sign in sign up
<<
Home , Aktau, Arkalyk, Balkhash (city), Dostyk, Economy of Kazakhstan, Government of Kazakhstan

Doing business in An introductory guide to and legal issues 2 Doing business in Kazakhstan Preface

This publication is intended to provide a useful practical summary of some of the legal and tax issues that investors may face when starting and building a business in Kazakhstan. We hope that it will help investors to avoid common pitfalls and highlight areas where some forethought and planning can prevent problems from arising. Kazakhstan offers many opportunities and is strongly committed to encouraging foreign investment in key sectors of the economy.

This guide is split into five sections:

1. Welcome to Kazakhstan

2. Our top 10 tax and legal tips for prospering in Kazakhstan

3. Getting started

4. An overview of tax rules in Kazakhstan

5. An overview of other laws affecting business administration.

This guide is a high-level summary of the rules in force as of 1 2021. It is not a substitute for comprehensive professional advice, which should be sought before engaging in any significant transaction. It should also be noted that this guide does not cover all in Kazakhstan (of which there are more than 30). Here, we cover only the most important taxes, so advice should be sought as to the actual taxes applicable to any particular business.

We wish you every success in this exciting and dynamic environment.

Doing business in Kazakhstan 1 Contents

2 Doing business in Kazakhstan Welcome to Kazakhstan ...... 4 Overview of other laws that affect Highlights...... 5 business administration ...... 50 System of ...... 8 ...... 51 Time ...... 8 Employment regulations ...... 51 Business hours...... 8 Import and formalities and duties. . . 53 Kazakhstan fact sheet ...... 9 Licensing ...... 54 Our top 10 tax and legal tips ...... 10 Banking regulations ...... 56 Currency regulations ...... 57 Tax tips...... 11 Currency regimes ...... 59 Legal tips ...... 13 EY in Kazakhstan ...... 64 Getting started...... 16 About EY ...... 65 Arriving in Kazakhstan...... 17 Encouraging investment...... 65 Post-arrival procedures ...... 18 Supporting our clients in the dynamic landscape. . . .65 Types of legal entities ...... 19 Office locations...... 66 Establishing a legal presence...... 20 EY Kazakhstan at social media ...... 66 Incentives for investors ...... 25 Appendix...... 68 Overview of tax rules in Kazakhstan...... 30 Double tax treaties ...... 69 Personal (“PIT”) ...... 31 List of countries with preferential tax regimes . . . . .70 Social tax ...... 34 Key macroeconomic indicators of Kazakhstan . . . . .71 Corporate income tax (CIT)...... 38 Withholding tax (WHT) (other than PIT)...... 40 Value added tax...... 42 Subsurface use taxes ...... 46 Tax administration...... 46

Doing business in Kazakhstan 3 Welcome to 1Kazakhstan

4 Doing business in Kazakhstan Highlights • On 1 January 2015, the Treaty on the • Kazakhstan posted an annual average (EAEU) entered into force. The union US$24,263 GDP growth rate of 5.2% from 2005 of , , Kazakhstan, million to 2019, with GDP in 2019 reaching and comprises a US$180.2 billion (US$9,731.2 per market of 184 million consumers. gross FDI inflows recorded capita). In the first 9 months of 2019 by Kazakhstan in 2018 the growth rate accelerated to 4.5% • In 2012, the former from 4.1% in 2019.1 The country’s , Nursultan GDP shrank by 2.6% in 2020 as it Nazarbayev, in his annual address to took a heavy hit from the coronavirus the nation, unveiled the Kazakhstan pandemic. In October 2020, the 2050 Strategy, which aims to make Ministry of National one of the ’s 30 Kazakhstan announced an updated most developed countries. The strate- GDP forecast for 2021, predicting a gy is to be realized through a number 184 real GDP growth rate of 2.8% in 2021.2 of key initiatives: a comprehensive million consumers and pragmatic economic policy (infra- • Foreign direct investment (FDI) inflows structure development, modernized make up the EAEU market into Kazakhstan have been strong in systems for managing state assets recent decades. Kazakhstan’s success and natural resources, accelerated in attracting FDI may be attributed industrialization, modernization of to its vast natural resources and the agriculture and new policies on water commitment of the country’s leader- resources), the development of a ship to welcoming FDI and promoting culture of entrepreneurship, new the country’s stable economic growth, social policies, targeted development November 2014 as well as to developing non-extractive of knowledge and professional skills, Infrastructure development sectors such as agriculture, renewable further strengthening of state gover- program launched in Kazakhstan energy, infrastructure, logistics and nance and democracy, consistent and transport. In 2019, Kazakhstan posted predictable foreign policy, and a new gross FDI inflow of US$24.1 billion national patriotism. compared to US$24.3 billion in 2018. • The Nurly Zhol (Shining Path) • Kazakhstan is ranked 25th for Ease infrastructure development program of Doing Business in the ’s was launched in November 2014 Doing Business 2020 report. The with the aim of creating an efficient country has moved up three positions transport and logistics infrastructure 3 compared with the previous year. in Kazakhstan.4,5

1 World Bank Data. 2 The Ministry of the National Economy of Kazakhstan. 3 Doing Business 2020, the World Bank, October 2019. 4 Official Information Source of the Prime Minister of the of Kazakhstan, 22.10.2019, https://www.government.kz/en/news/realizaciya-novoy-gosprogrammy-nu-rly-zhol-na-2020-2025-gody-pozvolit-sozdat-bolee-550-tys-rabochih-mest 5 Astana Times, 24.10.2019, https://astanatimes.com/2019/10/kazakh-government-estimates-nurly-zhol-programme-will-cost-16-91-billion-over-next-five-years/

Doing business in Kazakhstan 5 • KZT 5.8 trillion was invested in civil service, rule of law, industrializa- Kazakhstan’s transport industry tion and economic growth, a unified KZT 5.8 trillion under the Nurly Zhol program nation, and the transparency and was invested in Kazakhstan’s in 2015–2019. Of this, 56% was accountability of the state. The new transport industry funded with the involvement of the President of Kazakhstan, Kassym- private sector, the rest by the state Jomart Tokayev, has continued the course and confirmed institutional • 3,000 km of republican roads reforms as a key priority in ac- were built rebuilt, including celerating Kazakhstan’s economic completion of the Western development.6 ­ — Western international transport corridor • The ‘Digital Kazakhstan’ state km program was launched in 2017. 3,000 • 1,400 km of new railways were It aims to accelerate economic commissioned: Zhezkazgan–Beineu of republican roads development and improve the quality (1,040 km), –Shubarkol were built or rebuilt of life of the people of Kazakhstan (214 km), Borzhakty–Yersai with the aid of digital technologies. (14 km) and the second track of the –Shu section (111 km) • The first wave of in Kazakhstan laid the foundations of • 6 runways were upgraded at the the in the . airports of Uralsk, Petropavlovsk, At the end of 2015, Kazakhstan Almaty, , and announced a new privatization plan 1,400 km . that seeks to shrink state ownership of new railways were The program will include the follow- of the national economy from more commissioned ing projects: completion of 3,800 km than 40% to around 15%. However, of roads; rebuilding of the runways real progress has been slow. at Kostanay and Balkhash airports; • On 30 November 2015, the World modernization of the –Moyynty Organization (WTO) welcomed railway line and electrification of the Kazakhstan as its 162nd member. Moyynty–Aktogay railway line; develop- Kazakhstan has successfully ment of water transport through the negotiated arrangements on sensitive purchase of 48 ships, including six mer- 6 runways economic issues, including support chant fleets, and major repairs to locks. were upgraded for agriculture, financial services • In June 2015, in line with the and telecommunications, and has at the airports Kazakhstan 2050 Strategy, former coordinated its WTO and EAEU President set commitments in line with national out 100 steps for the implementation interests. Kazakhstan became an of five institutional reforms aimed at associate member of the OECD promoting a modern and professional Investment Committee in 2017

6 Official website of the President of the Republic of Kazakhstan, https://www.akorda.kz/ru/official_documents/strategies_and_programs

