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

Article 260. Deduction of expenses for preparatory works for uranium mining using ISL method after commencement of extraction after commercial discovery

1. Costs of (expenses for) acquisition and (or) creation of depreciable assets actually incurred by a subsoil user in the preparation of processing facilities (well fields) for the extraction of uranium using ISL method in the period after commencement of extraction after commercial discovery form a separate group of depreciable assets under a relevant subsoil use contract.

The depreciable assets indicated in this paragraph include:

1) production, injection and monitor wells, semi-wildcats constructed at processing facilities (well fields), including expenses for their geophysical study;

2) process pipelines constructed from processing facilities (well fields) to a sand pond at an industrial site for processing pregnant solutions, including production and injection reservoirs at processing facilities (well fields);

3) process pipelines constructed between processing facilities (sections of well fields);

4) process pipelines constructed at processing facilities (well fields);

5) header houses built at processing facilities (well fields);

6) units for distribution of pregnant solutions built at processing facilities (well fields);

7) units for reception of technical solutions built at processing facilities (well fields);

8) units for acid reception and liquid reagent warehouses, as well as acid pipes built at processing facilities (well fields);

9) industrial pumping stations with equipment and instrumentation installed at processing facilities (well fields);

10) pumps for pumping solutions with equipment and instrumentation installed at processing facilities (well fields) at the stage of mining-and-preparatory works;

11) submersible pumps with control cabinets installed at processing facilities (well fields) at the stage of mining-and-preparatory works;

12) power supply facilities installed or built at processing facilities (well fields): transformer substations, compressor stations, air lines, cable lines;

13) control and process automation equipment installed at processing facilities (well fields);

14) air ducts at processing facilities (well fields);

15) access roads to processing facilities (well fields) and inside them;

16) sand ponds or tanks of pregnant solutions and leach solutions at processing facilities (well fields);

17) protection against sand blowout at processing facilities (well fields);

18) sulfuric acid for acidification.

The cost of depreciable assets referred to in this paragraph includes costs of (expenses for) the acquisition and (or) creation of assets, as well as other costs (expenses) that are subject to inclusion in the value of such assets in accordance with international financial reporting standards and the requirements of the legislation of the Republic of Kazakhstan on accounting and financial statements.

In addition to the above, in the cases provided for by this Code, the amount of expenses specified in this paragraph allocated to a separate group of depreciable assets shall not exceed the established norms for allocating such expenses to deductibles for corporate income tax purposes.

2. Costs (expenses) specified in paragraph 1 of this article shall be deducted from total annual income in the form of depreciation allowances from the commencement of extraction after commercial discovery of minerals.

In this case, the amount of depreciation allowances, calculated in accordance with this article, is deductible up to the amount of depreciation allowances of such a group of assets calculated on the basis of taxpayer’s accounting records.

The amount of depreciation allowances is determined in accordance with the accounting method for a group of depreciable assets, formed in accordance with paragraph 1 of this article, for processing facilities or a field (well field) as a whole using the following formula:

S - the amount of depreciation allowances;

C1 - the value of a separate group of depreciable assets at the beginning of a taxable period;

C2 - costs of (expenses for) preparatory works for extraction specified in paragraph 1 of this article incurred in a current taxable period;

C3 - the cost of a separate group of depreciable assets specified in paragraph 3 of this article, acquired from third parties or received as a contribution to the authorized capital in connection with the acquisition of the subsoil use right;

V1 - physical quantity of ready-for-extraction uranium reserves at the beginning of a taxable period;

V2 - physical quantity of ready-for-extraction uranium reserves, for which extraction all the preparatory works were completed during a taxable period;

V3 - physical quantity of ready-for-extraction uranium reserves, purchased from third parties or received as a contribution to the authorized capital in connection with the acquisition of the subsoil use right;

V4 - physical quantity of recovered reserves of uranium with account of standard losses in subsoil resources for a taxable period.

For a taxable period in 2009, the value of a separate group of depreciable assets at the beginning of the taxable period is the amount of accrued costs of (expenses for) preparing for uranium mining determined in accordance with paragraph 1 of this article as of January 1, 2009.

In subsequent taxable periods after 2009, the value of a separate group of depreciable assets at the beginning of a taxable period is the value of this group of assets as of the end of a previous taxable period, determined in the following order:

the value of a separate group of depreciable assets as of the beginning of the taxable period

plus

costs (expenses), specified in paragraph 1 of this article for preparatory works for extraction, incurred in current taxable period,

plus

the cost of acquiring a group of depreciable assets from third parties specified in paragraph 3 of this article,

plus

the value of a group of depreciable assets received as a contribution to the authorized capital specified in paragraph 3 of this article,

minus

the amount of depreciation allowances for the taxable period.

For a taxable period in 2009, the physical quantity of ready-for-extraction uranium reserves at the beginning of a taxable period is the physical quantity of ready-for-extraction uranium reserves as of January 1, 2009.

In subsequent taxable periods after 2009, the volume of ready-for-extraction uranium reserves at the beginning of a taxable period is the physical quantity of ready-for-extraction reserves at the end of a previous taxable period determined in the following order:

the physical quantity of ready-for-extraction uranium reserves at the beginning of the taxable period

plus

the physical quantity of uranium reserves, for which extraction all the preparatory works were completed during the taxable period,

plus

the physical quantity of ready-for-extraction uranium reserves, acquired from third parties or received as a contribution to the authorized capital in connection with the acquisition of the subsoil use right,

minus

the volume of recoveredreserves of uranium with account of standard losses in subsoil resources during the taxable period.

If the actual quantity of recovered reserves of uranium over the entire period of the processing facility’s operation is less than the actual quantity of ready-for-extraction uranium reserves of this processing facility, the remaining value of the group of depreciable assets of this processing facility is deducted in the taxable period in which the taxpayer’s accounting writes it off as the production cost of extraction and primary processing (enrichment).

If a subsoil use activity is completed under a separate extraction or combined exploration and extraction contract, provided that a subsoil user completed subsoil use activity after the commencement of extraction after commercial discovery, the value of a separate group of depreciable assets at the end of a taxable period is deductible in the taxable period in which such activity was completed.

3. The procedure established by this article shall also apply to a separate group of depreciable assets specified in paragraph 1 of this article acquired from third parties and (or) received as a contribution to the authorized capital in connection with the acquisition of the subsoil use right.

In case of receipt of a separate group of depreciable assets, specified in paragraph 1 of this article, in connection with its acquisition from third parties, the value of such a group of assets is the value of its acquisition, determined in accordance with international financial reporting standards and the requirements of the legislation of the Republic of Kazakhstan on accounting and financial reporting. When a separate group of depreciable assets, specified in paragraph 1 of this article, is received as a contribution to the authorized capital, the value of such a group of assets is the value of the contribution specified in constituent documents of a legal entity.

Footnote. Article 260 as amended by the Law of the Republic of Kazakhstan dated 10.12.2020 No. 382-VI (effective from 01.01.2020).