Grain market faces stagnation amid tax changes

Following the entry into force of the new Tax Code in Kazakhstan, the rule governing value-added tax on agricultural exports has been adjusted. The amount of VAT eligible for offset has been reduced by 80%. In response, grain traders and industry associations appealed to the government to reconsider the application of this provision, pointing to potential consequences for the domestic market.

In a letter addressed to Deputy Prime Minister — Minister of National Economy Serik Zhumangarin, industry representatives stated that the reduction in VAT refunds would create an additional tax burden. According to their estimates, this burden would be passed on to agricultural producers through lower domestic purchase prices. The potential decline in farmers’ revenues could reach 12.8%, which would, in turn, affect profitability and production volumes.

The issue was discussed at a meeting of the Project Office for the implementation of the Tax Code. However, following the discussion, authorized government bodies have not yet made a decision to revise the current provision.

The government clarified that under current legislation, agricultural producers exporting goods are required to reduce previously credited VAT by 80%. Accordingly, the refund is made at 20%, since producers are entitled to reduce their tax liabilities by 80%. It was emphasized that this provision applies exclusively to crop and livestock products, including their primary processed forms.

It was also reported that the Ministry of National Economy is preparing an official clarification on the procedure for applying VAT to exports of agricultural and processed products.

Amid the ongoing uncertainty, Yevgeny Karabanov, head of the analytics committee of the Grain Union of Kazakhstan, noted signs of stagnation in the market. According to him, some exporters have temporarily suspended purchases and sales of grain, while others continue to fulfill previously signed contracts.

The expert believes that if uncertainty over VAT persists, adjustments to domestic and export prices for Kazakh grain may become inevitable in the near term.