In response to the coronavirus (COVID-19) pandemic and the resulting economic fallout, the government of Kazakhstan has introduced several emergency measures to stabilize the country’s economy and help businesses. This LawFlash discusses some of those measures, including tax incentives and extended grace periods for loans, among others.

Legal Basis

Due to the declaration of the COVID-19 pandemic by the World Health Organization, the president of the Republic of Kazakhstan, Kasym-Zhomart Tokayev, issued Decree No. 285 on 15 March 2020 (Decree No. 285) ordering a state of emergency in the entire territory of the Republic of Kazakhstan (RoK) from 16 March 2020 (8:00 am) to 15 April 2020 (7:00 am) (SE) to protect the life and health of citizens.

President Tokayev’s decree has also ordered the introduction of certain restrictive measures in the RoK (restriction on functioning of trade objects, quarantine, restriction on entry and exit from the RoK, etc.)[1] and establishment of the State Commission for Maintenance of the State of Emergency, which is the key authority that may revise and supplement the relevant restrictive measures during the SE period.

In accordance with the Law of the RoK on State of Emergency, the president may extend the SE period, or make a full or partial early cancellation if warranted by a change in the circumstances that led to the introduction of SE.

This is the first time in the modern history of RoK that such SE was ordered nationwide. Taking into consideration the social and economic consequences of the COVID-19 pandemic, in the framework of the declared SE, and in accordance with Article 44.16 of the Constitution of the RoK, the president issued the Decree on Measures for Maintenance of Social and Economic Stability No. 286, and the Decree on Further Measures for Stabilization of Economy No. 287 (both dated 16 March 2020, hereinafter Decree No. 286 and Decree No. 287, respectively). These acts became binding on the date of signing and are the basis for measures required to maintain social and economic stability and support business in a crisis situation.

This LawFlash discusses below the main measures for business support and stabilization of economy. These measures are not limited to the SE period and apply during the period specified in the legal acts that introduced such measures.

Economic Stimulus Package

Grace Period for Repayment of Loans by Socially Vulnerable Population & SMBs

Under Decree No. 286, Agency of the RoK for Regulation and Development of Financial Market approved the procedure for suspension of payment of principal amount and interest on loans granted to the population, including small and medium-sized businesses ( SMBs) affected by the SE.[2] Suspension of payments is in effect from 16 March until 15 June 2020 and is applicable to bank credits and microcredits obtained before 16 March 2020 by individuals belonging to vulnerable social groups (as defined by law), unemployed, recipients of targeted social assistance and other categories of people whose financial position worsened as the result of the SE (employees with reduced income, temporarily disabled, etc.). SMBs including individual entrepreneurs operating in such sectors of economy as trade, tourism, public catering, and transportation services (with some exceptions) and/or whose financial position worsened are eligible to suspension of such payments subject to confirmation of reduction in volume of goods and/or services provided, delay, suspension, postponement of terms of payments from buyers, reduction of staff, or any other objective reasons during the SE period.

Other requirements and conditions for granting of the aforesaid grace period are set out in the Resolution of the Board of Agency of for Regulation and Development of Financial Market No. 17 on 22 March 2020.[3]

Tax Incentives

Under Decree No. 287, the government of RoK^[4] adopted the following tax stimulus measures:

• For the period up to and inclusive 1 October 2020, establish 8% VAT rate applicable to sale and import of goods included in the list of food staples,[5] approved by Government Decree No 145 dated 1 March 2010
• For the period up to and inclusive 31 December 2020, exempt producers of excisable goods from excise tax in RoK on exported gasoline (except for aviation gasoline) and diesel fuel
• For 2020, establish zero adjustment factor applicable to rates of property tax of legal entities and individual entrepreneurs on taxable items used for business in tourism, public catering, and hospitality sectors
• For taxpayers falling under micro and SMB categories according to the Entrepreneurial Code of the RoK, grant a grace period for payment of all taxes and other obligatory payments to the budget, including social payments until 1 June 2020; suspend (except for high-risk taxpayers) measures on enforcement of outstanding tax liability and enforcement of tax and customs debts, including social payment arrears, until 1 June 2020.
• For the period up to and inclusive 31 December 2020, introduce zero adjustment factor to rates of property taxes of legal entities and individual entrepreneurs on large trade objects, malls, cinemas, theaters, exhibitions, health-and-fitness and sport facilities; as well as to land tax on agricultural lands of agricultural producers and individual income tax of individual entrepreneurs working under the general taxation regime.[6]

