Monthly Legal Alert: January 2023

SIGNUM regularly provides Legislative/Regulatory Alerts to keep Clients informed about important laws and regulatory changes in the Republic of Kazakhstan (“RK”). This Alert covers recent developments introduced in January 2023 related to:

1.     Administrative liability for the restoration of solvency and bankruptcy of the RK citizens.

2.     New edition of the Water Code of the RK.

3.     New edition of the Law of the RK "On Heat Power".

4.     Amendments in tax laws.

5.     Marginal prices for gasoline and diesel.

1.     Administrative liability for the restoration of solvency and bankruptcy of the RK citizens

Following the introduction of the law on the restoration of solvency and bankruptcy of citizens9 covered by our Legal Alert at https://signumlaw.com/posts/obzor-zakonodatelstva-dekabr-2022-g, the Administrative Code of the RK introduced10 the liability of citizens related to the bankruptcy of individuals. Any concealment, alienation or destruction of property, information on property, including falsification of property documents, shall be now punished by an administrative fine in the amount of 100 monthly calculation indices11 (MCI).

Administrative liability of the financial manager for non-compliance with the laws on bankruptcy of individuals and failure to fulfill obligations, including failure to provide relevant information to governmental authorities, alienation of the debtor's property, unlawful satisfaction of the requirements of separate creditors shall be punished by a fine of up to 100 MCI.

2.     New edition of the Water Code of the RK

In February 2022, the President instructed to develop a new draft of the Water Code. We have reviewed the first draft12 of the Water Code of RK (January 2023) containing the following important points:

Ø  The priority of protection of water fund before use is fixed;

Ø  The rights and competences of governmental authorities in the field of water resources management have been revised. In particular, the establishment of the Water Council of Kazakhstan which is a consultative and advisory authority under the Government of the RK and is governed by the Prime Minister of the RK. The main role of the council is to develop recommendations and proposals in this industry.

Ø  A national information system for water resources has been established. This system is established in order to provide information support for the development and implementation of governmental policy, as well as information support for the activities of water users, individuals, legal entities and their associations.

Please note that the current Water Code of the RK was adopted in 2003.

3.     New edition of the Law of the RK "On Heat Power"

Given the problems in the field of heat power industry, the Government plans to adopt a new law “On Heat Power”. We have reviewed13 the third draft Law (January 2023) containing the following important points:

Ø  The technical standards in the field of heat power industry have been updated based on international practice.

Ø  The tariff system of enterprises has been improved. The criteria for assessing the quality of work of the subjects of the heat power is planned to be established assuming modern experience, as well as the establishment of a more flexible system of regulation of natural monopolies in the heat power industry in order to provide the subjects with incentives for development and fix the development criteria (indicator).

Ø  Emphasis has been placed on the use of renewable energy sources (RES) in the heat power industry. In particular, the use of RES equipment in the modernization, replacement or additional construction of the base capacity is planned to be prioritized. It is also expected to introduce governmental support measures for the use of renewable energy sources in heat power industry, including financing of governmental programs.

4.     Amendments in tax laws14

Tax administration pilot project

Individuals registered on the Internet platform as individual entrepreneurs and providing services to clients using the Internet platform can participate in this project subject to their consent granted by means of the Internet platform.

A potential participant goes through the online registration procedure on the Internet platform by biometric identification through Digital OD, provides consent to process his/her personal data and consent to participate in the project. The participant shall further be registered as an individual entrepreneur to  choose a special tax regime and to withhold mandatory and social payments (taxes).

Deregistration of VAT payers in the gambling business

According to the introduced amendments, the non-submission of tax reporting by the gambling business VAT payer is the ground for deregistration for VAT without notifying the taxpayer.

Damage suffered by large businesses during the emergency situation

Damage or loss of goods incurred during the period of the emergency situation by a large business entity are subject to deduction for the cost of goods accounted on the date of the emergency situation. There shall be a proof document for such damage/loss of goods and information on damage or loss shall be indicated in the tax register. In case of damage or loss of goods as a result of an emergency situation, a large business entity is also entitled not to reduce the previously recognized VAT.

Digital assets and digital mining

Ø  Sale of digital assets is now subject to a property income.

Ø  Citizens of the RK, candases and RK residents owning digital assets as of 31 December of the reporting tax period are required to file an individual income tax declaration.

Ø  A declaration on the digital mining fee for tax liabilities that arise from 1 January 2023 must be filed quarterly no later than the 15th day of the second month following the reporting quarter with the governmental revenue authority at a taxpayer location. The payment for digital mining must be no later than the 25th day of the second month following the reporting quarter. The declaration for 2022 is filed with the governmental revenue authority at a taxpayer location no later than 31 March of the year following the reporting year. The taxes must be paid before 10 April 2023.

5.     Marginal prices for gasoline and diesel

The marginal prices for petroleum products15 shall be as follows:

1)     AI-80 gasoline – KZT 89 per liter;

2)     AI-92 and AI-93 gasoline in Kostanay, North-Kazakhstan regions – KZT 187 per liter and KZT 182 per liter in the rest regions;

3)     diesel fuel (summer, off-season) – KZT 450 per liter;

At the same time in case of driver's license in the amount of up to 100 liters per day or a vehicle registration certificate for trucks, specialized vehicles and buses in the amount of up to 300 liters per day, the price shall be KZT 230 or 260 per liter depending on the region.

6. Amendments in the rules on activities by subjects of natural monopolies16

The consent on transactions with property used to provide a regulated service of access roads now can be obtained online via the electronic governmental portal www.egov.kz.

The service "Issuance of consent on transactions with property used to provide a regulated service of access roads" is processed within 10 business days. Please note that before the introduction of these amendments, the subject of natural monopoly should have applied to the office of the department of the governmental authority or its territorial authority at the place of its inclusion in the Register.

1. Law of the Republic of Kazakhstan No. 178-VII dated 30 December 2022 "On the Restoration of Solvency and Bankruptcy of Citizens of the Republic of Kazakhstan". Enters into force on 3 March 2023.
2. Law of the Republic of Kazakhstan No. 180-VII dated 30 December 2022 “On Amendments and Additions to the Code of the Republic of Kazakhstan on Administrative Offenses on Restoring Solvency and Bankruptcy of Citizens of the Republic of Kazakhstan”. Enters into force on 3 March 2023.
3. 1 MCI for 2023 – KZT 3,450 (approximately USD 7,5).
4. Dossier on the draft law "Water Code of the Republic of Kazakhstan" (January 2023).
5. Dossier on the Draft Law of the Republic of Kazakhstan “On Heat Power” (January 2023).
6. Letter of the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan No. KGD-07-1-15/175-I dated 9 January 2023 No. KGD-07-1-15/175-I.
7. Order of the Minister of Energy of the Republic of Kazakhstan No. 7 dated 11 January 2023 “On Amendments to the Order of the Minister of Energy of the Republic of Kazakhstan No. 361 dated 19 May 2015 "On Setting Marginal Prices for the Retail Sale of Petroleum Products for Which State Price Regulation is Established". Entered into force on 10 January 2023.
8. Order of the Minister of National Economy of the Republic of Kazakhstan No. 138 dated 28 December 2022 “On Amendments and Additions to the Order of the Minister of National Economy of the Republic of Kazakhstan No. 73 dated 13 August 2019 “On Approval of the Rules for the Implementation of Activities by Subjects of Natural Monopolies”. Entered into force on 16 January 2023.