A 15-Year Tax Game: How Kazakhstan's New Tax Code Tests Investor Confidence
Based on a presentation at Kazakhstan Legal Forum 2026
A major investment project in Kazakhstan resembles a chess game with a 15-year horizon. The investor makes the opening move using the Tax Code as a roadmap. But such a game can only be won on one condition: the rules must not change mid-play. We follow the path of a capital-intensive project through the new tax landscape, from the financial model to the courtroom.
Serving as a Supreme Court judge and leading a law firm have much in common. In both roles, you assess the quality and predictability of the rules of the game. That experience makes it possible to view tax reform through the eyes of someone deciding on a long-term investment.
Consider a typical scenario. An international or major domestic investor is prepared to commit hundreds of millions of dollars to a complex project: exploration, extraction and deep processing of raw materials. For that investor, the Tax Code is a set of mutual obligations between the state and business spanning decades.
The Opening: Rules Set on the First Move
At the outset, a financial model is built on the legislation in force. The investor:
- assesses the baseline tax burden;
- factors in mechanisms for recovering capital expenditure on exploration;
- models the effective rate on profit distributions, taking double tax treaties into account.
This is how legitimate expectations are formed, a concept well established in international and tax law. When those expectations are met, a jurisdiction earns a reputation as a safe harbor for capital.
The Middlegame: When the Moves Change
In the middle of the game, four key pressure points emerge. They are especially sensitive for subsoil users and exporters.
1. Differentiated MET rates. Flexible or increased mineral extraction tax rates tied to the degree of processing or to global prices are logical in themselves. The key question is their scope. If such rates are applied to mature, highly watered-out or hard-to-recover fields without regard to their actual production costs, extraction profitability drops to zero. MET differentiation should encourage deep processing and exploration, not become purely a tool for revenue extraction.
2. Restricted dividend exemptions. Tightening the conditions for exempting dividends from withholding tax, including through beneficial ownership requirements, directly changes investment returns. When the rules for repatriating net profit are revised for projects already underway, the original financial model breaks down.
3. Recovery of historical costs. Geological exploration costs are written off over many years. If enforcement practice later begins to revisit the composition of these expenses or how they are recognized, the investor has good reason to question the stability of contractual terms.
4. Transfer pricing compliance. Following transfer pricing reforms, export contracts are under close scrutiny. Tax authorities must rely on actual market conditions, taking into account logistics discounts, the comparability of raw material quality and the commercial terms of transactions, rather than applying formal averaged price ranges.
The Endgame: Who Acts as Arbiter
Legal certainty is tested not in statutory texts but during tax audits and in courtrooms. Three principles are decisive here.
Ambiguity resolved in favor of the taxpayer. Where provisions of the Tax Code are complex or open to more than one reading, a fundamental principle must work flawlessly: all irremovable doubts and contradictions are interpreted in favor of the taxpayer.
Well-founded recharacterization of transactions. Any conclusion by state revenue authorities that a commercial transaction has a different economic substance must rest on a comprehensive body of evidence, not on subjective judgment.
Consistent case law. This is the main institution protecting the investment climate. Courts must remain independent, objective and impartial arbiters, balancing the interests of the budget against the rights of investors. When business sees courts strictly following both the letter and the spirit of the law, it receives the most important signal: investments in Kazakhstan are protected by law.
A Draw That Satisfies Both Sides
In a long game, the only sustainable outcome is win-win. The state gains stable tax revenue and new jobs; business gains a clear return on invested capital.
For the new Tax Code to deliver that outcome, three conditions are essential:
- Stability and predictability. Key tax terms for investment projects are preserved for their entire payback period.
- Economically sound oversight. The real economics of fields are considered when calculating MET, conducting transfer pricing audits and deducting historical costs.
- Partnership-based arbitration. Tax administration shifts from a punitive model to a service-oriented one, and case law becomes consistent.
If your project is affected by changes to MET, dividend taxation or transfer pricing, the Fortune Partners tax team can help assess the risks and build your position. [ +7 (707) 793-12-10 ]
