KMG’s Tax Accounting Policy

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

The Corporate TAP was developed in accordance with requirements of the RoK tax laws in interconnection with International Financial Reporting Standards (IFRS), the Accounting and Financial Reporting Act of the Republic of Kazakhstan, other legislative acts of the Republic of Kazakhstan and international contracts ratified by the Republic of Kazakhstan as well as internal documents regulating activities of KMG/ subsidiary. The Corporate TAP provisions are a commercial and tax secret of KMG Group.

In the event of any conflicts between the provisions of the Corporate TAP and norms of the RoK tax legislation or international contracts ratified by the RoK, the tax legislation standards or the corresponding international agreement standards are applied.

KMG and all its subsidiaries are governed by the Corporate TAP, except for the subsidiaries:

• performing subsoil use operations as a part of the production sharing agreement that provides a special stable taxation regime;
• registered outside the RoK, as well as the KMG branches and its subsidiaries’ branches registered outside the RoK.

The Corporate TAP’s goal at achieving the tax accounting uniformity in order to form in the reporting the most complete, objective and accurate information taking into account the organisational and industry-specific peculiarities of KMG and its subsidiaries.

The Corporate TAP’s objective is to reflect the specifics of tax accounting of KMG Group in cases when the tax legislation:

• contains the norms requiring or allowing to choose from several options or methods provided by the RoK Tax Code;
• establishes only common norms and does not ensure clearness and specifics in the ways of tax accounting, procedure for defining taxable items and the items related to taxation;
• requires to reflect certain conditions and provisions in the TAP.

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

• Principle of Obligatory Taxation – KMG and its subsidiaries are obliged to timely and correctly calculate, withhold and pay taxes in full to the budget of the Republic of Kazakhstan;
• Taxation Equity Principle – operations of KMG and its subsidiaries cannot be subjected to double taxation with the same type of tax and payment for the same taxation unit for the same period;
• Fairness Principle of KMG and its subsidiaries – it is prohibited to get benefit from illegal actions in order to ensure tax saving and tax payments reduction.

Based on the Corporate TAP, KMG and all KMG subsidiaries have developed and implemented separate Tax Accounting Policies, taking into account the industry specifics of the Company’s operations.

In case of amendments and supplements to the tax legislation of the Republic of Kazakhstan, the relevant amendments are made to the Corporate TAP and separate TAPs of KMG and its subsidiaries.

KMG’s tax planning approach takes into account the specifics of KMG’s business activities and social impacts of this approach, which are fully consistent with KMG’s 2022–2031 Development Strategy.

As part of tax planning, information on tax payments in favour of states (GRI 207-4) is posted annually on KMG’s corporate website https://www.kmg.kz/ru/investors/reporting/.

Tax Governance, Control, and Risk Management

The approach to risk management, including tax risks, is set by the Corporate Risk Management System (CSMS).

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

Stakeholder Engagement and Management of Tax-Related Issues

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

KMG regularly analyses problematic issues of tax legislation application in KMG Group with further development of proposals to amend the legislative acts as well as initiates amendments into the RoK legislation in order to create favourable conditions for taxation of KMG Group, systemic improvement of tax legislation, customs legislation of the Customs Union and the RoK, the RoK transfer pricing legislation, and increase of operating efficiency and value of KMG as a whole.

The relations and interaction with the state authorities are formed under the RoK Tax Code standards via business correspondence in order to determine a correct tax policy, participation in the meetings, discussions organized by the state authorities and shareholders and industry associations.

Protection of KMG Group’s interests by improving the legislation includes:

• development of proposals (including substantiation, presentations and calculations) on improvement of tax legislation;
• consideration and provision of opinions on the draft legal and regulatory acts developed by the corresponding state authorities as a part of execution of tax legislation and subsoil and subsoil use legislation;
• support of legislative initiatives of KMG Group by direct participation in advisory bodies of the industrial associations (Association of Taxpayers of Kazakhstan (ATK), KAZENERGY, National Chamber of Entrepreneurs of the RoK “Atameken” (NCE), working groups with involvement of the state authorities of the Republic of Kazakhstan and RoK Parliament.