6 Doing business in Kazakhstan and a participant in the Public • The annual PowerExpo Almaty providing certain financial services Governance and Environmental Policy international exhibition presents the on the territory of AIFC, and personal Committees in 2019. The country latest equipment, technologies and income tax on income of foreign has also joined the OECD’s Base services for the energy industry. employees. As of 2021, more than Erosion and Profit-Shifting (BEPS) It has become an established 700 companies from 42 countries Project, an initiative involving over platform for business meetings, have been registered in the AIFC. 100 countries in an effort to tackle exchange of experience and They represent the , strategies that exploit negotiations. 118 enterprises from the USA, China, Russia, , gaps and mismatches in tax rules to 13 countries, including , , , , , artificially shift profits to low- or no- , Belarus, , Italy, , , , the United tax locations7. Kazakhstan, China, , South Arab Emirates, and other Korea, Russia, Singapore, leading economies. • The New is an ambitious and the , took part in transport infrastructure project that • The Khorgos-Eastern Gate special the exhibition in 2019, with national will enable goods to be delivered economic zone (SEZ) comprises a stands presented by companies from from the Pacific coast to Europe. dry port, a logistics and industrial China, Russia and Poland9. Redirecting cargo traffic to the zone, a railway station and the mainland is no easy task, as the • In 2018 Kazakhstan officially Altynkol Kazakh-Chinese Khorgos current sea route is significantly launched the Astana International International Centre of Boundary cheaper. However, the new overland (AIFC) on the site of Cooperation. In July 2015, the route through Kazakhstan allows the EXPO-2017 exhibition. It is set to country’s first dry port, with an delivery times to be reduced from serve as a financial hub for Central of 149 hectares and planned 40–60 days to 13–14 days. A railway , the Caucasus, the Eurasian capacity of 500,000 twenty-foot corridor connecting the Pacific coast Economic Union and . The equivalent units (TEU), was launched of China to the is already centre has a special legal regime in the SEZ. Thanks to the dry port, in operation. It will provide access to which differs from the legislation shipments that used to take up to 40 many major markets when integrated of Kazakhstan and is based on the days by sea from Asia to Europe can with the Kazakhstan — — principles of English law and best now be transported in just 10 days. and Azerbaijan — — Turkey practices of world-leading financial In 2018, Khorgos processed 311 railway systems. A joint industry and centres. Participants enjoy special tax, container trains along the China- investment cooperation program is currency and visa regimes, as well as Europe transport route and more underway between Kazakhstan and a favourable framework for attracting than 1.2 million people visited the China. It comprises 51 projects worth foreign labour. Tax incentives include - zone. So far, over more than US$27b and infrastructure a nearly 50-year exemption from US$1.4 billion has been invested in forms an important part of it.8 corporate income tax and VAT for the project10.

7 OECD, https://www.oecd.org/eurasia/countries/kazakhstan/ 8 Belt and Road News, 09.06.2019, https://www.beltandroad.news/2019/06/09/kazakh-chinese-one-belt-one-road-cooperation-discussed-in-astana/ 9 Official website of PowerExpo Almaty, https://www.powerexpo.kz/en/exhibition/about-the-exhibition 10 Forbes, 14.03.2019, https://www.forbes.ru/biznes/373183-baraholka-s-oborotom-eu18-mlrd-novaya-mekka-chelnokov

Doing business in Kazakhstan 7 System of government Time Public holidays The Republic of Kazakhstan gained Kazakhstan’s time zones range from five and days off independence on 16 December 1991. hours ahead of Greenwich Mean Time The following table presents Under the constitution adopted on (GMT) in the western part of the country Kazakhstan’s official public holidays 30 1995, Kazakhstan is a to six hours ahead of GMT in the other and days off. democratic, secular, legal and social . Nur-Sultan and Almaty are six state. State power is divided into hours ahead of GMT. Holiday Date legislative, and judicial New Year holidays 1–2 January branches. Kazakhstan is a unitary Orthodox Christmas 7 January state with presidential rule. Legislative Business hours International 8 March functions are performed by the Kazakh offices are generally open from Women’s Day of Kazakhstan, which is 9:00 am to 6:00 pm Monday to Friday, the supreme representative body and and closed Saturdays and Sundays. Nauryz Meyrami 21–23 March consists of two chambers, the Senate Kazakhstan People’s 1 May and the Majilis. The Government Unity Day of Kazakhstan acts as the supreme Defender of the 7 May executive body, headed by the Prime Fatherland Day Minister. Judicial authority is vested in 9 May the Supreme Court. Capital Day 6 July The first day of 20 July in 2021 Kurban Ait (observed in accordance with the Islamic Calendar) Constitution Day 30 August The First President of 1 December Kazakhstan Day Independence Day 16–17 December

8 Doing business in Kazakhstan Kazakhstan fact sheet

Capital Nur-Sultan Administration Kazakhstan is divided into 14 provinces and 3 cities of national significance: Nur-Sultan, Almaty and Bordering countries Russia, China, , Kyrgyzstan and Turkmenistan Land area 2,724,900 km2 Population (November 2020) 18.8 million Urban population, % (November 2020) 59% of the total population Age structure (2020) 0-15 years (29.9%); 16-62 years (59.1%); 63 and above (11.0%) Languages Kazakh (official language), (interethnic communication) President Kassym-Jomart Tokayev (since 20 March 2019) Prime Minister (since 25 February 2019) Nominal GDP (2019) US$181.666 billion GDP growth (2019) 4.5% GDP per capita (2019) 9,731.2 GDP composition by sector (2019) Agriculture (55.5 %); industry (33 %); services 4 %) External debt as a percentage of GDP (Q2 2020) 89.6% Labour force (2020) 9.06 million Unemployment rate (December 2020) 4.55% CPI (November 2020) 7.5% Stock exchange Kazakhstan Stock Exchange (KASE) Central Bank National Bank of Kazakhstan Corporate income 20% Individual income tax rate 10% State value added tax 12% Major cities Nur-Sultan, Almaty, Shymkent, , , Currency unit Kazakhstan tenge (KZT) Annual average exchange rate (2020) US$1=KZT 416.7; EUR1=KZT 477.98; RUR1=KZT 5.69; CNY1=KZT 60.8 Exchange rate as of 1 December 202011 US$1=KZT 425.05; EUR1=KZT 509.29; RUR1=KZT 5.58; CNY1=KZT 64.66

Sources: Official website of the President of the Republic of Kazakhstan; the National Bank of Kazakhstan; the Statistics Agency of Kazakhstan.

11 Hereafter in this guide, all calculations in US$ are made based on the exchange rate as of 1 December 2020

Doing business in Kazakhstan 9 Our top 10 2tax and legal tips

10 Doing business in Kazakhstan In this section we set out our top tax and legal tips for prospective Tax tips investors. Should you need more information on any of these issues, EY is happy to assist you in the following areas: 1 3

• Tax planning and compliance, Recent years have shown that Kazakh The scope of withholding taxes (WHTs) both in Kazakhstan and law is subject to frequent changes. on cross-border payments is wide, and internationally This makes it important to have robust rates are high (sometimes even when tax planning to enable businesses the recipient has never entered Kazakh- • Business accounting and to cope with changes in the law and stan). However, Kazakhstan has tax payroll implement structural changes as treaties with many countries which allow • A full range of legal consulting required without significant tax costs. for withholding taxes to be reduced or services in Kazakhstan, as well avoided if all the necessary documenta- as tax litigation services tion is in place place (though, the MLI provisions, which entered into force in • Transaction advisory services Kazakhstan from 1 October 2020, should and legal and tax due diligence 2 be considered and properly supported). Otherwise, tax will be withheld, and • Immigration support and obtaining a refund may be a complex and Corporate and personal income tax rates performance and reward time-consuming process with an uncer- in Kazakhstan are low by international planning tain outcome. Moreover, Kazakhstan standards, but penalties for non- has a unique position on transfer pricing • Assurance services payment and non-reporting, whether whereby all cross-border transactions intentional or not, are high. The first may potentially be inspected for transfer focus of tax planning in Kazakhstan pricing compliance, regardless of wheth- should be to confirm that all tax that er the parties are in any way related. ought to be paid in Kazakhstan is paid and reported. In addition, Kazakhstan is a documentation-driven country, and keeping documentation in order (including supporting documentation) is of paramount importance 4

There are many downsides to dealing with tax havens when structuring cross- border investments or transactions in Kazakhstan. Thus, tax havens should not usually form part of tax planning in Kazakhstan.