Preferential Lending for SMBs

For the purpose of Decrees No. 285 and 286, on 19 March the National Bank has approved the Program of Preferential Lending for Small and Medium-Sized Businesses (the Program). The total amount of financing by the National Bank to second-tier banks with the to support small and medium-sized businesses will be KZT 600 billion per the limits of second-tier banks set out in the annex to the Program.

The operator of the Program will be Kazakhstan Sustainability Fund Joint Stock Company (KSF), which will open a conditional deposit in second-tier banks. The purpose of the KSF’s deposit in a second-tier bank will be to advance new loans and provide new financing under the lines of credit extended to SMBs affected by the SE, for financing of their working capitals, with maturities not exceeding 12 months. The requirements to participation by second-tier banks in the Program are set out in the Resolution of the National Bank Board, No. 39 dated 19 March 2020.[7]

Customs Tariff and Nontariff Regulatory Measures

According to the press release of the Ministry of Finance of the RoK[8] the “green corridor” is established for food products imported into the RoK, while all customs barriers, checks, and value controls are removed. At the same time, starting from 22 March 2020 the RoK banned[9] export of certain food products (e.g., buckwheat, flour, sugar, potatoes, carrots), and the State Revenue Committee of the RoK strengthened customs export control, including via blocking export of the abovementioned products through IS ASTANA-1. Similar measures were adopted by competent EAEU bodies.[10]

Along with tax stimulus measures (see above), in accordance with the Order No.64-HK[11] of the RoK Minister of Trade and Integration, export customs duties for exporters of certain oil products are to be calculated at zero rate until 1 January 2021.

Special Simplified Procedure for State Procurement

State procurement through simplified procedure is carried out in crisis situations in the following cases:

• purchase of goods, works, and services, including goods of the state logistics reserve as determined by the State Procurement Interdepartmental Commission established under the ordinance of the RoK Prime Minister; and
• purchase of goods, works, and services from potential vendors determined by the Interdepartmental Commission, including under budget-funded investment projects.

In the above cases procurement is carried out by request for quotes or from a single source, per the Special Procedure.[12]

Restrictions on Currency Exchange Operations for Legal Entities

By Resolution[13]No.25 passed by the National Bank Board on 19 March 2020 (Resolution No. 25), the National Bank altered the procedure for buying and selling of noncash foreign currency by resident legal entities at domestic foreign currency market. Resolution No. 25 establishes unified approach to determination of thresholds to register the foreign trade deals and to presentation of confirmation documents, in case of buying noncash foreign currency for the amount equal to or exceeding an equivalent of US $50,000. Resolution No. 25 also introduces changes into the procedure of buying noncash foreign currency by legal entities at domestic foreign currency market, according to which all purchased foreign currency must be used for the stated purposes within 10 business days, and if unused, it must be sold back.

Further Amendments to Legislation

By Decree No. 286 the RoK president has ordered the government, within one month, to submit to the Parliament a draft law amending legislative acts in order to facilitate implementation of Decree No. 286. Moreover, President Tokayev announced in his 31 March statement further anti-crisis measures that would also require amendments to the current law of RoK.

CORONAVIRUS COVID-19 TASK FORCE

For our clients, we have formed a multidisciplinary Coronavirus COVID-19 Task Force to help guide you through the broad scope of legal issues brought on by this public health challenge. We also have launched a resource page to help keep you on top of developments as they unfold.