Mining in the Kyrgyz Republic: 10 Frequently Asked Questions

The subsoil use right is terminated upon expiration of the license, unless the licensee files for extension or transformation of the license within the required period as well as in case of waiving of the mineral right by the subsoil users.

Also the subsoil use rights may be terminated by the decision of the Geology Agency in the following cases:

- pledge of the license for subsoil use and change of control without registration with the Geology Agency;
- more than 30 day late payment of a bonus and/or license fees and/or royalty;

Under the Law of the Kyrgyz Republic: “On Investments in the Kyrgyz Republic investment dispute shall be settled in accordance with any applicable procedure previously agreed between the investor and the public authorities of the Kyrgyz Republic, which does not exclude the use of other remedies in accordance with the legislation of the Kyrgyz Republic. In the absence of such agreement, an investment dispute between the public authorities of the Kyrgyz Republic and the investor shall be settled through consultations between the parties.

Commonly, the activity in the natural resources sector in the Kyrgyz Republic falls within the general tax regime, involving the payment and reporting for the following types of taxes for local companies and foreign companies operating in the Kyrgyz Republic through a permanent establishment:

- profittax (10%);
- incometax (10%);
- VAT (general rate is 12%, for some operations 0% or 20%);
- excise tax (ranges according to the type of excisable goods, the price or volume);
- sales tax (from 1% up to 3%).

The subsoil legislation requires a compulsory environmental impact assessment and a positive expert opinion on the technical project for prospecting, exploration and development of deposit. Besides, while conducting activities the subsoil users must comply with the environmental legislation of the Kyrgyz Republic, including the following principal normative legal acts:

- Law on General Technical Regulation on Environmental Safety in the Kyrgyz Republic of 8 May 2009;
- Law on Environmental Impact Assessment of 16 June 1999;
- Forest Code of the Kyrgyz Republic of 8 July 1999;

- The Government administers and manages the state subsoil fund of the Kyrgyz Republic, approves technical regulations in mining, restrictions and prohibitions on the use of natural resources in order to ensure national security, public safety and environmental protection;
- Ministry of Economy is the authorized body for the development of public policy on subsoil use, including the legal acts in mining sector, investment policy in the subsoil;

Production sharing agreement (PSA) is an agreement under which the Kyrgyz Government awards exclusive rights for deposit development to a subsoil user for a certain term and the subsoil user undertakes to perform specified activities at its own expense and risk. In addition to other conditions of subsoil use, PSA should determine the procedure of production sharing between the parties to the agreement. The mandatory party of PSA is the state, on behalf of which acts the Kyrgyz Government or authorized bodies.

Concession is a form of subsoil use right arising from the concession agreement between the Kyrgyz Government and/or authorized state body and subsoil user, awarding the subsoil user an exclusive right to geological exploration and/or development of mineral deposits under the terms and conditions defined in the concession agreement. According to the current legislation the decision to provide the object for a concession is made by the Kyrgyz Government based on competition. The concession agreement is concluded for a period from 5 up to 50 years.

On the basis of the state registration the following activities are performed:

- scientific subsoil research performed according to the approved program;
- individual placer mining activities.

The state registration of scientific subsoil research performed according to the approved program is conducted by the Geology Agency, while the state registration of individual placer mining activities is performed by local state administration.

The license is the most common basis to use subsoil and a document confirming the right to use subsoil issued by the Geology Agency.

The Kyrgyz legislation provides for the following instruments of acquiring subsoil use rights from the state:
- license;
- state registration;
- concession agreement; and
- production sharing agreement.