Azernews.Az

By Aynur Jafarova

Kazakhstan's government plans to exempt subsoil users from value added tax (VAT) on exploration operations.

"The government wants to introduce such a system that would...facilitate the financial issues related to exploration within the scope of fiscal policy," Deputy Minister of Industry and New Technologies Nurlan Sauranbayev said during a forum on Wednesday.

Sauranbayev said these are issues such as the exemption from VAT and the possibility of subsoil users engaged in four or five projects to transfer their costs from one project to another and to show the total cost of their business on their balance sheets.

Sauranbayev noted that the social responsibility of subsoil users will come into force only after they find some reserves.

According to the deputy minister, the sectoral development program for 2015-2019 will be developed this year.

"The mineral complex sectoral development program for 2015-2019 will be developed this year. Whereas last year we adopted a development concept, this year we will prepare a sectoral program which will clearly describe what we will do and where we will allocate state funds in the next five years," he said.

Sauranbayev said that this year the Ministry of Industry and New Technologies intends to introduce 180 amendments to improve the legislative framework in the subsoil sector. In particular, the ministry offers to grant subsoil users a back payment of 15-20 percent of the amount of the declared extraction volume.

In March, Sauranbayev said that Kazakhstan will consider amendments to the law on subsoil use in April, a measure that he believes should facilitate the activity of subsoil users.

Sauranbayev said the changes to the current law were initiated because the initial version of the document had been drafted with little emphasis on the oil and gas industry.

"Naturally, our oil industry is the engine of the economy," Sauranbayev said. "There was such a situation that it was necessary to go through the same procedure as to obtain a contract for oil field development to get a contract for gravel and sand. The existing provisions of the law are correct for the oil industry, but they are inappropriate for solid minerals."

Sauranbayev added that after lifting the ban on solid minerals the first tenders on issuing licenses for subsoil use will be conducted late this year.

The key objectives of the amendments include increasing the investment attractiveness of the country's geology sector and facilitating the activity of subsoil users.

In November 2012, Kazakh President Nursultan Nazarbayev instructed the northern regions' representatives to intensify the efforts on attracting investors in the mineral resource sector and stressed the necessity of the government's taking certain measures to raise the regions' interest in attracting investment and lift the moratorium on some types of mineral resources.

The ban on the issuance of licenses for subsoil use was introduced in 2008 when the government began developing new tax legislation, which envisages cancellation of production sharing agreement as a type of contract.