Doing business in Kazakhstan 11 5 7 9

The rules for determining whether There is a safe harbour allowing an In many cases, exemption from capital a business dealing with Kazakhstan has entity that seconds staff to Kazakhstan gains tax may be obtained upon with- a taxable presence for corporate income to avoid a taxable presence. Provided drawal from an investment in Kazakhstan tax (CIT) purposes in Kazakhstan the arrangements are properly provided that the correct structuring (a ) are very structured, this is likely to be more tax- was used when the investment was first broad and can apply collectively to efficient than using the same staff to made. The complexity of the structuring whole groups of companies if they have provide consulting or other services. depends on the nature of the asset. been in the country for over six months. Some, but not all, of Kazakhstan’s tax treaties (with MLI limitations) protect against this. Therefore, if more than one group entity is used to do business in 8 10 Kazakhstan, the position of all entities involved should be reviewed collectively. Branch profit tax applies to all According to currently enacted , permanent establishments of foreign income received by foreign individuals legal entities at a standard rate of 15%. (cash and in-kind) for work performed It is usually reduced by tax treaties. in Kazakhstan (regardless of where the There is an equivalent tax on dividends income is paid) is treated as Kazakh- 6 at the same standard rate, which may source income and is subject to Kazakh also be reduced by treaties (with MLI personal income tax (PIT). Generally, limitations). In the case of dividends, Kazakh-source income is reported and Deductibility of interest on investor the rate is zero after an investment has taxed in Kazakhstan using one of the loans is subject to a debt-to-equity ratio been held for three years (except for following methods: (i) self-assessment of 4:1 (7:1 for financial organizations). investments in oil and gas or via an annual PIT return or (ii) at source At best, an investor will pay 10% operations (unless a certain portion via a local company acting as a so-called WHT on cross-border interest (under of minerals is refined), dividends paid “tax agent”. In most cases, the law a double ) and be able to to entities registered in tax havens places tax and reporting obligations claim a CIT deduction of 20%, while for and investments in certain CIT-exempt for Kazakh-source income of foreign certain borrowings accrued interest entities). individuals on the local tax agent (e. g., expense may be deducted only when a foreign legal entity with a registered paid. Furthermore, exchange gains and presence in Kazakhstan (a branch or rep- losses on loans are recognised for tax resentative office) or a local entity that purposes. uses services of a non-resident employer delivered through foreign employees).

12 Doing business in Kazakhstan Legal tips 1 3 6

Most investors use a Kazakh limited There is an extensive range of business The process of hiring foreign employees liability partnership (LLP) as their and professional activities that are is complex and strictly regulated in investment vehicle. subject to licensing requirements, and Kazakhstan. Immigration and labour it is important for investors to determine law has undergone numerous changes in advance whether they need a licence. resulting in frequent inspections of The penalties for failure to obtain a companies that employ foreign workers licence can be significant, including and increased penalties for violations 2 potential criminal liability. of labour and migration rules (including discriminatory remuneration terms and payment of salaries in foreign currency). Settlements between residents of Kazakhstan (Kazakh legal entities, branches/representative offices of foreign non-financial entities, and 4 Kazakh citizens) must be made in KZT (with a few exceptions — e. g., branches Kazakhstan often takes a formalistic 7 of non-financial entities may transact approach to procedural matters. In most with each other in foreign currency). cases, a company’s representatives must Kazakhstan generally permits foreign Settlements between non-residents have a detailed power of attorney and law to be the governing law for (foreign legal entities and citizens) and will regularly be required to refer to it — commercial contracts, except for Kazakh residents may generally be for example, when signing contracts. subsurface use contracts with the made in any currency but may have to state, foundation agreements of a be reported to the National Bank if they Kazakh legal entity, agreements on the hit certain thresholds. transfer of participating interests in a legal entity and transactions involving 5 immovable property. Regulatory acts of the AIFC governing relations between AIFC participants may be based on the Compliance with local content “principles, norms and cases” of the law requirements is very important for of England and Wales and standards of mining and oil and gas companies and international financial centres. their subcontractors and is constantly monitored by government authorities.

Doing business in Kazakhstan 13 8 10

In certain cases, Kazakh law requires At the same time, Kazakh legal entities approval to be sought from government have access to the AIFC’s court and authorities for the acquisition of international arbitration centre, whose shares/participating interests in legal decisions are recognised and enforced in entities operating in fields covered by Kazakhstan in a similar way to decisions competition and natural monopoly of arbitration and international courts. regulations and by legislation relating to subsurface use. It is therefore important to analyse the requirements of Kazakh laws on a case-by-case basis before entering into such transactions. 9

Disputes between Kazakh legal entities are resolved either through amicable procedures (mediation, amicable settlement and participatory procedure) or by courts and local arbitration, as well as by international courts if a provision allowing such dispute resolution is contained in the relevant agreement between the parties. Public disputes with Kazakh government authorities can be resolved either in court or through a pre-litigation procedure.

14 Doing business in Kazakhstan Doing business in Kazakhstan 15 Getting 3started

16 Doing business in Kazakhstan Arriving in Kazakhstan Business visas (Category B) are An individual may obtain certain issued to foreign individuals arriving types of official business and private The Kazakh authorities issue the in Kazakhstan for business purposes visas without a letter of invitation by following categories of visa: (e. g., negotiations, conclusion of submitting a written application to • Category A: diplomatic, official and contracts, provision of consulting or the Kazakh consular establishment in investor audit services, provision of installation, the respective country if he or she is a repair or maintenance services and citizen of one of the following countries: • Category B (short-term stay): attendance of conferences, symposiums, business visa, visa for international forums, exhibitions and concerts). • • road haulage, visa for crew members of aircraft, marine and river vessels Work visas (Category C) are issued to • Austria • and trains, visa for religious foreign individuals entering or staying • • Malaysia events, visa for practical training in Kazakhstan for employment and • • members of their families. In general, or internships, visa for permanent • • a work visa is issued based on a work residence in Kazakhstan, private visa, • • visa for adoption of Kazakh citizens, permit. See the “Work permits” section • • New Zealand tourist visa, transit visa and exit visa for details. • • to leave Kazakhstan In Kazakhstan, visas are issued by the • Czech Republic • • Category C (long-term stay): visa for Ministry of Internal Affairs (MIA) of • • Poland permanent residence in Kazakhstan Kazakhstan. Elsewhere, they are issued • Estonia • (for ethnic ), family reunion by Kazakh (for example, the visa, work visa, visa for missionary Consular Department of the Embassy of • Finland • activities, humanitarian visa, Kazakhstan). Business and work visas • • study visa, private visa (for ethnic are issued based on a letter of invitation • Germany • issued by a local Kazakh company or Kazakhs), visa for minors and medical • • Singapore a branch or representative office of a treatment visa. • Slovak Republic foreign company. The state duty for the • Visas of the above categories may execution of invitations is 0.5 times the • • be issued for single or multiple entry monthly calculation index (MCI).12 The • Ireland • depending on the category and type fee for issuing a visa ranges from US$20 • • of visa. Exit visas are issued only for to US$1,000 depending on the country • Italy • single use. of residence of the invited party and the • • United Arab type of visa requested. A visa should be • Emirates issued within five business days. • Korea (South) • United Kingdom • Latvia • •

12 The MCI was established by the Law of the Republic of Kazakhstan «On the Budget of the Republic for 2021–2023» Effective on 1 January 2021, 1 MCI = KZT 2,917 (approximately US$7)

