USD/KZT 447.89 
EUR/KZT 476.78 
Comments on the Investment Bill
Banu Babayeva, Vice President of the Kazakhstan Investment Promotion Center KAZINVEST
Article 1, Paragraph 2
«This law shall not govern investments from the state budget and investments in non-commercial organisations, including educational, charity and religious.»
According to the Acts of the Republic Kazakhstan On the Budget System and On Public Debts and State-Guaranteed Loans and Debts, and the Public Investment Programme for 2000-2002, public investments may be made not only from the state budget, but also from government foreign loans and grants and non-government loans guaranteed by the Republic of Kazakhstan. Therefore, Article 1 of the Bill should be supplemented with relevant provisions.
Limiting investors’ right to invest in non-commercial organisations, including educational, charity, scientific and religious, is deemed inadequate, since Article 3 of the Bill secures the right to «invest in any organisation or activity.»
We propose that Paragraph 2 of Article 1 be stated as follows:
«This Act does not govern investments from government funds and loans or grants received by the government, as well as state-guaranteed loans of the Republic of Kazakhstan.»
Article 2, Paragraph 1
«Investments are all kinds of material or intellectual property, including rights thereto, being made in the authorised capital stock of a commercial legal entity, or to the formation or expansion of fixed assets used for business purposes, in the form of subjects of the civil law owned by the investor, provided that no limitation is imposed on the circulation of such subjects of the civil law in the Republic of Kazakhstan by any laws, including money, securities or other property (save goods intended to be sold unprocessed or for personal consumption), property rights and rights to the results of intellectual work.»
The Civil Code of the Republic of Kazakhstan states that «the norms of civil law shall be interpreted in accordance with the literal sense of their wording.» Accordingly, the term «investments» as defined in the Bill allows for different interpretations of other terms, and contradicts the definitions contained in the Civil Code.
It is not clear what is meant by «material and intellectual property, subjects of civil law.» In civil law, these have flat definitions, and property and property rights are declared to include «goods, money including foreign currency, securities, works, services, materialised results of creative intellectual activity, brand names, trademarks and other means of product identification, property rights and other property.» Thus, «intellectual property» or, termed otherwise, subjects of intellectual property law, are included in the definition of material property and property rights, i.e. property.
In line with the Civil Code, subjects of civil law embrace property and non-property personal values and rights. The latter include life, health, dignity, good name, business goodwill, privacy, personal and family secrets, the right to name, the right to authorship, the right to the sanctity of production, and other intangible values and rights. Therefore we believe that personal non-property rights as subjects of civil law may not be subjects of investment.
The Civil Code (Article 34) provides no definition of a «commercial legal entity.» Therefore, the term «commercial organisation» as a type of legal entity appears more appropriate. The same applies to Article 2, Paragraph 2.
Investments should be allowed to maintain the entire capital, not just the «formation and expansion of fixed assets,» as the latter might come as a result of their reappraisal. In parallel, rehabilitation (modernisation, re-equipment) of fixed assets might imply no growth, despite real investment. In a situation where an investor has to choose whether to invest in authorised capital stock or fixed assets (which is far from being the same), he will be forced to prefer authorised capital stock or its ongoing expansion. For the self-employed, forming a legal entity or expanding fixed assets will become an obligatory requirement, even though this would not be economic for them. Otherwise such legal entity or individual will not be treated as an investor.
The words «personal consumption» should be removed, because this applies only to the personnel employed by a legal entity or an individual.
Based on the above, we propose the following wording to define «investments»: «investments are all kinds of property rights and values being dedicated to the subjects of business activities in the Republic of Kazakhstan, except sales of goods without processing.»
Article 2, Paragraph 4
«foreign investors are subjects involved in investment activity in the Republic of Kazakhstan: foreign citizens entitled to make investments in the territory of a foreign state; stateless persons whose legal capacity and capability is pursuant to the laws of the country of their permanent residence and who are entitled by these laws to make investments in the Republic of Kazakhstan; citizens of the Republic of Kazakhstan residing permanently outside the Republic of Kazakhstan; foreign legal entities and international organisations; foreign states in accordance with international treaties signed by the Republic of Kazakhstan; legal entities of the Republic of Kazakhstan, whose decisions in respect of themselves can be determined by foreign investors.»
