Analytics 09.08.2018 456

Nikolay Yefimchuk:
Customs formalities for implementation of investment projects in Kazakhstan

The ‘loyal’ policy pursued in the Republic of Kazakhstan in the area of ​​investment attractions and the possibility of using tax and customs preferences is of interest to a number of foreign and domestic companies in establishing production in their respective industries on the territory of the country. The state, in turn, provides support for the implementation of investment projects, setting up business according to the chosen investment model, and ensures the functioning of enterprises.

On the other hand, the state also exercises control over the activities of the investor and monitors the correct use of the chosen investment regime and the requirements of the legislation at all stages of the project.

One of the important areas of legislation that an investor must comply with when implementing an investment project is the customs law, which ensures the possibility of applying preferences for customs duties and taxes.
There are a number of preferential instruments, the use of which gives the investor the right to be exempt from the payment of customs duties and taxes on the goods imported by him for the implementation of the investment project and the production. This could be the application of customs procedures, such as the ‘Free Warehouse’ or the ‘Free Customs Zone’ (FCZ), the signing of an investment contract with the Investment Committee of the Ministry of Investments and Development of the Republic of Kazakhstan, the application of international agreements on the preferential import of goods, etc.

Each of the selected modes requires further work from the perspective of building proper customs logistics and applicable tools, the work on which must begin at the planning stage.

There are cases when companies, having not given serious attention to the issues of customs logistics and not worked through specific issues related to the application of customs privileges, had serious problems at the stage of project implementation or at its completion.

For example, one of the major construction companies, which was carrying our construction of infrastructure facilities of the Astana – Zhana Kala FEZ, did not properly prepare the documents on the completion of the customs procedure of FCZ after the completion of construction of one of the objects in 2012. In more than four years time, in 2017, the customs authority filed claims to the company on the completion of the customs procedure and charged them about fifty million tenge in customs duties, taxes and penalties, which the company had to pay to the state budget.

Another case occurred in 2016 with respect to the company, which was constructing facilities for the development of mineral deposits in the Mangystau region. When applying for preferential customs procedures, the company incorrectly carried out the operations to place components for production under the customs procedure. As a result, the customs authorities requested reimbursement for the amount of unpaid customs duties, taxes and penalties amounting more than two and a half billion tenge.

This year, the customs authorities issued a notification to one of the Astana production company following the audit and convicted them in the improper use of the customs procedure of the FCZ, as a result of which the amount owed to the state budget is about 1 billion tenge.

In this regard, the main focus in the implementation of investment projects falls on the alignment of customs logistics and a preliminary analysis of preferential instruments in the early stages of the import of goods. On the second level of importance, but also vital from the point of view of compliance with the law, is the provision of internal control over the observance and completion of customs formalities in the process of implementation of a given investment opportunity.

Considering that customs legislation is rather a complicated matter from the point of view of its perception, and the fact that it is regulated both at the Republic of Kazakhstan and the Eurasian Economic Union level, a clear understanding and appropriate expert assessment of its applicability is necessary in order to avoid negative implications to the parties involved.

Companies need to decide in advance on the method of transportation of goods and the relevant customs procedure, to work out the issues of licensing procedures and classification and to organize internal processes for the declaration of goods, etc.

This is not a complete list of issues, which, when considered at the initial stages of the project, will ensure the successful implementation.

If you are one of those who may be affected by the covered in this article customs aspects, we recommend that you properly approach the resolution of relevant issues at each stage of the project, which will ensure the ‘airbag’ both at the implementation stage and at its completion.