Legislation
New tax code – What Should Subsoil Users Expect?
Yelena Manayenko, Partner
Kristina Mychka, Associate
Dinmukhamet Nurakhmet, Junior Associate
AEQUITAS Law Firm
AEQUITAS is one of Kazakhstan’s leading law firms acknowledged in the global legal services market.
AEQUITAS’s clients are companies active in the leading sectors of economy from more than 50 countries, including major international corporations, companies representing world famous brands, banks and financial institutions, most of them working with AEQUITAS for years.
AEQUITAS lawyers have been actively participating in the development and improvement of the most important legislative acts governing market relations and business activities in Kazakhstan, which allows the firm not only to keep abreast of potential amendments in legislation, but also to influence, to a certain extent, the making of the rules of the game.
For many years, authoritative legal guides, including Chambers & Partners, Lexology (ex. Who’s Who Legal), Legal 500, are rating AEQUITAS and its partners and associates as the country’s most recommended.
On 18 July 2025, the President of the Republic of Kazakhstan signed the new Code of the Republic of Kazakhstan on Taxes and Other Mandatory Payments to the Budget (the "Tax Code"), marking the beginning of a far-reaching reform in the taxation sphere.
Starting 1 January 2026, the Tax Code will enter into force, introducing the updated approaches to the corporate income tax (the "CIT"), value-added tax (the "VAT"), and procedure for calculating advance payments. Certain norms will be gradually introduced in 2026–2027, which reflects the law-maker's intention to ensure smooth transition to the new rules.
The Tax Code represents the transition to a more predictable and balanced taxation model. Significant reduction of the scope of tax reporting and the number of effective taxes creates relevant prerequisites for lower administrative burden on business and optimization of interaction with the state. At the same time, the amendments secure transition to the service model of the tax authority's work where the focus is kept not on sanctions, but on advisory support and partnership with taxpayers.
Below are the key amendments to the Tax Code affecting the activities of subsoil users, as well as general amendments affecting all economy sectors, including the sphere of production and processing of raw hydrocarbons.
1. Changes in the Hydrocarbon Sector Taxation
As part of reform of the tax legislation, the law-maker re-considered the key provisions regulating taxation of the subsoil users' activities. Such changes are intended to unify the tax regime in the oil and gas industry and create conditions to stimulate the development and support the production at the producing and depleting fields.
The key amendments include as follows:
- Starting 1 January 2027, exemption from the necessity to pay the export rental tax on crude oil and oil products will cover not only subsoil users applying the alternative tax, but will also apply to the payers of the mineral production tax on hydrocarbons1.
The current Tax Code provides for a similar exemption only for the payers of the alternative tax on subsoil use2. Introduction of a similar exemption for the payers of the mineral production tax is intended to reduce differences between the tax regimes within the oil and gas sector and form more equal taxation conditions.
- Furthermore, the new Tax Code provides for a possibility to apply the alternative subsoil use tax with respect to depleting oil and gas fields, with the degree of depletion of more than 70% and water cut of more than 85%3. This tax is paid instead of the mineral production tax, payment for reimbursement of historical costs, excess profit tax, and export rental tax.
The current version of the Tax Code limits the right to apply the alternative tax by contracts entered into with respect to projects in the Kazakhstan sector of the Caspian Sea or a field with deep occurrence depth4. The new version of the Code expands this list, includes depleting fields, and secures inalterability of the right to apply the alternative tax within the entire effective period of a relevant contract.
The purpose of introducing this norm is to support major fields, which have already passed the peak production stage (including Uzen, Kumkol, Kenkiyak, etc.), which require significant investments to preserve the production volumes and workplaces.
- The new Tax Code also provides for the right to treat as deductible the costs incurred in connection with formation of a pledge over a bank deposit intended for ensuring remediation of subsoil use consequences in the sphere of hydrocarbons5. The contributions to form such pledge are recognized as deductible when calculating the corporate income tax, similar to the current procedure established for the liquidation fund. In case of returning the amount of pledge, it must be included in the total annual income of a taxpayer.
- In addition, to stimulate capital-intensive projects in the oil and gas industry, the new Tax Code secures a special tax regime for subsoil users implementing complex projects involving exploration and production of hydrocarbons.
Relevant provisions are set out in the new Chapter 83 of the Tax Code providing for special taxation rules for both complex onshore oil and gas projects.
For the subsoil users that entered into contracts for complex projects (except for onshore gas projects), the amendments provide for increased deductions relating to costs in connection with geological exploration and wear and tear, as well as for a special procedure for property accounting and revenue recognition6. This allows for more accurate accounting of costs incurred at early stages of a field development and reduces the effective tax burden during the period of active investments.
As regards complex onshore gas projects, the amendments provide for complete exemption from the CIT payment for the entire effective period of a relevant contract7. Such exemption is combined with special tax accounting rules, including recognition of expenses and wear and tear, which makes implementation of such projects more economically attractive and predictable.
Securing of these norms reflects a strategic course on support of complex projects with a long-term investment cycle and high level of geological and technical risks.