Doing business in Kazakhstan 17 Kazakhstan has a visa-free regime with Under this visa-free regime, citizens The letter will then be forwarded to the certain countries based on international of the above countries may enter IC for further consideration. The IC will agreements (for example, Belarus and Kazakhstan without a visa for a period consider requests on a case-by-case the Russian Federation). not exceeding 30 calendar days from basis within 5 working days (although it the date of crossing the border and not may take longer in practice). In the event Kazakh migration law allows citizens of more than 90 calendar days in total in of a favourable decision, the IC will issue the following countries to enter and exit any 180-calendar day period. If a foreign a protocol containing the name of the Kazakhstan without visas: individual wishes to stay in Kazakhstan company and the foreign individual and for a longer period, he or she may apply he/she will be able to enter Kazakhstan • Australia • Luxembourg for a single-entry business or investor based on that protocol provided that • Austria • Malaysia visa while in Kazakhstan. Investor all other visas and work permits are in • Bahrein • Malta visas are issued to certain categories place. • Belgium • Mexico of business immigration applicants • Bulgaria • Monaco (managers of companies that carry out investment activities in Kazakhstan and Post-arrival procedures • Canada • Netherlands members of their families) and provide Until 10 January 2020, foreign • Chile • New Zealand certain privileges. individuals arriving in Kazakhstan for • Columbia • Norway It should be noted that, due to the more than five calendar days were • Croatia • Oman coronavirus pandemic, the visa-free normally required to register with • Cyprus • regime with the above-listed 57 the Ministry of Internal Affairs (MIA). • Czech Republic • Poland countries has been suspended until However, this has been replaced by an • Denmark • Portugal 1 May 2021. obligation on the part of the inviting • Estonia • Qatar party to obtain a temporary stay permit In view of the pandemic and related for the foreign citizen. • Finland • Romania quarantine measures, obtaining entry • France • Saudi Arabia to Kazakhstan is currently a more In addition, the inviting party must • Germany • Singapore challenging and complex process notify the MIA within three working days of the arrival of the foreign individual in • Greece • Slovak Republic for foreigners. A separate written Kazakhstan. • Hungary • Slovenia approval from the Interdepartmental Commission (“IC”) chaired by the • Iceland • Spain Immigration records are kept by the of the Republic • • Sweden MIA based on information from inviting of Kazakhstan is required for foreign parties and by the National • Ireland • Switzerland individuals to enter the country. This Committee of Kazakhstan based on • Israel • means that, when a foreign individual information from Kazakh border control • Italy • Turkey seeks entry to Kazakhstan for work, authorities. • Japan • United Arab business or other purposes, the inviting company must first prepare an official A temporary stay permit allows a foreign • Korea (South) Emirates request addressed to the head of the individual to stay for a definite period • • United Kingdom administration of the respective city (e. g., the length of an employment • United States • Latvia (the city governor). That request must agreement) and must be obtained by the • Liechtenstein • Vatican set out the reasons why the company inviting party. A temporary stay permit is • Lithuania • needs the foreign employee in question. issued based on applications from:

18 Doing business in Kazakhstan 1. Individuals inviting foreign Various sanctions are prescribed for Limited liability partnerships (LLPs) individuals for family reunion non-compliance with immigration The main difference between a JSC requirements. Please refer to the 2. Individuals or legal entities that and an LLP is that an LLP does not relevant section for details. have concluded an employment issue shares; instead, participants hold agreement with a foreign individual interests in the partnership. An LLP may Should you require assistance in be formed by one or more participants. 3. Educational organizations planning and managing your human Generally, the participants in an LLP are not liable for the LLP’s debts beyond the 4. Medical organizations capital needs, EY can assist with business and work visas, work permit value of their contributions. There are a 5. Religious organizations applications for foreign employees, number of exceptions to this rule under Kazakh law. 6. Local authorities inviting individuals tax registration, tax and legal compli- to engage in entrepreneurial ance for expatriate individuals and the The minimum capital requirement for activities (business immigrants). drafting of secondment agreements. an LLP is 100 MCI (approximately US$694), with the exception of small However, foreign individuals in posses- businesses, for which the minimum is sion of a visa issued after 1 July 2018 Types of legal entities set at zero. Participants’ interests are do not need to obtain a temporary stay proportional to their contributions to the permit. Relevant data will be automati- Under the Civil Code, foreign and charter capital, unless the foundation cally recorded in the Berkut electronic local investors may use a number documents provide otherwise. database based on information provided of organizational forms to do Participants have pre-emptive rights to in the letter of invitation. For foreigners business in Kazakhstan, including each other’s interests. entering Kazakhstan under a visa-free simple partnerships, limited liability Importantly, LLPs in Kazakhstan are regime, the new rule described above partnerships, additional liability limited separate legal entities that are distinct will apply. The period of stay in Kazakh- partnerships, production cooperatives from their participants. As a legal entity, stan ends upon the expiry of the visa or, and joint stock companies. for visa-free visitors, after 30 calendar an LLP is subject to state registration days or the period indicated in the tem- In this section we give details of those and taxation in its own right, i. e., it is types of business vehicles that are most not tax-transparent. porary stay permit. widely used in practice. In addition, Kazakh law allows a foreign Starting from 2020, the temporary stay company to establish branches and of foreign individuals arriving in Kazakh- Joint stock companies (JSCs) representative offices. Under the Civil stan under a visa-free regime (including A JSC is a legal entity that issues shares Code, branches and representative the 57 countries listed above) must not in order to attract investments to offices are not considered separate legal exceed 30 calendar days from the day finance its activities. A JSC is separate entities. of crossing the Kazakh border and must and distinct from its shareholders, not exceed 90 calendar days in any i. e., shareholders are not liable for Representative office 180-calendar day period unless other- the JSC’s liabilities. It may have one A representative office is established or more shareholders. The minimum wise provided in an agreement between to represent a foreign entity’s interests capital required for a JSC is 50,000 MCI Kazakhstan and the foreign country con- in Kazakhstan. A representative office (approximately US$350,000). cerned or decided by the Government of protects and represents the interests Kazakhstan. This rule does not apply to of the foreign legal entity and carries individuals who have a temporary stay out preparatory and auxiliary activities, permit as described above.

Doing business in Kazakhstan 19 such as marketing and advertising. Generally, a representative office may not engage in commercial activities.

Branch A branch is a subdivision of a foreign legal entity that performs all or part of the foreign entity’s functions. In particular, it may engage in commercial activities. Should you require more information on the nature and uses of the various types of business entities in Kazakhstan, EY offers tax and legal advice on how to structure a business, as well as a full range of company formation and registration services.

Establishing a legal presence As a rule, all legal entities, branches and representative offices in Kazakhstan must be registered with the state. It is important to determine whether any specific approvals and/or consents must be obtained from government authorities before proceeding with state registration.

State registration State registration in Kazakhstan follows a “one-stop shop” principle: all registration documents must be submitted to a single government authority, the Government for Citizens. Under the law on state registration, the procedure should take from 1 to 5 business days. In practice, general registration can take up to one month.

20 Doing business in Kazakhstan The law prescribes a standard set of If entities are not actually present National Bank of Kazakhstan of the documents that must be submitted for at their legal address, i. e., the state opening of a bank account abroad by the state registration of a company. revenue authorities cannot find anyone applying for a registration number to Having all the right documents is key to representing an entity at the time of be assigned to the bank account by a successful registration process. It is observation, they may be penalized. the National Bank of Kazakhstan essential to ensure that the documents Specifically, they may be deregistered • Kazakh legal entities, branches and have been duly signed, sealed, notarized for VAT purposes or their bank accounts representative offices of Kazakh legal and legalized, or apostilled if they may be frozen. It is therefore important entities are required to provide the were executed abroad; otherwise, for entities to be actually present at the National Bank of Kazakhstan with the registration process may be legal address stated in their foundation information on any transactions considerably delayed. documents and registration records, or on bank accounts held with foreign at least to ensure that, if the authorities The state registration fee is currently banks visit (or if they send correspondence 6.5 MCI (approximately US$43). or call the contact telephone number), • Kazakh legal entities, branches and Location (legal address) there is someone who can confirm the representative offices of Kazakh legal entities are required to notify the A legal entity’s location is the address validity of the legal address. National Bank of Kazakhstan of the indicated in its foundation documents Kazakh law stipulates that entities closure of or changes in details of (e. g., its charter). Under Kazakh law, that are not present at their registered bank accounts held abroad. a legal entity is located in the same address for one year or more may be place as its permanently operating liquidated/deregistered based on a court See the “Banking regulations” and governing body (i. e., its director or decision. “Currency regulations” sections for board of directors). Location plays more details. an important part in a legal entity’s Opening a bank account registration and other legal events, such (legal entities and individuals) Categories of work immigrants, as the determination of the court with Bank accounts may be opened with a work permits and secondment which an appeal against such entity local bank in Kazakhstan in the national The Law of the Republic of Kazakhstan should be filed (usually a court in the currency and/or in a foreign currency. defendant’s location) and the state on Population Migration, adopted on Branches and representative offices 22 July 2011, establishes the following revenue authority to which tax and of foreign legal entities may opt to use other payments must be made. categories of immigrants entering the offshore (foreign) bank accounts. country for employment purposes: Under Kazakh law, government Kazakh legal entities are permitted to authorities, including state revenue • Foreign immigrant workers, i. e., hold bank accounts outside Kazakhstan persons who come to Kazakhstan to authorities, require legal entities, without restrictions. branches and representative offices engage in independently arranged em- (“entities”) to be present at the legal Under currency law, the rules for ployment in high demand occupations addresses indicated in their foundation notifying the National Bank of in priority economic sectors (business documents and registration records. The Kazakhstan of the opening of a bank areas), and persons who are engaged state revenue authorities may visit them account with foreign banks are as follows: by employers to work in Kazakhstan, including by intra-corporate transfer at their legal address under the so-called • Kazakh legal entities, branches and “observation procedure”. representative offices of Kazakh legal • Business immigrants, i. e., entities are required to notify the persons who come to engage

