LETTER OF THE TAX COMMITTEE OF THE MINISTRY OF FINANCE OF THE REPUBLIC OF KAZAKHSTAN

of September 6, 2006 No. NK-UM-2-17/8219

The Tax Committee of the Ministry of Finance of the Republic of Kazakhstan, reports the following.

According to Item 1 of article 250 of the Tax Code the value added tax is paid by offsetting method on import of the following goods:

1) equipment;

2) agricultural machinery;

3) freight railway vehicles of road transport;

3-1) helicopters and airplanes;

3-2) locomotives railway and cars;

4) spare parts;

5) pesticides (agricultural chemicals).

The list of the specified goods and procedure for its forming are determined by the Government of the Republic of Kazakhstan.

At the same time goods which production is absent in the territory of the Republic of Kazakhstan are included in this list or does not cover need of the Republic of Kazakhstan.

According to Item 1-1 of article 250 of the Tax Code the goods specified in Item 1 of article 250 of the Tax Code are imported by taxpayers on value added for own production needs.

According to item 4 of article 250 of the Tax Code existing in edition both till 01.01.2006, and after 01.01.2006 further use of the goods specified in Item 1 of article 250 of the Tax Code is subject to taxation on value added according to the Tax code.

Thus, transfer of the equipment to Long-term finance lease, with the subsequent redemption the lessee on whom the value added tax was paid by offsetting method earlier is subject to taxation on value added in generally established procedure.

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