April 2020 – This brief note relates to various
governmental actions to support businesses in Kazakhstan due to
Covid-19 situation. Our note is intended to be a helpful guide
– it is not comprehensive and does not constitute legal
Concessional lending to SMEs
On 19 March 2020, the Programme of concessional lending to small and medium-sized entrepreneurship entities (the "Programme") was approved in accordance with Resolution No. 39 of the Management Board of the National Bank of the Republic of Kazakhstan (the “NBK”).
The NBK will provide up to 600 billion tenge (approximately $1.37 billion) to finance banks to support small and medium-sized entrepreneurship entities (the "SMEs"). According to the Programme, the conditions for granting loans and/or new financing within the framework of credit lines by banks to SMEs are as follows:
- interest rate - up to 8% (eight per cent) per annum;
- term - up to 12 (twelve) months.
The following SMEs are not eligible for financing:
- having overdue loans in excess of 90 (ninety) calendar days as of 16 March 2020;
- being persons connected with second-tier banks by special relationships;
- being non-residents of the Republic of Kazakhstan;
- whose founders (including participants, shareholders) are state-owned enterprises (institutions), national management holdings, national holdings, national companies and organisations, fifty or more per cent of shares (participating interests in the authorised capital) of which are directly owned by the state, persons affiliated with them as well as SMEs whose form of ownership is registered as a private institution, and non-profit organisations.
Temporary tax breaks
On 20 March 2020, measures related to tax policy were approved in accordance with Resolution No. 126 of the Government of the Republic of Kazakhstan, namely:
1.For a period until and including 31 December 2020, a "0" correction coefficient is introduced in respect of the rates of:
(a) property tax on legal entities and individual entrepreneurs in respect of large trading facilities, shopping and entertainment centres, cinemas, theatres, exhibitions, and fitness and sports facilities;
(b) land tax on agricultural lands of agricultural producers;
(c) individual income tax of individual entrepreneurs.
2.For taxpayers referred to in (a) and (b) of item 1, the accrual of default interest on all overdue tax liabilities was suspended until 15 August 2020, and the deadlines for submitting tax statements have been postponed to Q3 2020.
Further, on 27 March 2020, measures were taken to stabilise the economy regarding tax policy in accordance with Resolution No. 141 of the Government of the Republic of Kazakhstan, specifically:
- For a period until 1 October 2020, setting the VAT rate at 8% for turnover in the sale and import of goods included in the list of socially significant food products, approved by Resolution No. 145 of the Government of the Republic of Kazakhstan, dated 1 March 2010;
- For a period until 31 December 2020, the exemption from excise taxes of producers of excisable goods in the Republic of Kazakhstan for petrol (excluding aviation petrol), diesel fuel sold for export;
- For 2020, setting a "0" coefficient for property tax rates for legal entities and individual entrepreneurs on taxable items used in carrying out entrepreneurial activities in the field of tourism, public catering and hotel services,
- For taxpayers classified as micro, small or medium-sized entrepreneurship entities in accordance with the Entrepreneurial Code Republic of Kazakhstan, the following is provided:
(a) deferral of payment of all taxes and other obligatory payments to the budget, as well as social payments until 1 June 2020;
(b) suspension of measures to enforce overdue tax liabilities and enforce recovery of tax and customs arrears, as well as social payments arrears (except for taxpayers with a high degree of risk as determined under the Tax Code) until 1 June 2020;
(c) extension of deadlines for complying with a notice under Article 114.2.10 of the Code of the Republic of Kazakhstan "On taxes and other obligatory payments to the budget", dated 25 December 2017, where such deadlines fall during the period of the state of emergency (from 15 March 2020 to 15 April 2020), with the exception of taxpayers with a high degree of risk;
(d) suspension of inspections carried out by state revenue authorities for the period of the state of emergency, and the period of such suspension is not to be included in the inspection timing.
Non-accrual of interest and penalty on loans
On 22 March 2020, measures were approved to support the population and entrepreneurship entities during the state of emergency (the "State of Emergency") in accordance with Resolution No. 17 of the Management Board of the Agency of the Republic of Kazakhstan on the Regulation and Development of the Financial Market.
For the period of the State of Emergency, banks, organisations engaged in certain types of banking operations, organisations engaged in microfinance activities (the "Banks and Organisations"):
1. do not accrue interest under bank loan and/or microcredit agreements of individuals where the delay in payment of principal and/or interest exceeds 90 (ninety) calendar days;
This measure does not apply to bank loan and/or microcredit agreements if, on the date of its conclusion, the amount of the principal debt was fully secured by a pledge of property subject to registration and/or a pledge of money;
2.do not accrue fines and default interest for late payments on the principal debt and/or interest under bank loan and/or microcredit agreements for:
(b) legal entities whose financial position deteriorated as a result of the introduction of the State of Emergency.
3. provide a deferral of payments under bank loan and/or microcredit agreements, including payments on the principal debt and/or interest, for up to 90 (ninety) calendar days for the following persons:
(a) individual entrepreneurs;
(b) SMEs, whose financial position deteriorated as a result of the State of Emergency.