Doing business in Kazakhstan 21 in entrepreneurial activities in agreements, which are commonly used There is, however, a restriction on the accordance with Kazakh law around the world) and (iii) transfer number of foreign employees that • Seasonal foreign workers, i. e., of a foreigner to a local branch/ may be hired by a Kazakh employer/ immigrants hired to perform representative office/subsidiary from local host entity — the so-called “ratio seasonal work during specific periods a parent company based in a WTO requirement”. Currently, the total (seasons) determined by climatic or country (intra-corporate transfer). number of foreign employees of a other natural conditions, but not for A work permit is obtained by submitting Kazakh employer/local host entity must more than one year documents to the local authorities under not exceed: one of two procedures: the standard • Labour immigrants who come to • 30% of the total number of Category procedure or intra-corporate transfer. Kazakhstan as domestic workers 1 and 2 employees The latter option is available as a result to perform household-based work of Kazakhstan joining the World Trade • 10% of the total number of Category (services) for individuals (employers) Organization (WTO). 3 and 4 employees under a labour immigrant permit. Work permits Standard procedure An exemption from the ratio requirement applies for small businesses, state There are two types of permits Work permits are issued by local enterprises and agencies, self-employed allowing foreign individuals to work in authorities within the quota allocated foreign individuals, permits issued within Kazakhstan: by the Ministry of Labour and Social Protection on an annual basis. The quota the quotas for particular countries of • A permit to engage foreign labour is the maximum number of foreign origin and branches and representative offices of foreign legal entities with no • A permit issued to a foreign individuals who can be hired to work in more than 30 employees. individual who independently came Kazakhstan in particular regions. Quotas to Kazakhstan to work in a particular are determined mainly on the basis of To obtain a work permit, each foreign occupation. The Kazakh government annual applications from employers, individual must meet the set qualification approves the list of such occupations. which must be submitted by 1 October. requirements. As in many other countries, employers The government may decide to reduce A work permit under the standard in Kazakhstan must obtain a permit to the overall quota for a particular year procedure is issued for the following employ foreign citizens. (for instance, the quota for 2020 was durations: reduced by 40% compared with 2019). There is a reasonable amount of • Category 1 — 1, 2 and 3 years with flexibility in the process of hiring For the purposes of work permits issued annual extension by 1, 2, or 3 years foreigners in Kazakhstan. Unlike under the standard procedure, foreign • Category 2 — 12 months with annual many countries where employers individuals are divided into the following extension by 12 months, but no more are required to sign employment categories: than 3 times contracts with foreign nationals to hire • Category 1 — CEOs and deputy CEOs them as local employees, Kazakhstan of companies • Category 3 — 12 months with annual offers different options, including (i) extension by 12 months, but no more employing a foreigner directly as a • Category 2 — Leaders of business than 3 times local employee, (ii) engaging foreign divisions/department • Category 4 — 12 months with no specialists through a service contract • Category 3 — Professionals option to extend with a foreign contractor not present in Kazakhstan (including secondment • Category 4 — Skilled workers

22 Doing business in Kazakhstan An employer is charged a state duty the transfer period, but not more than new jobs for Kazakh citizens, retraining for the issuance or extension of a work 3 years (36 months) with the option to of Kazakh citizens, etc.). No special permit. The amount of the duty is extend it by 1 year (12 months). conditions are imposed on the host established by the Kazakh government company when hiring executives. ICT-based work permits are issued free and depends on the type of business of state duties and are not subject to the of the employer and the category of Work permit exemptions foreign labour quota. the foreign employee. The amount of To encourage foreign investment, state duty ranges from approximately However, before hiring a foreign Kazakhstan offers various exemptions US$950 to US$3500 depending on specialist to work in Kazakhstan under from the requirement to obtain work the sector and the category of the ICT, the local host entity must carry out permits for foreign workers. Exemptions employee. a search for suitable candidates on the apply, for instance, to Kazakh labour market and obtain a work Intra-corporate transfer • Business immigrants who come permit only if no suitable candidates are to Kazakhstan to engage in An intra-corporate transfer (ICT) is found. For each manager or specialist entrepreneurial activities a temporary transfer of a foreign work permit received under ICT, the individual from a legal entity established employer must fulfil one of a number in the territory of a WTO state other of special conditions (e. g., creation of than Kazakhstan to a branch, subsidiary or representative office in Kazakhstan. For the purpose of obtaining a work permit under ICT, foreign individuals are classified into: • Specialists • Managers • Executives Under the ratio requirement for ICT, the number of foreign employees must not exceed 50% of the total number of managers­ and specialists. No ratio requirement applies in relation to ex- ecutives. A foreign individual engaged under ICT remains employed by the home company but must comply with the requirements of the host employer in terms of work schedule and health and safety requirements. The foreign in- dividual must meet relevant qualification requirements and have at least one year of work experience with the entity based in a WTO member state. Local authori- ties issue a work permit under ICT for

Doing business in Kazakhstan 23 • CEOs of local branches or • Employees of companies registered in Sanctions for non-compliance representative offices of foreign one of Kazakhstan’s 10 free economic with immigration legislation companies and CEOs and deputy zones (FEZs) to implement projects Kazakh law imposes severe sanctions CEOs of local wholly foreign-owned worth more than KZT 2.917 million on inviting parties and foreign citizens companies (in 2021) or companies contracted for non-compliance with immigration by an FEZ resident, for the period of • CEOs of companies that have legislation. Administrative sanctions construction and installation work entered into agreements with the imposed on a company may be as high in the FEZ and during the first year to invest as US$6,900 (per foreign individual per after the commissioning date of more than US$50 million in the violation). In the worst-case scenario, the project facility, in accordance country, and CEOs of local companies the individual may be subjected to with the list of employee categories running investment projects in key administrative detention for up to 15 and numbers adopted by a special industries under agreements with days or administrative deportation from committee of competent authorities local competent authorities the country and the company may be • Individuals working in a national man- banned from hiring foreigners for up to • Nationals of member countries of the aging holding company in positions 1 year, i. e., no work permit will be issued Eurasian Economic Union regardless not lower than heads of departments, and invitations from the company will of their position or the duration of holding a higher education and not be accepted for visa applications. their employment in Kazakhstan possessing the required supporting In addition, a foreign individual must • Foreign nationals engaged by documents, and individuals hired by a personally attend the administrative participants or bodies of the Astana national managing holding company court in connection with an immigration International Finance Centre (AIFC) as members of the board of directors offence. Such foreign individuals are not • Individuals working in the Astana • Employees sent on business trips for allowed to enter Kazakhstan for 5 years Hub international technology park a period or periods totalling no more after administrative deportation from or hired by park participants in the than 120 calendar days in the course Kazakhstan. positions of managers and specialists of a calendar year. Residence permits with a higher education Kazakhstan issues residence permits. • Managers and professionals with a There is no quota system for immigration higher education working either with into Kazakhstan under residence permits. local companies that have entered into contracts to implement investment projects in priority areas or with companies in the architectural, town- planning and construction industries contracted by such an investor, for the period until the end of the first year after the commissioning date of the project facility, or as skilled workers in accordance with the list of occupations and employee numbers approved as part of investment contracts

