Changes in fiscal payments for environmental pollution

CHANGES IN FISCAL PAYMENTS FOR ENVIRONMENTAL POLLUTION

New amendments in Kazakhstan environmental regulations

New Kazakhstan Environment Protection Code will have binding legal force from 1 July 2021¹. In comparison with old Kazakhstan Environment Protection Code, new code has completely different approaches on environmental protection and new incentive measures for reducing harmful emissions (further – emissions).

Such new approaches will have impact on fiscal payments for environment pollution. Some payments have been increased, but at the same time, there will be incentive measures for using tax exemptions.

Tax rate increase for fiscal payment

According to amendments in Kazakhstan Tax Code,² from 2022 up to 2037 year tax rate for emissions will be increased each third year and there will be gradual increase.

For example, for lead emissions tax rate will be 1.75 million tenge in 2022, and by 2037 the same fiscal payment will be 28 million tenge. In general, the increase will be 16 times.

Tax exemption for fiscal payments

Although the fiscal payments for emissions have been increased, the Kazakhstan Tax Code will allow companies to use tax exemption from 2022 year. Such exemptions were provided in order to reduce harmful impacts on the environment.

Companies are entitled to use tax exemptions under certain conditions. They should have environmental permit and a phased program of decrease the harmful impact.

Additional fiscal payments, Tax authorities’ disputes

Tax authorities are entitled to charge additional fiscal payments for any incompliance with environmental regulations. For instance, any breaches in a program for emissions reduction will cause additional taxes and penalties.

Our lawyers forecasting there will be many disputes in the future related to environmental protection and tax regulations. In order to avoid such disputes it will be important to consider tax regulations together with environmental protection regulations.

Today many companies are planning to reduce emissions or planning to increase budget for fiscal payments.

Incentives measures in law regulations push companies to decrease emissions and pollution. Once a company has such internal plan or program for reducing emissions, why not to approve such plan with State environmental protection authorities in order to gain tax exemptions?

Mr. Nurzhan Stamkulov and Mr. Ali Dautalinov prepared this legal alert.

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¹Environmental Code of the Republic of Kazakhstan dated January 2, 2021 No400-VI

²Law of the Republic of Kazakhstan dated January 2, 2021 No. 402-VI "On Amendments and Additions to the Code of the Republic of Kazakhstan "On Taxes and Other Obligatory Payments to the Budget" (Tax Code) and the Law of the Republic of Kazakhstan "On the Introduction of the Code of the Republic of Kazakhstan "On taxes and other obligatory payments to the budget" (Tax Code)" on environmental issues"