In order to standardize the tax accounting in the companies of KMG Group, KMG developed and implemented the Corporate Tax Accounting Policy (hereinafter – the Corporate TAP).

The Corporate TAP was developed in accordance with the requirements of the tax legislation of the Republic of Kazakhstan in conjunction with the International Financial Reporting Standards (IFRS), Law of the Republic of Kazakhstan No. 234-III ЗРК On Accounting and Financial Reporting dated 28 February 2007, other legislative acts of the Republic of Kazakhstan and international treaties ratified by the Republic of Kazakhstan, as well as internal documents regulating the activities of KMG/subsidiary. The provisions of the Corporate TAP are trade and tax secrets of KMG Group of Companies.

If there are discrepancies between the provisions of the Corporate TAP and the rules of the tax legislation of the Republic of Kazakhstan or provisions of the international treaties ratified by the Republic of Kazakhstan, the rules of the tax legislation or the relevant international treaty shall apply.

KMG and all of its subsidiaries shall follow the Corporate TAP, except for the following subsidiaries:

• those carrying out subsoil use operations under a production sharing agreement providing for a special stable tax treatment;
• those in which KMG holds less than 50 % of controlling shares (interests); or
• those registered outside the Republic of Kazakhstan, as well as branches of KMG and branches of its subsidiaries registered outside the Republic of Kazakhstan.

The purpose of the Corporate TAP is to achieve uniformity of tax accounting in order to generate the most complete, objective and reliable information in reporting, subject to the organizational and industry specifics of KMG and its subsidiaries.

The objective of the Corporate TAP is to reflect the specifics of the tax accounting in KMG Group of Companies in cases where the tax legislation:

• contains the rules that require or allow making a choice from several options or methods provided for by the Tax Code of the Republic of Kazakhstan;
• establishes only general rules and does not provide certainty and specifics in the methods of tax accounting, the procedure for determining the taxable and tax-related items; and
• requires separate terms and conditions to be reflected in the TAP.

The Corporate TAP is based on the following principles of the Tax Code of the Republic of Kazakhstan:

• the principle of mandatory taxation – KMG and its subsidiaries are obliged to timely and correctly assess, withhold and pay taxes in full to the budget of the Republic of Kazakhstan;
• the principle of tax equity – operations of KMG and its subsidiaries cannot be subject to double taxation by the same type of tax and payment on the same taxable item in the same period; and
• the principle of good faith of KMG and its subsidiaries – it is not allowed benefiting from their illegal actions in order to obtain tax savings and reduce tax payments.

On the basis of the Corporate TAP, KMG, like all subsidiaries of KMG, has been developed and implemented the Tax Accounting Policy of KMG (hereinafter – the KMG TAP).

Approval of the Corporate TAP and the KMG TAP, as well as amendments and alterations thereto, is referred to the competence of the Management Board of KMG.

Amendments and alterations are made to the Corporate TAP and the KMG TAP in the following cases:

• changes are made in the rules of the Tax Code of the Republic of Kazakhstan, which affect the tax accounting procedure established by the provisions of the Corporate TAP;
• changes are made in the rules of Law of the Republic of Kazakhstan No. 234-III ЗРК On Accounting and Financial Reporting dated 28 February 2007 or IFRS, which affect the tax accounting procedure established by the provisions of the Corporate TAP;
• decisions are made by KMG/subsidiary that change the accounting methods and principles of KMG Group of Companies, which affect the procedure for maintaining tax records, determining taxable and (or) tax-related items; or
• decisions are made by KMG/subsidiary that result in changes in the procedure and principles for keeping separate tax records of KMG Group of Companies and other provisions in respect of which the Tax Code of the Republic of Kazakhstan contains dispositive provisions.

In other cases, amendments are made to the Corporate TAP and the KMG TAP as and where required, but not more than twice a year.

KMG takes into account in its approach to taxation, at the time of tax planning, the peculiarities of KMG’s commercial activities and the social impacts of such an approach, which are fully consistent with the Development Strategy of KMG for 2022–2031.

More details on the Company’s taxes (207-4) are set out in the Report on payments in favour of the state for 2022: https://www.kmg.kz/en/investors/reporting/

Tax administration and control, risk management

The approach to manage the risks, including tax risk, is set by the corporate risk management system (CRMS).

For more information about the risk management process, see the ESG Risk Management section.

For more information on the mechanism to make complaints, see the Mechanisms for Seeking Advice on Improper Conduct section.

Information on tax reporting is available on: https://www.kmg.kz/en/investors/

Communication with stakeholders and management of tax related problems

KMG is included in the list of major taxpayers that are subject to tax monitoring in accordance with the tax legislation.

KMG is constantly working to analyse the problematic issues of applying the tax laws, which issues arise in the companies of KMG Group, followed by the development of proposals for amendments to legislative acts, as well as the initiation of amendments to the legislation of the Republic of Kazakhstan in order to create favourable conditions for taxation of activities of the companies of KMG Group, systematic improvement of the tax legislation, customs legislation of the Customs Union and the Republic of Kazakhstan, legislation of the Republic of Kazakhstan on transfer pricing, as well as improvement of operational efficiency and increase in the value of KMG as a whole.

Relations and communication with the government authorities are built within the framework of the rules of the Tax Code of the Republic of Kazakhstan, through business correspondence in order to determine the correctness of the tax policy, participation in meetings, discussions organized by both the government authorities and the shareholder, industry associations.

Protection of the interests of KMG Group of Companies by improving the legislation includes:

• development of proposals (including substantiations, presentations and calculations) to improve the legislation in terms of taxation;
• consideration and submission of conclusions to draft regulatory legal acts developed by the relevant government authorities in terms of the implementation of tax legislation and legislation on subsoil and subsoil use; and
• support of legislative initiatives of KMG Group of Companies through direct participation in the work of consultative and advisory bodies operating under industry associations (Kazakhstan Taxpayer Association (KTA), KAZENERGY Association, Atameken National Chamber of Entrepreneurs of the Republic of Kazakhstan (NCE)), in working groups with participation competent government authorities of the Republic of Kazakhstan and the Parliament of the Republic of Kazakhstan.