Kazakhstan's New Tax Code: First Results of the Reform, Seen by Business and Government

B2B: the right objective, too broad an instrument

The sharpest topic of the session was the restriction on deductions for transactions with entities applying special tax regimes.

Participants agreed that the state was addressing a genuine problem — the artificial fragmentation of businesses to reduce the tax burden. The chosen mechanism, however, proved too broad: it caught companies that had never engaged in aggressive tax planning.

Business proposes making the regulation targeted. Instead of restrictions affecting a wide range of entrepreneurs, the state should make fuller use of tax administration tools: electronic invoice (ESF) data and risk-based controls. The new rules have hit small and micro businesses particularly hard — these companies have historically worked with individual customers and corporate clients in parallel.

VAT: is the tax still neutral for business?

The rate increase to 16%, VAT refunds for exporters and sector-specific treatment took up a substantial part of the session.

Exporters are the key storyline. Timely VAT refunds directly affect their working capital, and a higher rate automatically increases the amounts subject to refund from the budget. The higher the rate, the more critical the refund mechanism becomes.

Agriculture offers a telling example. The restriction on VAT refunds for grain exports has become a significant burden for the sector; the issue has been raised repeatedly with government authorities, and a return to the more favourable refund mechanism is now under consideration.

Healthcare: a tax the patient ends up paying

The taxation of medical services, pharmaceuticals and the pharma industry was discussed separately. Applying different VAT rates to different transactions within a single sector complicates administration and creates an additional burden on manufacturers and suppliers.

The point on medical services themselves was made most forcefully: "VAT on services, when you have no input VAT to offset, is essentially a direct tax."

The consequences extend beyond business. Rising service costs mean some patients will move from private healthcare into the public sector. A single reduced rate for the sector, and preserving the VAT exemption for certain medical services, were discussed as possible solutions.

A "perfect storm" for finance functions

Almost every participant raised tax administration and the performance of state information systems. Business has a common complaint: certain new requirements were introduced faster than the digital infrastructure was ready to support them in full operation.

The position is straightforward — major changes to administration should be fully tested before they become mandatory. A company should not carry additional risk because government systems are not technically ready.

One speaker described the current situation for CFOs as a "perfect storm": implementing a new Tax Code, operating with expensive financing, and adapting to the rapid advance of artificial intelligence, all at once.

The fiscal effect is real. Next comes broadening the tax base

From the government's side, one of the new Code's key objectives was to reduce the budget deficit and dependence on transfers from the National Fund. On that count, early results are viewed positively.

But participants stressed that revenue growth should not become the ultimate goal of tax policy. The more durable long-term effect comes from industrial development, a greater number of operating enterprises, job creation and inflows of investment — that is, from broadening the tax base itself. Raising rates and tightening controls deliver a largely immediate fiscal effect; new, sustainable enterprises deliver revenue for years.

For investors, predictability matters more than the rate

On headline rates, Kazakhstan can still look competitive against many jurisdictions. For an investor, however, the decisive factor is more often not the size of the rate but the stability of the legislation and the predictability of how it is applied. As one large-business representative framed it: "When the rules of the game are clear, you can invest. When the rules change, investing becomes difficult."

Participants also examined how clearly the law regulates investment incentives, AIFC regimes and the new special economic models — and how these interact with international tax rules.

Pillar Two featured here as well: for multinational groups, an incentive granted in Kazakhstan does not always translate into real savings, because the corresponding tax may arise in another jurisdiction. The conclusion is that Kazakhstan must not only grant preferences but ensure they actually work within the modern international tax system.

Social commitments and the limits of the tax burden

Kazakhstan remains a social state, and a significant share of budget expenditure is tied to the social sphere. At the same time, there are limits to how far the tax burden can rise. Participants noted that the burden should not fall disproportionately on small and micro businesses.

In participants' view, the state's task is not limited to redistributing revenue already collected. What is needed are conditions in which companies have an incentive to grow from small to medium, and from medium to large: clear tax rules, infrastructure, access to financing, and no incentive to fragment artificially.

Access to financing

The banking sector's capacity to finance new projects formed a separate theme. With a high base rate and the risks involved, banks are reluctant to enter greenfield projects and manufacturing built from scratch. Participants noted that lending volumes for new projects remain well below the needs of the economy.

In these conditions, state development institutions — including Baiterek holding — continue to play a substantial role. But the task is not to substitute private banks with state financing; it is to develop the sector systematically: protecting creditors' rights, improving collateral mechanisms and increasing competition.

What business is asking for: an ongoing dialogue

In closing, participants highlighted the work of the project office, where business representatives discuss the practical problems of the new Code directly with government authorities, and proposed opening that format further to the professional and entrepreneurial community: "Within the permanent framework of tax relations, we need this kind of feedback loop with business, with society, with citizens."

What this means for companies right now

Tax reform is a living process: some of the identified imbalances will still be adjusted, and the full picture will not emerge before 2027. But business cannot wait for that moment — decisions are made under the rules that apply today. Points worth attention now:

• Review your procurement and counterparty structure in light of the new restrictions on transactions with entities under special tax regimes, and assess what share of your deductions is now at risk.
• Test your readiness for VAT refunds: at a 16% rate, the cost of an error in documentation or export confirmation has risen in proportion to the refundable amounts.
• Do not treat an incentive as a given if the group has a foreign footprint: the benefit must be calculated together with the Pillar Two consequences in other jurisdictions.
• Document failures of state information systems: technical unreadiness of the infrastructure should not become the company's tax risk, but you will need evidence to make that case.
• Prepare your position on ambiguous provisions in advance — where wording permits two readings, the practice of the Ministry of Finance Appeals Commission and emerging court practice are your reference points.

The Fortune Partners team advises companies across the full range of tax matters: application of the new Tax Code, VAT refunds from the budget, transfer pricing, international taxation and the application of tax treaties, support during tax audits, pre-trial and court appeals, and business structuring.

If you would like to assess how these changes affect your company specifically, get in touch and we will review your situation in detail.