Customs Union and Common Economic Space of the Eurasian Economic Union – impact on Kazakhstan’s tax and customs legislation Kanat Skakov Partner, Salans Almaty 05 October 2012

2 Brief Overview of History of Formation and Current Status of the Customs Union of the Republic of Kazakhstan, the Russian Federation and the Republic of Belarus

3 FORMATION OF THE CUSTOMS UNION OF THE REPUBLIC OF KAZAKHSTAN, THE RUSSIAN FEDERATION AND THE REPUBLIC OF BELARUS  In 1994 in Moscow President Nazarbayev proposed to establish the Eurasian Union  The first step for economic integration was made in 1994 in the form of the first Free Trade Zone Agreement  On January 20, 1995 the Presidents of Kazakhstan, Russia and Belarus signed the first Treaty on the Customs Union Formation  In 1999 Kazakhstan, Belarus, Russia, Kyrgyzstan and Tajikistan signed the Agreement declaring the intention to establish the Customs Union and Common Economic Space

4  Next step was the establishment of the Eurasian Economic Community (the “EurAsEC”) by Presidents of Belarus, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan on 10 October 2000  On 6 October 2007 Kazakhstan, Belarus and Russia signed treaties on formation of the Customs Union  On 1 July 2010 the Customs Union became effective on the territory of the Republic of Kazakhstan, and the Customs Codes of the Customs Union and of the Republic of Kazakhstan entered into legal force

5 MAIN BODIES OF THE CUSTOMS UNION THE SUPREME BODY OF THE CUSTOMS UNION: 1) Interstate Council at the level of the heads of the state; 2) Interstate Council at the level of heads of government. EURASIAN ECONOMIC COMMISSION ( REPLACED THE CUSTOMS UNION COMMISSION FROM 1 JULY 2012): 1)EEC Council at the level of deputy heads of governments 2)EEC Board THE COURT OF THE EURASIAN ECONOMIC COMMUNITY CONSULTATIVE COMMITTEES AND EXPERT GROUPS

6 THE EURASIAN ECONOMIC COMMISSION  Established by the Treaty dated 18 November 2011 and started functioning from 1 July 2012  The Commission’s main objective is to ensure the proper functioning and development of the Customs Union and Common Economic Space at the supranational level.

7  The Council is in charge of general regulatory activities of the integration processes in the Customs Union and Single Economic Space. It consists of three deputy prime-ministers. The Council’s decisions are reached be simple majority vote.  The Board is a supranational executive body of the Eurasian Economic Commission which makes proposals for further integration within the framework of the Customs Union and the Common Economic Space. It has three representatives from each member state. Administration of the Eurasian Economic Commission:

8 Danial AKHMETOV Member of the Board (Minister) on Energy and Infrastructure Timur SULEIMENOV Member of the Board (Minister) on Economy and Financial Policies Nurlan ALDABERGENOV Member of the Board (Minister) on Competition and Antitrust Regulations

9  Constituted by the Agreement on Foundation of Eurasian Economic Community dated 10 October 2000 and by the Decision of the EurAsEC Interstate Council dated 5 July 2010 No  Functions: provides guarantees of uniform enforcement by the Parties; considers the disputes of economic nature arising between Parties on issues of implementation of decisions of the EurAsEC bodies; considers claims upon compliance with acts of the Customs Union’s bodies to the international agreements forming the legal base of the Customs Union; resolves disputes between Customs Union Commission and other states of the Customs Union. THE COURT OF THE EURASIAN ECONOMIC COMMUNITY

10  Function: review a specific issue at the request of the Eurasian Economic Commission.  Expert groups draft reports on the following areas: customs and tariff regulation; non-tariff regulation; technical regulation; implementation of sanitary, veterinary and phytosanitary measures; customs administration and statistics; indirect taxes, information technologies in the customs union; special protective, anti-dumping and compensation measures, and so on. CONSULTATIVE COMMITTEES AND EXPERT GROUPS

11 Latest Developments  Common Economic Space is in force from 1 January 2012 and functions based on four principles:  Freedom of trade with goods  Freedom of trade with services  Freedom of movement for financial capital  Freedom of movement for human capital  The Customs Union will transform into the Eurasian Economic Union in 2015  a higher form of integration ensuring common tariffs, technical regulation, harmonised trade and immigration legislation, common banking and currency regulation, etc.

Development of Customs Legislation Full harmonisation of customs legislation within the Customs Union  Customs Code of the Customs Union  Customs Codes of the Member States  Harmonised customs tariffs and procedures 12

Implications for Tax Legislation of Member States  Limited harmonisation of tax laws and policies of the Member States  Main focus is indirect taxation (VAT and excise duties) in trade operations between the Member States  Agreement on Principles of Indirect Taxation dated 25 January 2008  Additional Protocols  Stability issues under the Customs Union legislation 13

14 Contact Partner, Salans Almaty Tel.: Fax: , Abylai Khan Ave Almaty Republic of Kazakhstan Kanat Skakov

15 ALMATY BAKU BARCELONA BERLIN BRATISLAVA BRUSSELS BUCHAREST BUDAPEST FRANKFURT ISTANBUL KYIV LONDON MADRID MOSCOW NEW YORK PARIS PRAGUE SHANGHAI ST PETERSBURG WARSAW