On taxes and other obligatory payments to the budget (Tax Code)

Article 740. Tax base

The tax base for calculating the mineral extraction tax is the value of the volume of hydrocarbons produced for a taxable period.
Article 741. The order for determining the value of hydrocarbons

1. For the purposes of calculating the mineral extraction tax, the value of oil produced in a taxable period is determined as follows:

1) in case of sale by a subsoil user to an oil refinery located in the territory of the Republic of Kazakhstan or to a third party for subsequent sale to an oil refinery located in the territory of the Republic of Kazakhstan - as the product of the actual volume of oil sold by a subsoil user to an oil refinery located in the territory of the Republic of Kazakhstan or to a third party for subsequent sale to an oil refinery located in the territory of the Republic of Kazakhstan, and the actual purchase price of an oil refinery located in the territory of the Republic of Kazakhstan, per unit of output;

2) in case of transfer by a subsoil user as customer-supplied raw materials for processing to an oil refinery located in the territory of the Republic of Kazakhstan or sale to a third party for subsequent transfer as customer-supplied raw materials for processing to an oil refinery located in the territory of the Republic of Kazakhstan and (or) use by a subsoil user for their own production needs - as the product of the actual volume of oil transferred by a subsoil user as customer-supplied raw materials for processing to an oil refinery located in the territory of the Republic of Kazakhstan or sold to a third party for subsequent transfer as customer-supplied raw materials to an oil refinery located in the territory of the Republic of Kazakhstan and (or) used by the subsoil user for its own production needs and the production cost, including treatment, of a unit of output determined in accordance with international financial reporting standards and requirements of legislation of the Republic of Kazakhstan on accounting and financial reporting, increased by 20 percent;

3) in case of in-kind transfer of mineral resources by a subsoil user to pay the mineral extraction tax, the export rent tax, royalties and share of the Republic of Kazakhstan within production sharing to the recipient on behalf of the state - as the product of the actual amount of oil transferred by a subsoil user in kind to pay the mineral extraction tax, the export rent tax, royalties and share of the Republic of Kazakhstan within production sharing to the recipient on behalf of the state in accordance with Chapter 88 of this Code and transfer price established in the manner determined by the Government of the Republic of Kazakhstan.

2. The cost of commercial hydrocarbons produced by a subsoil user under each subsoil use contract for a tax period shall be determined as the product of the volume of commercial hydrocarbons produced and the world price per unit of production, calculated for the tax period in the manner specified in paragraphs 3 and 4 of this Article.

3. The world price of oil is defined as the product of the arithmetic mean value of daily price quotations for a taxable period and the arithmetic average market exchange rate for a relevant taxable period using the formula below.

For the purposes of this paragraph, a price quotation means a price quotation for oil in a foreign currency for each separate standard grade of oil of Urals Med or Brent Dtd in a taxable period on the basis of information published in the “Platts Crude Oil Marketwire” source of The Mcgraw-Hill Companies Inc.

In case of no information on prices of these standard grades of crude oil in this source, the prices for these standard crude oil grades are used:

according to the “Argus Crude” source of the Argus Media Ltd;

in case of no information on prices for these standard grades of crude oil in the above sources - according to other sources determined by the legislation of the Republic of Kazakhstan on transfer pricing.

To determine the world price of oil, the units of measurement are converted from a barrel to a metric ton with account of actual density and temperature of extracted oil, adjusted to standard measurement conditions and indicated in the oil quality certificate, in accordance with the national standard approved by the authorized agency for standardization.

In this case, for the purposes of calculating the mineral extraction tax, the units of measurement are converted from a metric ton to a barrel on the basis of the weighted average ton-to-barrel conversion factor using the following formula:

К w.av.barr. = (V ton 1 x K barr.1 + V ton 2 ... x K barr.2... + V ton n x K barr.n)/V ton S, where:

К w.av.barr. - weighted average ton-to-barrel conversion factor, calculated to within four decimal places;

V ton - the volumes of each produced oil batch;

К barr.1, K barr.2... + K barr.n – ton-to-barrel conversion factors specified in the quality certificate for each relevant batch of produced oil;

V ton S - total volume of oil produced within a taxable period, expressed in metric tons.

The world price of oil is determined using the following formula:










where:

S - world oil price for a taxable period;

P1, P2..., Pn - daily arithmetic average price quotation on the days, for which price quotations were published within a taxable period;

E - arithmetic average market exchange rate for a relevant taxable period;

n - the number of days in a taxable period, for which price quotations were published.

