1. KAZAKHSTAN: NEW INVESTMENT CLIMATE Yerbolat Yerkebulanov GRATA Law Firm Almaty, 15 September 2014

2. Background Kazakh Law on Investments dated 8 January 2003 was significantly amended as of 24 June 2014 (Provisions on tax preferences and investment subsidy to enter into force on 1 January 2015); The concept of "investment priority project" ("Project") was introduced; Substantial preferences (similar to those applicable to participants of Special Economic Zones) are provided for investors that signed an investment contract for a Project : (i) for not less than approx. USD 20 million; (ii) for one of the activity spheres for Projects, as set out in the list approved by the Kazakh Government (the “Activities List") (see further).

3. The List can be reconsidered not more than once per year. The following areas cannot be included in the List: (i) gambling business; (ii) activities in subsoil use sphere; (iii) manufacturing of excisable goods (except for motor transportation vehicles with volume of engine being more than 3,000 cubic cm, not including microbuses, buses and trolleybuses) The Activities List

4. The presumable* Activities List (1/2) 1) ferrous metallurgy; 2) non-ferrous metallurgy; 3) oil refining; 4) petrochemical industry; 5) food production; 6) agro chemistry; * 1. The final version of the List with subactivities will be approved in October. 2. The list corresponds to the State Program of Industrial Innovative Development of Kazakhstan for 2015-2019 (the Presidential Decree dated 1 August2014 No. 874)

5. The presumable Activities List (2/2) 7) production of chemicals for industry sector; 8) manufacture of motor vehicles, their parts, accessories and engines; 9) production of electrical machinery and electrical equipment; 10) production of agricultural machinery; 11) manufacture of railway technics; 12) production of machines and equipment for the mining industry; 13) production of machinery and equipment for oil refining and oil industry; 14) production of construction materials. * Pharmaceuticals may be added

6. Preferences (1/4) 1) exemption from the corporate income tax (20%) for up to 10 years; 2) exemption from the land tax for up to 10 years; 3) exemption from the property tax for up to 8 years from the date of fixed assets commissioning (e.g. plant); 4) reimbursement of up to 30 percent of actual expenses on construction works and purchase of equipment* ("Investment subsidy") after full commissioning of such object on the basis of documentary evidence. * Excluding VAT (12%) and excise duties; not more than the cost of the expenses set out in the approved pre-design documentation

7. 5) the exemption from the need to obtain work permits* for foreign employees of the company holding the investment contract, its contractors and subcontractors in the field of research and design activities, engineering services and construction works. Such exemption shall be valid until the expiration of 1 year from the date of commissioning. The list of professions and the number of staff members involved is set out by the investment contract; Preferences (2/4)

8. 6) stability with regard to: (i) the above tax preferences and (ii) “work permits-free” regime; 7) Interaction with the Investments Committee of the Ministry for Innovation and Development under the principle of "one window". An investor shall only submit an application with the relevant documents to the Investments Committee and, if satisfied, negotiate further regarding the terms of the investment contract; Preferences (3/4)

9. 8) simplified procedure for obtaining land plots for the Project; 9) Investment Committee’s assistance with regard to obtaining a guaranteed order(s) from the national state- owned companies (might be annexed to the contract); 10) (this preference existed earlier and remains valid) exemption from the customs fees for the import of technological equipment and spare parts, for the period of the investment contract, but not more than 5 years. Preferences (4/4)

10. Entry criteria (1/3) 1. Status of a "newly established Kazakh legal entity" An investment contract under a Project can be concluded only with the legal entity, which has the status of a "newly established Kazakh legal entity” (either LLP or JSC), i.e.: 1) its state registration was performed within one year before the application for investment preferences was submitted; 2) it carries out the activities set out in the Activities List; 3) the implementation of the Project is performed only within the framework of a single investment contract.

11. 2. The newly established Kazakh legal entity shall invest more than 2 million monthly calculation indexes (approx. USD 20 million). 3. Such legal entity shall not : (i) carry out activities on the territory of special economic zones; (ii) be a company owned directly or indirectly by a state or quasistate companies; or (iii) be an autonomous educational institution. Entry criteria (2/3)

12. 4. No state budget funds shall be attracted as a source or guarantee of financing of the Project; 5. Investment activity shall not be performed under the concession agreement; 6. The Kazakh Government Decree on granting an investment subsidy shall be available (it is applicable only if the investor wishes to receive an investment subsidy). Entry criteria (3/3)

13. Conditions under the Kazakh Tax Code To enjoy tax preferences, the entity- holder of the investment contract under the Project shall receive not less than 90 percent of the aggregate annual income from carrying out the activity relating to the execution of the Project. If tax legislation is amended and rates and fees are increasing, then the holder of the investment contract under a Project shall apply the rates of taxes and fees (except VAT and excise taxes), that were applicable on the day when the investment contract was concluded.

14. Investment Ombudsman Obligations: 1) consider applications of investors and issue recommendations for resolving them, including by means of interaction with the authorities; 2) assist investors in the resolution of disputable issues in out-of-court and pre-trial orders; and 3) elaborate and file to the Government recommendations for improving Kazakh legislation.. He is appointed by the Government and has to assist in the protection of rights and lawful interests of investors.

15. * If the application for investment preferences provides the granting of investment subsidies, a Kazakh legal entity in addition to the documents referred to in Article 19 (Requirements for application for investment preferences) of the Investment Law shall also submit the pre- design documentation approved by the state expert as set out by Kazakh laws How to apply (1/2)

16. According to current Rules on Receipt, Registration and Consideration of Application for Granting Investment Preferences, approved by Order of Minister of Industry and New Technologies dated 1 June 2012 No. 183, the Investments Committee considers an application with relevant documents within 20 business days. If it is approved, the Committee prepares a draft investment contract within 10 business days from the date of approval. Such contract is made in view of provisions of the typical investment agreement approved by the Government. The parties may negotiate more detailed content of the investment contracts. How to apply (2/2)

17. Any question? Yerbolat Yerkebulanov Counsel, GRATA Law Firm + 7 (727) 2445 777 + 7 (701) 7600 040 yyerkebulanov@gratanet.com www.gratanet.com