The new tax code set to be introduced in Kazakhstan next year will provide Eurasian Natural Resources Corporation (ENRC), one of the world's largest mining groups, with a one-off USD100m reduction in corporate tax.
Taking effect from January 1, 2009, the new tax code will work in two different ways. Firstly, it will begin by reducing the current 30% rate of corporate income tax by half to 15% by 2011, and secondly, it will introduce a new Mineral Extraction Tax.
This levy on mineral extraction is to be implemented on various levels, staggered to suit each type of material, and has been designed to create stability within the country's tax system by removing the current royalties scheme.
Duties for exporters of oil and gas are also set to be revised and replaced with an Export Rent Tax.
In a statement on the new tax code, ENRC explained that if all of the changes were to be incorporated in the 2008 tax charge, the impact would have been in line with the Group’s previous guidance of an additional 2% to 3% on its effective tax rate. However, the company went on to add that, as a one-off impact in 2008, with the implementation of the new tax code, ENRC will benefit from a release of deferred tax liabilities which will reduce the estimated effective 2008 corporate income tax charge by approximately USD100m.
ENRC went on to state that: "in an environment of lower commodity prices, the effective tax rate should remain broadly stable under the new tax code."
The company's Chief Financial Officer, Miguel Perry commented:
"We believe that the government of Kazakhstan’s willingness to engage with the industry in the development of the new tax code provides a good balance between the interests of large extraction companies and the government’s wider objectives.”
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