24 Doing business in Kazakhstan Family members Incentives for investors 2. Priority investment projects The spouse of a holder of a Kazakh work involving the creation of new With the aim of creating a favourable permit does not automatically receive production facilities with investments investment , Kazakhstan provides the same type of work permit. If he or of no less than US$13,858,177 various benefits for investors depending she wishes to take up employment, a or the expansion and upgrading on their area of activity. work permit application must be filed of existing production facilities with investments of no less than independently. Investment contract US$34,645,443 Secondment In order to enjoy certain investment incentives, the investor must enter 3. Special investment projects The secondment of foreign personnel is into an investment contract with the implemented by legal entities currently a major issue on the Kazakh Investment Committee of the Ministry registered as participants of special job market. of Foreign Affairs of the Republic of economic zones, or by owners of a The Tax Code provides a safe harbour Kazakhstan (the “Committee”). The free warehouse, or by legal entities whereby a foreign entity providing form of investment contract is approved that have entered into an agreement secondees from outside Kazakhstan may by a Government Resolution. on the industrial assembly of motor avoid being taxed in Kazakhstan. Certain vehicles. It is important to note that the conditions must be met for this to apply. investment contract must be concluded All such investment projects must fall Under secondment, the local host with a Kazakh legal entity, which may within the list of priority areas of activity company acts as a tax agent in relation be a subsidiary of a foreign company. approved by the Kazakh government. to the income of the seconded personnel The term of the investment contract Below we outline types of incentives and is responsible for shadow payroll is determined by the effective period provided to investors depending on the tax calculation and reporting, including of the investment incentives to be type of investment project: personal income tax and social tax provided. 1. Regular investment projects liabilities. However, it is important The Entrepreneurial Code of Kazakhstan • exemption from customs duties to note that, besides tax legislation, specifies three types of projects that the secondment must also comply may be implemented under investment • exemption from import VAT with relevant Kazakhstan labour law contracts: • in-kind grants (free land lease, requirements. 1. Regular investment projects title to land plots and equipment) involving the creation of new or up to a value not exceeding 30% EEY can assist with expansion and upgrading of existing of total investment (i) the structuring of a secondment production facilities, including arrangement that meets the applicable 2. Priority investment projects facilities created, expanded and/ legislative requirements; • exemption from customs duties or upgraded through public-private (ii) drafting secondment agreements partnerships, including concession and other mandatory documents; • in-kind grants (free land lease, projects. (iii) application for required permits, title to land plots and equipment) registration, etc. in Kazakhstan up to a value not exceeding 30% of total investment

Doing business in Kazakhstan 25 • tax incentives, and specifically: concluded for one and the same mineral Special economic zones processing project or production facility. • 100% CIT relief for up to 10 Special economic zones (SEZ) are years for new production Furthermore, the state grants specialized territories of Kazakhstan facilities and 3 years for the investment incentives based on with defined boundaries and a special upgrading of existing production the principle of reciprocity, i. e., the regulatory regime designed to support facilities subsurface user may be required to certain priority activities. The list of fulfil a number of social and investment priority activities is set by an Order • zero rate land tax for up to obligations, such as: of the Minister for Investment and 10 years Development. The Order specifies • the creation and preservation of • zero rate for up to priority activities for 13 (thirteen) jobs for citizens of the Republic of 8 years different SEZs in Kazakhstan: Kazakhstan in the extractive and/or • investment subsidies if the processing industries 1. Astana, New City (Nur-Sultan) — investments are no less than construction of industrial facilities • the creation, expansion and/or US$34,645,442 (compensation and infrastructure upgrading of processing facilities of up to 30% of expenditure 2. National Industrial Petrochemical on construction works and • obligations relating to the volume and Technopark (Atyrau ) — procurement of equipment during level of processing of solid minerals manufacture of petrochemical the implementation stage). • obligations relating to the volume products and construction of industrial facilities 3. Special investment projects of products sold as raw materials to entities operating on the domestic 3. Morport Aktau (Mangystau • exemption from customs duties market region) — metallurgy, construction • exemption from import VAT • the financing of programs of Kazakh of industrial facilities educational institutions for the train- Agreement on the processing of solid 4. Innovative Technologies Park ing of specialists in environmental minerals (Almaty) — IT services protection and applied sciences The Subsurface Use Code currently 5. Ontustik (South Kazakhstan provides investment incentives for • the financing of the construction and/ region) — production of textile and subsurface users that implement a or reconstruction of social and/or other materials priority investment project involving cultural facilities 6. Saryarka () — the processing of solid minerals in The termination of an agreement on the metallurgy, construction of Kazakhstan and have concluded relevant processing of solid minerals also entails industrial facilities agreements with the Committee. the termination of investment incentives To enjoy investment incentives, granted. 7. Khorgos Eastern Gates subsurface users must invest no less () — production of than US$48,503,620 and apply to the food, textiles, non-metallic minerals Committee to conclude an agreement and other materials on the processing of solid minerals 8.  (Pavlodar) — manufacture through a negotiation and appraisal of chemical and petrochemical process. It should be noted that only materials and construction of one processing agreement may be industrial facilities

26 Doing business in Kazakhstan 9.  Chemical Park (Taraz) — development of export-oriented • 100% relief on land tax/land use manufacture of chemicals and manufacturing fees non-metallic minerals 13. Qyzyljar (Petropavlovsk) — • 100% property tax relief 10. Astana-Technopolis (Nur-Sultan) — production of food, electronics, • 100% CIT relief production of food, pharmaceuticals, mechanical engineering and • 0% VAT on supplies of goods to the machinery and other products and medical services SEZ construction and commissioning of • VAT exemption for supplies of infrastructure facilities Companies registered as participants of an SEZ enjoy the following benefits: goods in the territory of the SEZ 11.  (Turkistan) — • 100% social tax relief (only for the • the SEZ territory is classed as a free construction of infrastructure, Innovative Technologies Park) customs zone industrial and social facilities • free land lease • simplified procedures for engaging 12. ICBC Khorgos (Almaty region) — foreign labour. development of cross-border • tax incentives (subject to certain trade and economic cooperation, criteria), and specifically:

Doing business in Kazakhstan 27 Astana Hub International Technology Park The Astana Hub International Technology Park was conceived as part of the Digital Kazakhstan national program. The Astana Hub is a designated and equipped area that provides a favourable environment for start-ups, including co-working, exchange of experience, assistance in attracting investors and expert advice. In order to be registered as a participant in the Astana Hub, Kazakh or foreign legal entities must submit an electronic application together with supporting documents, including a business plan. The applicant must be involved in information and communication technology (ICT) activities. • It is not a subsurface user or SEZ marketing, engineering and It should be noted that, until 1 January participant data security services and work 2024, Astana Hub participants are not connected with the creation of data • It is not a payer of tax. required to be located in the territory of processing centres (unless payable the Astana Hub. Astana Hub participants may enjoy the to non-residents registered in tax following benefits: haven jurisdictions) In order to be registered as an Astana Hub participant, an applicant must meet • tax incentives (subject to certain • 5% (instead of 15%) withholding tax the following requirements: criteria), and specifically: on capital gains and dividends on shares and interests in Astana Hub • It is a legal entity • 100% CIT relief until 1 January 2029 participants • It does not have branches or • PIT exemption for both local and • VAT exemption for imports of separate corporate units (other than foreign employees of Astana Hub certain goods and exemption representative offices) participants until 1 January 2029 from reverse charge VAT for • It does not implement priority or • exemption from social tax — services acquired by Astana hub strategic investment projects under expected to be applicable only to participants an investment contract income of foreign employees of • VAT exemption until 1 January Astana Hub participants • 50% or more of its shares are not 2029 for goods and services directly or indirectly owned by the • withholding for produced and supplied by Astana government, a national company or non-residents on royalties and Hub participants. subsidiaries of such a company other income paid by Astana Hub participants for consulting,

