Kazakhstan VAT Refund for Grain Trade Awaits Parliament Vote

Tashkent, Uzbekistan (UzDaily.uz) — Representatives of the grain and flour industries of Uzbekistan and Kazakhstan raised concerns at the Uzbekistan-Kazakhstan Business Forum in Tashkent over reduced VAT refunds for Uzbek traders importing Kazakh grain, as well as counterfeit flour sold under Kazakh brands in Uzbekistan and Afghanistan.

Uzbekistan imports about 4 million tonnes of grain from Kazakhstan annually. One Uzbek entrepreneur active in the sector said his company and its partner alone import around 1 million tonnes each year.

Since March this year, traders exporting grain to Uzbekistan have faced a fivefold reduction in VAT refunds, from 100% to 20%.

A representative of the ministry responsible for the financial portfolio on the Uzbek side confirmed that the issue had been discussed with Kazakh counterparts.

"Many entrepreneurs from Kazakhstan have raised this issue with us. We discussed it within the Ministry of Agriculture and with members of parliament. We also presented it to Deputy Prime Minister Serik Zhumangarin. As a result, a decision has been made to return to the mechanism that was in place last year before these changes," he said.

According to the official, the authorities are now working on the legal wording of the mechanism, including whether it will apply retroactively to the current year. The final decision will be made by parliament.

"A new parliament is currently being elected, and the final decision will be taken there. So we need to wait a little longer. The government's position is generally to return to the previous mechanism, but the details have not yet been finalised," he said.

Kanat Sharlapayev, Chairman of the Presidium of Kazakhstan's National Chamber of Entrepreneurs Atameken, summarised the situation.

"The Ministry of Economy, the tax authorities and the Ministry of Agriculture have officially agreed to restore the previous mechanism. We now need members of parliament to vote for it, and that is expected to happen in September. From my experience, if three government bodies have reached agreement and the National Chamber supports it, the chances of approval are high," he said.

Kazakhstan ranks sixth or seventh globally in grain exports and second in flour exports, according to the Kazakh side. The country's wheat processing capacity is estimated at around 11 million tonnes, of which 4-5 million tonnes are currently processed. Kazakhstan has about 200-300 flour mills producing up to 4 million tonnes of flour annually, with half supplied to the domestic market and half exported.

Participants also raised concerns about counterfeit flour sold in Uzbekistan and Afghanistan under the brands of Kazakh producers.

A representative of the industry said the continuing problem of counterfeit flour products marketed under Kazakh brands in Uzbekistan and Afghanistan required further work, including stronger border controls in Uzbekistan and Afghanistan.

The discussion concluded that flour is often repackaged within Uzbekistan under Kazakh branding before being shipped to Afghanistan, where Afghan traders reportedly request Kazakh packaging because of its reputation in the market. Participants noted that the quality of the repackaged products may differ from the original, creating reputational risks for Kazakh manufacturers among end consumers.

At the end of the discussion, the parties agreed to appoint responsible representatives for the flour milling sector to continue work on pricing, quota issues and brand protection.