The ABC of SEZs: Everything You Need to Know About Special Economic Zones

On 29 October 2018, a special economic zone called ‘TURKISTAN’ was set up pursuant to the Decree of the Government of the Republic of Kazakhstan. This zone will be active till the year 2043.

A special economic zone (or SEZ) refers to a part of the territory of the RK with precise and defined boundaries. Entities registered and operating in such zones enjoy a special legal regime which is applied for carrying out priority activities as defined under the Kazakhstan laws . In addition to the SEZ ‘TURKISTAN’, the following SEZs are currently active in Kazakhstan:

• SEZ ‘Astana - new city’
  

• SEZ ‘National Industrial Petrochemical Technopark’
  

• SEZ 'Seaport Aktau’
  

• SEZ ‘Park of innovative technologies’
  

• SEZ ‘Ontustik’
  

• SEZ 'Saryarka’
  

• SEZ 'Khorgos - Eastern Gate’
  

• SEZ ‘Khorgos International Center for Cross-Border Cooperation’
  

• SEZ 'Pavlodar’
  

• SEZ 'Chemical Park Taraz’
  

• SEZ 'Astana-Technopolis’
  

A SEZ is usually set up to solve certain strategic tasks of the state. SEZs provide foreign investors favorable conditions to conduct business, remove the administrative barriers and provide an opportunity to access the Kazakhstan market. The SEZ “TURKISTAN” seeks, among others, to increase the tourist potential of Turkestan city. The goal is to position it as the spiritual capital of the Turkic world and to develop a highly efficient and competitive tourist infrastructure which can attract both domestic and foreign tourists.

SEZs offer a special legal regime in terms of taxation, customs, land regulation, as well as employment regulation. At the same time, companies which operate in SEZs must submit various reports on their activities with the government authorities to confirm that they work towards their priority goals.

In order to become a member of a SEZ, one must have an appropriate financial security and must submit all relevant documents as specified in the SEZ Law to the management company of the SEZ. Once an application is approved, parties sign an agreement on the implementation of activities, the applicant is featured in a unified register as a recognized SEZ participant. Subsoil users, organizations producing excisable good, organizations already enjoying special tax regime, etc. are not eligible for applying to operate in the SEZs.

Taxation

The legislation of the RK as well as the Agreement on free economic zones provide certain tax benefits for participants of SEZ:

• Sales of goods are subject to zero-rate VAT
  

• Exemption from VAT payment when importing finished goods produced within the territory of a SEZ
  

There are also certain guidelines in determining the amount of CIT:

• For an organization carrying out its activities in the territory of a SEZ – the reduction of the amount of CIT is 100% on revenues that arise from implementation of priority activities
  

• For an individual entrepreneur – the reduction of PIT is 100%
  

Customs regulation

The terms and order of placing goods and equipment for customs clearance as in the free customs zone in the territory of the special economic zone must be set out by the customs regulation of the Republic of Kazakhstan

SEZ ‘TURKISTAN’ is considered as being excluded from the customs territory under the Customs Code of the Eurasian Economic Union (CC EAEU). In accordance with the CC EAEU , the territory of a SEZ is a customs control zone. The customs authorities must be notified when importing and exporting goods from SEZ’s

Abolition of a SEZ

A SEZ is established for a specific period. Once the term has expired, the SEZ is abolished. In case targets or tasks of the SEZ are not achieved, the government authorities may consider an early abolishment of such SEZ.

SEZs help in the overall economic development of a region. SEZs play an important role in attracting direct investments in non-raw material resources and innovative productions, as well as integration into the global trading system. Considering the high efficiency of the majority of special economic zones of Kazakhstan, in the long term their number and role in the development of the country will most likely increase.