Legislative News

204 normative legal acts were passed in December 2008, comprising of:

• Constitutional law of the Republic of Kazakhstan – 0;

• Laws of the Republic of Kazakhstan – 23;

• Decrees of the President of the Republic of Kazakhstan – 5;

• Regulation of the Government of the Republic of Kazakhstan – 88;

• Other normative legal acts – 88.

The majority of these legal acts regulate public and financial issues.

The two main legal acts passed in December were the new Budget and Tax Codes. In the following we provide a summary of those legal acts that we have deemed of greatest relevance.

  1. Code “On Taxes and Other Obligatory Payments to the Budget” (Tax code of RoK) dated 10.12.2008 № 99-IV;

A separate news bulletin on this important new Code, which has potentially far-ranging consequences, will be published.

The new Tax Code entered into force on January 1, 2009. Certain provisions of the new Code will only enter into force later.

The main points are as follows:

• Reorganization of the tax administration;

• VAT is reduced to 12%;

• CIT will be reduced gradually as follows: 20% (until 31st December 2009), 17.5% (until 31st December 2010), 15% (effective from 1st January 2011 onwards);

• Taxation of subsurface users has been changed significantly, and tax stabilization under subsurface use contracts has potentially been compromised;

• New taxation basis for joint activities and reorganization of legal entities.

  1. Budget code of the Republic of Kazakhstan dated 04.12.2008 №95-IV;

The new Budget Code entered into force on January 1, 2009, except certain provisions related to the republican budget for 2009, which will enter into the force later.

The following are the salient points of the new Budget Code:

• Implementation of a complex system of monitoring;

• Implementation of three-year budget planning;

• Regional budgets are allowed to be interrelated with budgets of cities of republican importance and capitals;

• Simplification of procedures for budget implementation.

  1. Law on amendments and addenda to the legislative acts of the Republic of Kazakhstan “On Issues Related to Activity of Independent Field Regulators” dated 29.12.2008 № 116-IV;

This Law sets out the requirements for activities of independent field regulators. In accordance with this Law administrative responsibility for holders of natural monopolies has been increased for the events of:

• Failure to present required information to authorized state bodies; and

• Increase of prices and realization of goods (works, services) in a regulated market without notifying the authorized state body.

  1. Government Decree of the Republic of Kazakhstan dated 24.12.2008 #1234 on amendments and addenda to the Government Decree of the Republic of Kazakhstan “On collection of customs duties on export from the customs territory of the Republic of Kazakhstan of crude oil and oil products” dated 15.10.2005 #1036;

Analyzing this Decree, we have come to a conclusion that it includes enough innovations, essential from which are presented below:

The export customs duty (ECD) on crude oil for payers of rental tax has been canceled. The rates of the ECDs on exported crude oil from the customs territory of RoK are not used:

  1. For crude oil produced by subsoil users working under production sharing agreements (contracts) entered into before January 1, 2009, subject to them having undergone obligatory tax expertise;
  2. For subsurface use contracts confirmed by the President of the Republic of Kazakhstan and which stipulate exemption from export customs payments for crude oil.
  3. Government Decree of the Republic of Kazakhstan dated 23.12.2000 #1230 “On amendments and addenda to the Government Decree of the Republic of Kazakhstan “On confirmation of standard charters of small, medium-sized and large business legal entities” dated 16.09.2008 #852;

According to this Decree the standard charters of JSCs and LLPs must stipulate the following:

• For LLPs, the audit committee or sole auditor of the partnership should be elected for a term not exceeding 5 years;

• For JSCs, the decision to voluntarily delist the shares of the company is now the exclusive jurisdiction of the General Meeting of the Participants of the company.

  1. Decree of the President of the Republic of Kazakhstan “On ratification of the Convention between the Republic of Kazakhstan and Japan on avoidance of double taxation and prevention of avoidance of taxation concerning income tax and Protocol to it” dated 25/12/2008 #714;

This convention was signed on December 19, 2008.

  1. Decree of the President of the Republic of Kazakhstan “Onreorganization of several regional and equivalent courts of the Republic of Kazakhstan” dated on 25.12.2008 №717;

Several regional and equivalent courts in Astana, Almaty and Almaty oblast have been reorganized. The following courts were added: Esilskiy regional court of Astana, regional court #2 of Esilskiy regional court of Astana, Alatauskiy regional court of Almaty and Karasayskiy specialized interdistrict administrative court of Almaty oblast. The name of the specialized interdistrict administrative court of Taldikorgan of Almaty oblast has been changed to Taldikorganskiy specialized interdistrict administrative court of Almaty oblast.

  1. Law “On competition” dated 25.12.2008 #112-IV;

This law now unites the Law “On competition and restriction of monopoly activity” dated 19.01.1998 and the law “On unfair competition” dated 09.06.1998, and contains the following novelties:

• A new definition of “extraterritoriality of the law”. In other words, the new law extends the applicability of the law to market participants where a restriction of competition in Kazakhstan arises out of agreements made outside the territory of Kazakhstan;

• The Anti-monopoly authority is no longer allowed to carry out inspections;

• Exemption of the subject of market from transfer of the monopoly income in the case of active repentance which means representing the voluntary information to the antimonopoly authority on participation in executed or prepared antimonopoly agreement (Clause 76).

APPOINTMENTS

The following important official appointments were made in December:

• Mr. Kairat Pershenovich Kozhamzarov has been appointed to the position of Chairman of the Agency of the Republic of Kazakhstan on Economic and Corruption-Related Crimes (Financial Police).

• Mr. Saribay Sultanovich Kalmurzayev has been appointed to the position of Head of the Department of Presidential Affairs of the Republic of Kazakhstan.

This Client Update contains a very general overview of new legislation that may be of consequence. We would be happy to provide you with more detailed information and our recommendations upon request.

Best regards,

Signum Law Firm

Information contained in this Client Update is of general nature and cannot be used as legal advice or recommendation. Please seek for a specific advice in relation to any questions. Please note that Kazakhstan and Turkmenistan are emerging economies and their legislation and legal systems are in constant development. Should you have any questions or would like to discuss subjects addressed in this Client Update please contact us.