The daily average arithmetic price quotation is determined using the formula:










where:

Pn - daily arithmetic average price quotation;

Сn1 - the lowest value (min) of the daily price quotation of the standard grade of crude oil Urals Med or Brent Dtd;

Сn2 - the highest value (max) of the daily price quotation of the standard grade Urals Med or Brent Dtd.

A subsoil user classifies a certain standard grade of oil Urals Med or Brent Dtd on the basis of oil supply contracts. If a standard oil grade is not specified in a supply contract or indicated oil grade does not belong to the above standard grades, a subsoil user is obliged to classify the volume of oil delivered under such a contract as that belonging to such oil grade, the average world price for which was the maximum one within a taxable period.

4. The world price of crude gas is defined as the product of the arithmetic mean value of the daily price quotations in foreign currency for a taxable period with account of conversion of international units of measurement into cubic meter in accordance with the approved factor and the arithmetic average market exchange rate for a relevant taxable period using the formula below.

For the purposes of this paragraph, a price quotation means the price quotation of Zeebrugge Day-Ahead natural gas in foreign currency in a taxable period on the basis of information published in the “Platts European Gas Daily” source of The Mcgraw-Hill Companies Inc.

In case of no information on the price of Zeebrugge Day-Ahead natural gas, this source uses the price of Zeebrugge Day-Ahead natural gas:

1) according to the “Argus European Natural Gas” source of the Argus Media Ltd;

2) in case of no information on the price of Zeebrugge Day-Ahead natural gas in the above sources - according to other sources determined by the legislation of the Republic of Kazakhstan on transfer pricing.

The world price of crude gas is determined using the following formula:










where:

S - world price of crude gas for a taxable period;

P1, P2..., Pn - daily arithmetic average price quotation on the days, for which price quotations were published within a taxable period;

E - arithmetic average market exchange rate for a relevant taxable period;

n - the number of days in a taxable period, for which price quotations were published.

The daily average arithmetic price quotation is determined using the formula:










where:

Pn - daily arithmetic average price quotation;

Сn1 - the lowest value (min) of the daily price quotation of Zeebrugge Day-Ahead natural gas;

Сn2 - the highest value (max) of the daily price quotation of Zeebrugge Day-Ahead natural gas.

5. For the purposes of calculating the mineral extraction tax, the value of crude gas sold by a subsoil user on the domestic market of the Republic of Kazakhstan and (or) used for its own production needs, of associated gas used for the production of liquefied petroleum gas, and also crude gas used by a subsoil user that is an entity carrying out industrial and innovative activity, is determined as follows:

1) in case of sale by a subsoil user of extracted crude gas on the domestic market of the Republic of Kazakhstan – on the basis of the weighted average selling price established for a taxable period determined in accordance with paragraph 7 of Article 745 of this Code;

2) in case of use of extracted associated gas for the production of liquefied petroleum gas in accordance with the conditions specified in subparagraph 6) of paragraph 2 of Article 739 of this Code, and (or) use of extracted crude gas for own production needs - as the product of the actual volume:

of associated gas, used for the production of liquefied petroleum gas, and the production cost of extraction, including treatment, of a unit of output determined in accordance with international financial reporting standards and requirements of the legislation of the Republic of Kazakhstan on accounting and financial reporting, increased by 20 percent;

of crude gas used by a subsoil user for own production needs, and the production cost of extraction, including treatment, of a unit of output determined in accordance with international financial reporting standards and the requirements of the legislation of the Republic of Kazakhstan on accounting and financial reporting, increased by 20 percent.

If the extraction of crude gas is associated with that of oil, the production cost of extraction of crude gas is determined on the basis of the production cost of extraction, including treatment, of oil in the following ratio:

one thousand cubic meters of crude gas corresponds to 0.857 tons of oil;

3) in case of use of extracted crude gas by a subsoil user that is an entity carrying out industrial and innovation activity in accordance with the conditions specified in subparagraph 7) of paragraph 2 of Article 739 of this Code - as the product of the actual volume of crude gas, used by a subsoil user that is an entity carrying out industrial and innovation activity, and the production cost of extraction, including treatment, of a unit of output determined in accordance with international financial reporting standards and requirements of the legislation of the Republic of Kazakhstan on accounting and financial reporting, increased by 20 percent.

6. The world price of standard grades of hydrocarbons is determined for each taxable period by the authorized body in the manner prescribed by this Code and shall be published in mass media on or before the 10^th day of a month following a reporting taxable period.

Footnote. Article 741 as amended by Law of the Republic of Kazakhstan № 184-VI as of 05.10.2018 (takes effect ten calendar days after its first official publication); dated 10.12.2020 No. 382-VI (shall come into effect from 01.01.2021).