4. analyse the financial position of individual borrowers and make decisions on additional support conditions, including in the form of deferral of payments under bank loan and/or microcredit agreements, including payments on principal and/or interest, for individuals who have lost their jobs or other sources of income, as well as who are experiencing other financial difficulties.
This measure extends to bank loan and/or microcredit agreements concluded before 18 March 2020.
The Banks and Organisations apply the measures referred to in items 1 and 2 to individuals unilaterally without the need for an application from the borrower.
In order to apply the measures specified in items 2 and 3 in relation to legal entities and individual entrepreneurs, as well as item 4, the Banks and Organisations apply measures on a case by case basis upon a written application of the borrower.
The application is to be submitted by the borrower to the Bank or the Organisation, by way of, inter alia, an e-mail, an online bank-client system, an Internet resource, a mobile application, or other means of communication.
As may be necessary, the Banks and Organisations may request documents confirming the deterioration of the financial position of the borrower as a result of the introduction of the State of Emergency. The results of the consideration of the application are to be reported in the manner and within the timing established by the internal documents of the Banks and Organisations.
Procedure for suspension of payments of principal and interest on loans
On 26 March 2020, the Procedure for suspension of payments of principal and interest on loans of the population, SMEs affected by the State of Emergency (the "Procedure") was approved in accordance with Order No. 167 of the Chairman of the Agency of the Republic of Kazakhstan on the Regulation and Development of the Financial Market.
The Procedure extends to all bank loans and microcredits granted before 16 March 2020 by second-tier banks, organisations engaged in certain types of banking operations, organisations engaged in microfinance activities, pawnshops, online lending companies, credit partnerships, and legal entities that previously were the above organisations (a "Credit Organisation").
Therefore, for a period from 16 March to 15 June 2020, a Credit Organisation suspends payments on principal and interest under bank loan and/or microcredit agreements (hereinafter a "Suspension of Payments") for the following persons and under the following conditions:
List of persons entitled to the Suspension of Payments
Documents and terms of the Suspension of Payments
With the consent of the borrower for the following categories:
• socially vulnerable segments of the population in accordance with Article 68 of the Law of the Republic of Kazakhstan "On Housing Relations";
• recipients of state targeted social assistance in accordance with the Law of the Republic of Kazakhstan "On state targeted social assistance";
• unemployed registered with the local employment authority in accordance with the Law of the Republic of Kazakhstan "On employment".
Neither an application and supporting documents nor the signing of additional agreements to bank loan and/or microcredit agreements, are required.
Credit bureaus send lists of these individuals to Credit Organisations. The respective Credit Organisation notifies the borrower of the Suspension of Payments by any available means.
Whose financial position deteriorated for the following reasons:
• temporary disability due to the introduction of quarantine;stay on unpaid leave;
• dismissal, termination of the employment agreement and termination of other labour relations;• reduction or suspension of payment of wages or other income;
• in case the employee cannot be present at the workplace due to restrictions on entry (exit) into the area where the state of emergency and/or quarantine is in effect;other reasons testifying to the deterioration in financial position.
An application of the borrower (drawn up in any form) is required. The application must contain the reason for the Suspension of Payments and be submitted to the Credit Organisation at any time from 16 March to 15 June 2020.
In this case, the borrower does not need to provide documents confirming the deterioration of the financial position.
The application is to be considered within 10 (ten) business days. A decision to refuse to suspend payments is made if the Credit Organisation has information that there is no deterioration in the borrower's financial position.
SMEs, individual entrepreneurs
Carrying out activities in the following economic sectors:
• trade sector, including tenants of shopping and entertainment centres, consumer goods stores, good supply chains, with the exception of grocery stores, pharmacies and related supplies;
• sports, tourism and hotel business, including tour operators and travel agents;
• passenger and freight transport sector, with the exception of food and medicine;
• catering sector, including restaurants and cafes;personal services sector, organisation of leisure and recreation, including theatres, cinemas, photo and video shooting, exhibitions and conferences, organisation of celebrations, beauty salons and fitness centres.
Whose financial position deteriorated, subject to a confirmation of a decrease in the volume of goods and/or services sold, delay, suspension, postponement (suspension) of payments from buyers, reduction in the number of employees or for other objective reasons during the period while the State of Emergency is in effect.
An application by the borrower submitted to the Credit Organisation at any time from 16 March to 15 June 2020 is required. In addition, documents confirming the deterioration of financial position are required.
The Suspension of Payments is carried out by providing a deferral of the repayment of the principal debt and interest without signing additional agreements to bank loan and/or microcredit agreements, pledge agreements and is not a basis for deteriorating the borrower's credit history and giving negative information about the borrower to credit bureaus.
For the period of the Suspension of Payments, the Credit Organisation terminates any claim activities in respect of such borrower and notification of the borrower of the need to repay the overdue debt.
We note that in accordance with Letter No. 2-010355-20-21127 of the Deputy Prosecutor General of the Republic of Kazakhstan, dated 31 March 2020, amendments may be made to the Procedure for the following purposes:
- the possibility of suspending the enforcement of judicial acts for the recovery of loans pending before court enforcement officers;
- tithe compulsion of banks, microcredit and other organisations to withdraw or suspend (upon an application) any enforcement proceedings aimed at recovering loans from citizens specified in the Procedure.