Kazakhstan drafts new rates for oil tax

energy

Kazakhstan drafts new rates for oil tax

By SRI ⋅ September 4, 2008 ⋅

(SRI) - According to a draft law, Kazakhstan has proposed to set mineral extraction tax rates for oil producers at 5-18 percent of crude’s market value in 2009, with higher rates applied to larger producers, Reuters reported on Wednesday.

This is part of an anticipated new tax code that aims to shift much of the current tax burden onto the oil and mining sectors through a new mineral extraction levy. At the same time, the government plans to lower the corporate tax rates for companies operating in non-extractive sectors. It has proposed to cut the corporate income tax, currently at 30 percent, to 20 percent in 2009, 17.5 percent in 2010 and 15 percent from 2011.

Accrording to Reuters, the government has also drafted a law which provides for gradual change of different tax rates, including the mineral extraction tax, in 2009 and 2010, before rates set by the tax code itself take effect in 2011.

The tax will be calculated based on benchmark crude oil grades such as Urals and Brent, the draft says, Reuters reported. The proposed rates for 2009 are at 5 to 18 percent of the commodity market value depending on a company’s annual output and for 2010 one percentage point higher at 6 to 19 percent.

The same draft sets the mineral extraction tax for metals and mining products regardless of output. The tax rate for copper is 8.7 percent in 2009 and 9.8 percent in 2010. The rates for zinc are 8.0 percent and 9.0 percent. The government suggests taxing chrome ore at 16.2 percent and then 16.8 percent and iron ore — at 2.5 percent and 2.8 percent.

Major oil extraction projects operating under production sharing agreements (PSA’s) like the Tengiz or Kashagan projects will be exempt from the new tax law, as their tax structure is stipulated separately in their PSA’s.

While the new tax regime will make operating in Kazakhstan less profitable than in recent past, most analyst agree that the proposed tax measures will below those already in place in Russia.