1. Taxation of subsoil users under the New Tax Code Almat Daumov GRATA Law Firm Almaty, March 27, 2009

2. Content Tax regime prior January 1, 2009 New Tax Code Comparative analysis of tax burden changes Tax regime stability issues of early concluded contracts Preferences under Mineral Resources Production Tax (MRPT)

3. Tax regime models prior to January 1, 2009 Subsoil Use Contracts (CIT, Excess Profit Tax, Royalties, Excise Duty, Rent Tax, VAT, Property Tax and others): a) concluded prior January 1, 2004 provided with guarantee of tax regime stability b)concluded after January 1, 2004 – no tax regime stability provided Product Sharing Agreement (share of RoK in the production sharing, VAT, CIT)

4. Taxes of subsoil users prior January 1, 2009 CIT – 30% VAT – 13% (18-20%) Royalty – 2-6% Excess Profit Tax – 0-30% (0,5-60%) Bonuses – determined in the contracts Rent Tax on expert of crude oil and gas condensate – 0-33% (under the contracts concluded starting January 1,2004) Share of RoK in production sharing (under PSA) Calculation tax base for Royalty and Rent Tax takes account for subsoil user’s expenses

5. Taxes of subsoil users from January 1,2009 Abolition PSA as tax regime model CIT – 20% (17,5 – 15%) VAT – 12% MRPT – 7-20% (5-18%, 6-19%) for oil, 10% – for natural gas Excess Profit Tax – 0,5-60% Bonuses – determined in the contracts Rent Tax on export of crude oil and gas condensate – 0-32% Calculation tax base for MRPT and Rent Tax does not take account for subsoil user’s expenses

6. Comparative analysis prior and after January 1, 2009 Reduction of income tax from 30% to 20-15% Reduction of VAT to 12% Royalty substitution by MRPT Excess Profit Tax – amount of non-taxable net income is increased from 20% to 25% Toughening of Rent Tax on export of crude oil and gas condensate In accordance with data of Ministry of Economy the increase in tax burden is from 49 to 62% (at crude oil price $60 for barrel).

7. Issues Discrepant calculation of coefficient of the subsoil users' tax burden Increase of tax burden at price reduction (at $60 for barrel, the tax burden is 74%) Toughening of control over the transfer pricing Absence in New Tax Code the provision on reservation of tax regime stability for the contracts concluded prior January 1, 2004

8. Tax regime stable and valid only for : PSA concluded before January 1, 2009 Subsoil use contracts confirmed by President of RoK. At this no provision that tax regime stability guarantee for the contracts concluded before January 1, 2004 is cancelled.

9. Stability of tax regime Secured in subsoil use contracts (RoK (as a party) represented by authorized state body) Confirmed by the Investment Law, Tax law dated 1995 and by the Tax Code dated 2001 Confirmed by practice of tax authorities of RoK Confirmed by court practice in Kazakhstan In part of securing tax regime stability, subsoil use contract not differed from PSA and those subsoil use contract confirmed by President of RoK.

10. Is it necessary to make changes to subsoil use contracts? No clear official position of MEMR and Tax Committee of Ministry of Finance RoK In accordance of actions of the MEMR on sending the letters to subsoil users with a proposal to pass into current tax regime due to enacting of New Tax Code indirectly confirms necessity to make changes From the legal point of view, tax regime under the New Tax Code might apply to subsoil user only in cases of making inserting respective changes to the contract in part of tax regime.

11. Preferences under MRPT Technical criteria's (maturity (4-5,4%), watering (3-5,4%), high-viscosity (3-5,4%) или specific productivity index (3-9%)) Low profitability – minimum reduce rate MRPT on oil is 5% to general rate of MRPT Application on preferences on 2009 might be applied before December 1, 2009 Minimum reduced rate of MRPT = minimum royalty before January 1, 2009.

12. THANK YOU! ANY QUESTIONS? Almat Daumov Partner GRATA Law Firm Director Tax Law Department mobile: +7-701-7258769 Email: Adaumov@gratanet.com