems;
- publishing information on the web portal of information systems;
- other functions in accordance with the laws of RK.
The Resolution came into force retroactively on 22 July 2016.
New Tax Reporting Forms
On 21 June 2016, the Minister of Finance of the RK signed the Decree No. 324 "On Amendments to the Order of the Minister of Finance of the Republic of Kazakhstan No. 587 "On Approval of Tax Reporting Forms and Rules for Drafting Thereof" dated 25 December 2014".
The Order introduces amendments to tax reporting forms and rules for filling out of the following forms No. 200.00, 220.00, 400.00, 421.00, 590.00, 700.00, 701.00, 701.01., as well as to rules for filling out forms No. 100.00, 150.00, 230.00, 300.00, 910.00, 920.00.
Tax reports submitted prior to the effective date of the Order would be deemed submitted to the tax authorities.
The Order came into force on 13 August 2016.
On 27 July 2016, the Prime Minister of the RK signed the Government Resolution No. 443 introducing amendments to taxation rules in relation to mineral tax.
- Low-Profit Deposits
Unjustified increase for more than 10% of production costs for purchase of imported goods due to Kazakh Tenge depreciation as against foreign currencies, and of costs for acquisition of goods manufactured in the RK due to rise of the annual inflation rate per ton of mineral raw materials, mineral, metal, compared with the previous calendar year must not serve as a ground for refusal of classifying the deposit as a low-profit deposit.
- Taxable Income Determination
For the purposes of determining taxable income the amount of deductions for the current tax period must not exceed the amount of deductions for the prior tax period, save for events when such increase of deductions resulted from purchase of imported goods due toKazakh Tenge depreciation as against foreign currencies and from acquisition of goods manufactured in the RK due to rise of the annual inflation rate.
The Order came into force on 10 August 2016.
Declarations on oil products turnover
On 27 June 2016, the Minister of Finance of the RK signed the Decree № 340 "On Introduction of Amendments into Decree of the Minister of Finance of the Republic of Kazakhstan № 119 "On Approval of Forms and Rules for Filing and Completing Oil Products Turnover Declarations" dated 24 February 2015".
The Order introduces the following changes:
- For the purposes of presenting oil products turnover declaration individuals must act as individual entrepreneurs;
- New forms of oil products turnover declarations were approved.
The Decree came into force on 20 August 2016.
Calculation of normative standards and volumes for associated and natural gas flaring
On 27 June 2016, the Minister of Energy of the RK signed the Decree № 274 "On Introduction of Amendments into the Decree of the Minister of Energy of the Republic of Kazakhstan № 64 "On Approval of the Method of Calculating the Standards and Volumes of Flaring and (or) Natural Gas during Oil Operations" dated 21 October 2014".
Decree removed the following operations from the list of oil operations:
- Commissioning of technological equipment;
- Exploitation of technological equipment;
- Technical maintenance and repair works of technological equipment.
The Decree came into force on 19 August 2016.
Judicial system and status of judges
In August 2016, Mazhilis of the Parliament of the RK introduced a draft Constitutional Law of the RK "On Introduction of Amendments to the Constitutional Law of the Republic of Kazakhstan "On Judicial System and Status of Judges of the Republic of Kazakhstan".
The Draft law proposes the following changes:
- to set out rules for transfer of judges to another court without competition for quality improvement of the judiciary;
- to extend the list of grounds for dismissal of a judge in case of his/her refusal to be transferred to another court and specialization;
- to stipulate that the decision of Judicial qualification commission on recommendation to transfer the judge to another court or to another specialization is non-binding;
- to exclude the provision on year-end professional re-assessment of a judge in case the judge receives a negative appraisal. In this case, the Judicial qualification commission would be entitled to make decision on recognizing a judge as unfit for the position due to professional incompetence.
Currency regulation and control
In June 2016, the National Bank of the RK introduced Draft Law on Currency Regulation and Control abolishing the Law of the RK № 57-III "On Currency Regulation and Control" dated 13 June 2005.
The Draft Law is aimed at improving the legal framework for regulation of relations arising in the sphere of currency regulation and control and addresses the following:
- Revision of definition of "resident" due to accession of the RK to the WTO;
- All major cross-border payments to be subject to statistical monitoring;
- Implementation of effective regulation and control system of activities related to foreign currency exchange cash operations.
The Draft Law revises definition of "resident" for branches and representative offices of foreign legal entities of the RK.
Implementation of effective regulation and control system of activities related to foreign currency exchange cash operations stipulates reinforcement of requirements to non-bank entities engaged in the organization of foreign currency exchange cash operations, in terms of their activities and institutions close to the banking.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.