We believe that legal entities of the Republic of Kazakhstan should not be classed as foreign investors, even in cases where foreign investors are entitled to determine decisions in respect of these entities.
Article 2, Paragraph 8
«investment activity is an activity by legal entities or individuals (the self employed) associated with holding a stake in authorised capital stock of a commercial legal entity, or formation or expanding fixed assets used for business.»
The interpretation of «investment activity» appears incorrect, because this is thought to be an activity by investors, which might be foreign states or international organisations, apart from individuals and legal entities. This clause not only confines the investor’s choice, but runs counter Article 3 of the Bill, which stipulates that «investors have the right to invest in any subjects or kinds of activity.»
We propose to state the above definition as follows: «investment activity is an activity associated with investments in the Republic of Kazakhstan.»
Article 10, Paragraph 1
«Any forms of foreign investments and associated activities which are not prohibited by the current laws of the Republic of Kazakhstan shall be carried out under conditions which are equally favourable as those applicable to investments by individuals or legal entities of the Republic of Kazakhstan or any other foreign individuals or legal entities, save the exceptions stipulated by laws of the Republic of Kazakhstan.»
According to the definitions provided in the Bill, its Article 10, Paragraph 1 needs to be amended, namely, the words «foreign investments and associated activities» should be changed to «investments by a foreign investor,» and words «individuals or legal entities» to «investments by a domestic investor.»
We propose the following wording for this Paragraph: «Any investments which are not prohibited by the current laws of the Republic of Kazakhstan shall be made under conditions which are equally favourable as those applicable to investments by domestic investors.»
Article 15, Paragraph 2
«For each priority activity, the Government of the Republic of Kazakhstan shall approve the maximum investment and periods of tax preferences to be granted by an authorised state body.»
Article 15, Paragraph 3
«In the event of exceeding the maximum investment volume, the periods of tax preferences shall be determined by the Government of the Republic of Kazakhstan.»
The state should encourage and support any amount of investments entering Kazakhstan’s economy. Any limits in respect of the minimum or, moreover, maximum investment are not deemed advisable. The need to have a governmental resolution regarding any investment project exceeding the limits will complicate and make longer the procedure of granting preferences, representing an unnecessary bureaucratic impediment.
Article 18, Paragraph 1
«State grants in kind shall be handed over, as per the procedure set forth by this Act, by the Government of the Republic of Kazakhstan or an authorised state body based on agreement with the authorities for state property and land management, for ownership or under the land use right, in accordance with laws of the Republic of Kazakhstan.»
We propose to change the words «under the land use right» to «under the right of ownership or use.»
Article 23, Paragraph 6
«The date of investment shall be the earliest of the date of first payment in respect of the investment project implementation, or the date of documenting as investment the transfer of property rights or rights to the results of intellectual work. If several of the conditions stated in this Paragraph are present, the date of investments in the Republic of Kazakhstan shall be the date of meeting the first of the above conditions.»
Associating the date of investment with the date of the first payment might incorrectly reflect the actual starting date, since the first payment might be effected much earlier or later than the start-up of the investment project. This applies to the cases where authorised capital stock might be formed of assets owned by the founder, or equipment for the investment project is supplied under a leasing arrangement, i.e. with a delay of payment. We propose the date of investment to be the date when the ownership right to property to be used under the investment project arises.

Table of contents
· 2016 №1  №2  №3  №4  №5
· 2015 №1  №2  №3  №4  №5  №6
· 2014 №1  №2  №3  №4  №5  №6
· 2013 №1  №2  №3  №4  №5  №6
· 2012 №1  №2  №3  №4  №5  №6
· 2011 №1  №2  №3  №4  №5  №6
· 2010 №1  №2  №3  №4  №5/6
· 2009 №1  №2  №3  №4  №5  №6
· 2008 №1  №2  №3  №4  №5/6
· 2007 №1  №2  №3  №4
· 2006 №1  №2  №3  №4
· 2005 №1  №2  №3  №4
· 2004 №1  №2  №3  №4
· 2003 №1  №2  №3  №4
· 2002 №1  №2  №3  №4
· 2001 №1/2  №3/4  №5/6
· 2000 №1  №2  №3

Rambler's Top100

  WMC     Baurzhan   Oil_Gas_ITE   Mediasystem