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

Article 275. Application of preferences

1. Preferences are applied using one of the following methods:

1) the method of deduction after putting a facility into operation;

2) the method of deduction before putting a facility into operation.

2. To apply the method of deduction after putting a facility into operation means to deduct the initial value of tax preference items, which is determined in accordance with paragraphs 2 and 3 of Article 276 of this Code, either in equal parts during the first three taxable periods of operation or in a lump sum in the taxable period, in which an item is put into operation.

3. To apply the method of deduction before putting a facility into operation means to deduct costs of construction, production, purchase, assembly and installation of tax preference items, as well as subsequent expenses for reconstruction, modernization of industrial buildings and structures, machinery and equipment before putting them into operation in the taxable period, in which such costs are actually incurred.

4. Unless otherwise provided for in paragraph 5 of this article, preferences are abolished from the date of their application and a taxpayer is obliged to reduce deductions by the amount of preferences for each taxable period, in which they were applied, if, within three taxable periods following the taxable period, in which industrial buildings and structures, machinery and equipment, with respect to which preferences are applied, were put into operation:

1) the taxpayer failed to observe the provisions of paragraphs 2 - 4 of Article 274 of this Code;

2) the taxpayer, who applied preferences or his/her/its successor, in case of reorganization of such a taxpayer, meets any of the provisions of paragraph 6 of Article 274 of this Code.

5. If a legal entity is reorganized through separation by the decision of the Government of the Republic of Kazakhstan, the reorganized entity is not deprived of preferences if it failed to meet the requirement established by paragraph 2 of Article 274 of this Code to use tax preference items in a profit-oriented activity for at least three taxable periods following the taxable period, in which the items were put into operation due to such reorganization.

This paragraph applies provided all of the following requirements are met:

1) as of the date of reorganization, the controlling interest in the reorganized legal entity belongs to the national management holding;

2) a legal entity under reorganization transfers items, to which preferences were applied, to new legal entities emerged as a result of reorganization;

3) preference items were transferred within three years from the date of state registration with registering authority of new legal entities emerged as a result of reorganization.

Footnote. Article 275 as amended by the Law of the Republic of Kazakhstan dated 02.04.2019 No. 241-VI (shall be enforced from 01.07.2019 г.)