28 Doing business in Kazakhstan AIFC Foreign partnerships and companies As well as work permit exemptions for The AIFC was established to provide a may be registered in the AIFC in the foreign workers, the AIFC also provides: following legal forms: favourable environment for investors. • Commercial and civil dispute So far, the AIFC has succeeded in its • Recognised Company resolution through the AIFC Court or main mission of becoming a hub for the International Arbitration Centre; foreign and local investors and various • Recognised General Partnership • An exchange platform — the Astana financial, market and ancillary service • Recognised Limited Partnership providers by establishing common law as International Exchange (AIX) — for the governing law within the AIFC and a • Recognised Limited Liability corporations (listing), state bodies legal framework similar to those of well- Partnership ( issue) and and large investors interested in various known international financial centres, Certain activities, such as financial financial instruments. such as the Dubai International Financial services, market activities and ancillary Centre. services (legal, audit, accounting, The AIX has quickly drawn attention There are two options for establishing a consulting, ), are subject to from other countries in view of its legal presence within the AIFC: licensing in the AIFC. simplified arrangements for the provision of financial services. i. registration of a new legal entity or AIFC participants may enjoy the following benefits (subject to certain The Astana Financial Services Authority ii. recognition of existing legal entities as criteria being met): (AFSA) offers an arrangement whereby AIFC participants. firms may provide financial services • CIT exemption until 1 January 2066 on the AIX as a Recognised Non-AIFC New AIFC legal entities may be for certain financial services specified Member (RNAM) (i. e., a legal entity registered in forms provided for in in AIFC law that are provided in the located in a jurisdiction other than common law, such as: territory of AIFС the AIFC may apply to the AFSA to • Limited Partnership • PIT exemption until 1 January 2066 be recognised as a RNAM). The main • Limited Liability Partnership for expatriate employees of AIFC advantage of RNAM status is that it participants enables foreign businesses to avoid a • General Partnership lengthy application process when they • СIT and PIT exemption until only seek access to the AIX as a trading • Private Company 1 January 2066 for dividends and member. • Public Company capital gains on securities officially listed on a stock exchange and shares • Investment Company in licensed AIFC participants • Special Purpose Company • VAT exemptions for certain financial • Non-Profit Incorporated Organization services specified in AIFC law that are provided in the territory of AIFС • Protected Cell Company • Exemption from property tax • Restricted Scope Company • Exemption from land tax • Foundation • Simplified visa regime for foreign citizens coming to Kazakhstan to work for AIFC participants.

Doing business in Kazakhstan 29 Overview of tax rules 4in Kazakhstan

30 Doing business in Kazakhstan In the sections that follow we Personal income tax • The individual is a Kazakh citizen or has permission to live in Kazakhstan outline the most significant (“PIT”) on a permanent basis taxes in Kazakhstan. Payers • The individual has a spouse or close There are a number of Residents are taxed on their worldwide relatives who reside in Kazakhstan other less significant taxes, income. Non-residents are taxed on • The individual and/or his or her Kazakh-source income only, regardless spouse and/or members of his or such as assets tax, land of where it is paid. Income is deemed to her family own, or otherwise have at tax, payments for the be from a Kazakh source if it is derived their disposal, immovable property from work performed in Kazakhstan. in Kazakhstan that is permanently use of various resources Kazakh-source income also includes available for residence. such as radio frequencies, interest income from residents and non-residents that have a permanent Double tax treaties may lay down environmental taxes and establishment in Kazakhstan and different rules for determining tax residency. a number of taxes on dividends from resident legal entities. “subsurface users”, i. e., oil, For tax purposes, individuals are considered residents if they are present The tax treatment of various types of gas and mining companies. in the country for not less than 183 days income is described below. It is important to carry out in any consecutive 12-month period ending in the current tax year. Employment income a thorough review of any There is a separate investment Employment income consists of all proposed business activity to residency program offered by the compensation received by an employee, whether in cash or in kind (including determine the actual taxes AIFC whereby individuals may qualify as AIFC investment residents if they employee shares), subject to minor that apply to it. meet the program requirements and exceptions, regardless of where the are present in the country for not less income is paid. than 90 calendar days (including the Under Kazakh law, any income paid days of arrival and departure) in any for work performed in Kazakhstan consecutive 12-month period ending in (regardless of whether it is paid from the current tax period. inside or outside Kazakhstan) is deemed Kazakh citizens or holders of residence Kazakh-source income subject to permits are always considered residents statutory payroll of Kazakhstan if their centre of vital by the tax agent (i. e., a Kazakh entity interests is located in Kazakhstan. An or a branch or representative office of individual is deemed to have his or her a foreign entity which is responsible for centre of vital interests in Kazakhstan calculating, withholding and remitting if all the following conditions are payroll-based taxes/social payments). simultaneously met: In order to comply with local require- ments, host companies must run a shadow payroll to enable tax reporting

Doing business in Kazakhstan 31 of income paid abroad for work done in Exempt income Capital gains Kazakhstan. Under the shadow payroll Certain items are exempt from tax, The Kazakh Tax Code defines a capital mechanism, foreign income is reported including the following: gain as the difference between the for Kazakh tax purposes only while net sale price (disposal value) and the pay is received from the home-country • Business trip per diems within set acquisition price (base cost), supported employer. limits and reimbursement for certain by documents. business trip expenses Companies that engage freelancers Income derived from the disposal of (not registered as individual • Accommodation and meal expenses shares acquired through the exercise entrepreneurs) are obliged to act as tax within set limits for shift workers of a stock option equals the positive agents (as defined above) and withhold while they are at work difference between the sale price and PIT, contributions and social • The excess of the market value of the acquisition price. The acquisition medical insurance contributions from shares covered by a stock option at price includes the exercise price of the income paid to them. the time of exercise over the exercise option and the option premium. Self-employment and business income price of the option In the case of sales of property located Income of Kazakh citizens engaged in • Alimony in blacklisted low-tax jurisdictions, the self-employment activities (individual taxable amount is determined as the full • Medical expenses within set limits entrepreneurs) is subject to income sale price (i. e., the cost of acquisition is tax. Tax is levied on an individual’s • Dividends and interest on securities non-deductible). annual business income, which if, at the time of the accrual of such Capital gains are subject to tax at the consists of gross income less expenses dividends or interest, the securities rates shown in the “Rates” section of incurred in earning that income. To be are on the official list of a stock this guide. able to deduct expenses, individual exchange operating in Kazakhstan entrepreneurs must be registered Since capital transactions of individuals • Dividends and capital gains on shares with the tax authorities and provide are not currently adequately addressed held for over three years if certain supporting documentation for the in Kazakh tax legislation, it is not other conditions are met expenses concerned. The tax rates for possible for capital losses to be deducted self-employment income are the same • Capital gains derived from securities from capital gains for tax purposes or as those for employment income as that are listed on a stock exchange for capital losses to be carried backward shown in the “Rates” section, except for operating in Kazakhstan at the date or forward to other tax periods. individual entrepreneurs who apply a of sale Consequently, income recognised special taxation regime. • Interest income on deposits paid to for tax purposes may significantly Investment income tax resident individuals by licensed exceed income recognised in financial organizations in Kazakhstan statements prepared by a financial Investment income is normally included institution. in taxable income. The tax rates are • Income from Kazakh state securities shown in the “Rates” section. • 90% of the taxable income of an Controlled Foreign Company (CFC) Some types of investment income are employee if that income is less than Tax resident individuals who directly, exempt from tax (see the “Exempt 25 MCI (KZT 66,275/approximately indirectly or constructively control income” section). US$173) per month non-resident legal entities and/or other types of organizations subject to certain

