Expertise
Interest on science: reset or a hidden tax? Kazakhstan has changed the mechanism for subsoil users to finance R&
Kazakhstan has changed the mechanism for subsoil users to finance R&D
As of February 23, 2026, Kazakhstan has introduced a new model for financing research and development (R&D) at the expense of subsoil users. From now on, extractive companies must transfer the mandatory 1% of their annual hydrocarbon and uranium production costs directly to the republican budget under a separate budget classification code, 401103.
Formally, the change is framed as “centralization” and alignment with the Budget Code. In practice, it dismantles the previous decentralized model under which companies could independently select contractors and research priorities. The question is whether the new system will be more effective for everyone: science, subsoil users, and the budget. Or whether the 1% will ultimately turn into an additional quasi tax.
What the expert community proposed
A separate state fund is established to accumulate mandatory R&D contributions. The fund is managed by a council (board of directors) that includes representatives of the supervising agencies at the vice-minister level, national companies, large and mid-sized subsoil users, research institutions, and civil society.
The council selects research priorities using the following criteria:
- it must address an industry-wide issue or the most common and urgent problem;
- no more than 3 to 4 priorities, to avoid spreading the money too thin;
- the list of priorities should not be revised annually, because any serious research takes more than one year.
Research results become available to all subsoil users who financed the research using 100% of their mandatory contributions, with no resale rights.
Tax deductions of 200% to 300% are retained only for those who transferred 100% to the fund.
The goal is to concentrate funds and deliver real research and inventions, for example, in coal chemistry, the development of eco-reagents for mineral beneficiation, solutions to arsenic problems, new geological maps, and other areas.
Those who do not contribute to the fund, or contribute only partially, receive nothing: no deductions and no access to results. There is no such thing as being “a little bit pregnant”. The money should stop being spread thin and carved up to enrich unclear beneficiaries in the research sphere, and instead be directed to the real needs of the country’s industries.
However, the best R&D solution is to abolish the requirement entirely. Business should run business, not carry science that it does not always need. The state should support science from taxes paid by companies.
A Norwegian idea on Kazakhstani soil
R&D obligations in Kazakhstan were established in 2012 by the Law "On Subsoil and Subsoil Use." The ideological rationale was Norway's experience: to stimulate the development of a national oilfield services sector and a domestic scientific base by requiring investors to put money into research and technology localization.
In Norway, similar mechanisms were paired with tax incentives: spend a dollar on R&D and receive a double tax deduction. Over several decades, the country built a powerful oilfield services cluster and grew technology companies of global scale.
In Kazakhstan, implementation followed a different path.
Initially, the obligation was set at 1% of total annual revenue, which drew well-grounded criticism: companies holding multiple contracts had to pay regardless of project stage, including exploration, which could end unsuccessfully. The rule was later adjusted: the 1% was calculated from actual annual production costs.
A carrot was added to the stick: the Tax Code introduced a preference, a reduction of taxable income by 50% of the amount of R&D expenses. However, the deduction mechanism proved bureaucratically complex and, by market participants’ assessments, was rarely used.
The core problem was the lack of a clear conceptual framework. Early on, companies classified routine production activities as R&D, including seismic surveys, laboratory testing, and core analysis. The boundary between scientific research and engineering proved blurred.
Later, the list of eligible areas was refined in line with the 2013 Roadmap for the scientific and technological development of the extractive sector, developed with Shell's participation. Competitive procedures were introduced, a scientific and technical council was established under the Ministry of Energy, and subsoil users were required to publish tender information.