32 Doing business in Kazakhstan conditions are liable to 10% PIT on the Rates CFC’s retained earnings and are subject The following tax rates apply for resident and non-resident individuals depending on to separate tax reporting obligations. the type of income: See the “Controlled Foreign Company (CFC) rules” section for more details. Type of income Tax rate 10% Deductions Employment income of residents and non-residents taxed by the local employer/host company The taxable amount of a tax resident individual’s income may be reduced by Income of residents who receive income under a service agreement 10% the minimum monthly wage, which has Income of lawyers and private notaries 10% been set at KZT 42,500 (approximately 10% US$100) for 2021. If an employee’s Capital gains, interest and winnings of residents taxable income for a particular month Dividends received by residents from Kazakh companies 5% is below the minimum monthly wage, 15% the unused part of the deduction may Capital gains, dividends, interest and royalties paid to non-residents by Kazakh legal entities be carried over to later months within the year. This does not apply where an Any other Kazakh-source income paid to non-residents 20% individual changes workplace during a that is not received from a tax agent (local legal entity) tax period, i. e., the individual may not offset an excess arising at the previous Income received in foreign currency is converted into tenge at the exchange rate workplace against income earned at the current on the last business day preceding the date of payment. new workplace. Other deductions include the following: • Compulsory pension fund contributions • Compulsory employee social medical insurance contributions • Voluntary pension fund contributions made by the individual for his or her own benefit or by a tax agent under Kazakh pension law • Medical expenses supported by documents within set limits • Payments on mortgages with specific banks

Doing business in Kazakhstan 33 Tax registration of foreign nationals Social tax Monthly social tax liability is reduced in Kazakhstan by the monthly amount of compulsory The most common cases in which a Social tax is payable by employers. It is social insurance contributions (see foreign national must be registered as a an additional imposed on the “Social insurance contributions” taxpayer in Kazakhstan are as follows: employers that is not for the section). payment of social benefits to employees. • When opening accounts with local Social tax must be remitted to the state banks The tax base for social tax is the amount budget on a monthly basis by the 25th of income paid by the employer to its of the month following the tax period. • On receiving Kazakh-source income employees. Exclusions include: not taxed at source in Kazakhstan Mandatory pension fund contributions • Payments made by way of grants • On acquiring Kazakh tax resident An employer must withhold and pay status. • Compulsory pension fund pension fund contributions on a monthly contributions basis at the rate of 10% on the gross Tax registration must take place at • Compulsory employee social medical salaries of employees (local citizens and the foreigner’s location of residence. foreigners holding a residence permit). A range of documents must be insurance contributions submitted. By law, tax registration Employers must calculate social tax at In 2021, pension fund contributions should take three business days; a flat rate of 9.5% of gross income, less are not charged on monthly income in practice, it may take up to a week.. exempt amounts. The minimum tax in excess of 50 times the minimum base for social tax per employee is the monthly wage (KZT 2,125,000/ minimum monthly wage. approximately US$5,550). Pension fund contributions are deductible for PIT and social tax purposes.

34 Doing business in Kazakhstan The Kazakh Law on Pension Provision contributions at their own expense contributions to the Social Medical also requires employers to pay at 3.5% of the gross salaries of the Insurance Fund from income paid to additional professional pension employees concerned, whether or employees (Kazakh citizens, repatriated fund contributions at their own not they have a Kazakhstan residence ethnic Kazakhs, citizens of the Eurasian expense for employees working in permit. Economic Union and foreign citizens certain occupations in 17 industry holding a Kazakhstan residence sectors, including mining, oil and gas, Mandatory social medical insurance permit). These employee contributions pharmaceutical and consumer goods Employers must make employer are deductible for PIT and social tax manufacturing. The contributions are contributions to the Social Medical purposes. payable at the rate of 5% on the gross Insurance Fund on a monthly basis Contributions must be withheld monthly salaries of such employees. at the rate of 2% (3% from 2022) of income paid to employees (applicable at the rate of 2% of the employee’s Tax agents who pay income to to Kazakh citizens, repatriated ethnic income. individuals under civil contracts must, Kazakhs, citizens of the Eurasian In 2021 income subject to employer in addition to 10% PIT, withhold and pay Economic Union and foreign citizens and employee contributions to the 10% pension fund contributions on the holding a residence permit). Social Medical Insurance Fund is capped gross amount of that incomex. In addition to making employer at 10 times the minimum monthly Social insurance contributions contributions, starting from 2020 wage (KZT 425,000/approximately Employers must pay social insurance employers must withhold employee US$1,110) per month. contributions, which form part of social tax, at the rate of 3.5% of income paid to employees (Kazakh citizens and foreigners holding a residence permit). In 2021, social insurance contributions are not charged on monthly income in excess of 7 times the minimum monthly wage (KZT 297,500/approximately US$780). The minimum monthly tax base for social insurance contributions per employee is the minimum monthly wage. Social insurance contributions are expected to be charged at a flat rate of 5% starting from 2025. Under the Eurasian Economic Union Agreement of 29 May 2014 between Armenia, Belarus, Kazakhstan, Kyrgyzstan and the Russian Federation, employers that employ citizens of Eurasian Economic Union member states under employment contracts are required to pay social insurance

Doing business in Kazakhstan 35 Tax filing at which Kazakh tax residency status Kazakh tax returns must be filed by the arises), the foreign individual must following tax resident individuals: Tax filing by a tax agent report earnings attributable to working 1. Individual entrepreneurs As mentioned above, any employment days in Kazakhstan, even if it is only a income, including benefits in kind, paid few days. For this purpose, the individual 2. Individuals engaged in private for work performed in Kazakhstan concerned would be required to obtain practice, such as notaries, lawyers (irrespective of the place of payment) an Individual Identification Number in and enforcement officers must be taxed and reported by the local Kazakhstan and file a personal income 3. Individuals who receive property tax agent. tax return in which he or she may claim income a treaty exemption (if there is a double A tax agent must withhold PIT, tax treaty with Kazakhstan). If that 4. Tax resident individuals who receive pension fund contributions and threshold is exceeded, i. e., if the foreign income not taxed at source in employee medical social insurance individual spends 183 or more calendar Kazakhstan, including income from contributions on a monthly basis no days in Kazakhstan, the local customer outside Kazakhstan later than the date on which income is will become responsible for taxing the paid. PIT, pension fund contributions, 5. Tax residents who are Kazakh foreign employee’s salary and must run professional pension fund contributions citizens, repatriated Kazakhs or a shadow payroll (i. e., whereby the local and employer and employee medical individuals holding a residence company processes salary paid outside insurance contributions must be paid no permit where they have the following Kazakhstan through local payroll for later than 25th of the month following types of property: Kazakh tax purposes). In this case, the the month in which employment income local customer would need to obtain all • real estate, if the real estate was paid. Social tax and social insurance required supporting documents. Should itself or rights therein or contributions must be paid by the 25th it fail to obtain those documents, it transactions involving the real of the month following the month in would be obliged to apply PIT to 80% of estate are subject to state or which employment income accrued. the service fee charged by the foreign similar registration/reporting The tax agent must file a PIT and social service provider whose employees come requirements under the laws tax declaration (Form No. 200.00) on to Kazakhstan. of a foreign state a quarterly basis by the 15th of the • securities whose issuers are second month following the reporting Tax filing by individuals registered outside Kazakhstan quarter. The form also includes pension Where there is no tax agent in fund contributions, professional pension Kazakhstan, or where specifically • equity interests in legal entities fund contributions, mandatory medical provided in tax law, resident and non- registered outside Kazakhstan. insurance contributions and social resident individuals are responsible for insurance contributions. calculating PIT obligations and filing a Administrative sanctions for Kazakh tax return. The filing deadline individuals There is also a special set of rules for a Kazakh tax return is 31 March of regulating the taxation of foreign Failure to submit a PIT return on time: the year following the reporting year, nationals in situations where a foreign and any income tax liability must be • First time — a warning service provider sends an employee to settled within 10 calendar days of the a Kazakh customer for a short period • Repeat violation within a year — filing deadline. of time. Essentially, for the first 183 a fine of 15 MCI (KZT 43,755/ calendar days (i. e., up to the point approximately US$100)

36 Doing business in Kazakhstan Concealment of taxable items: • A fine of up to 3,000 MCI Failure to remit, withhold or pay (Approx. US$20,600), or mandatory pension fund contributions in • First time — a fine of 200% of tax full and on time: payable on each concealed taxable • Correctional labour to the same item amount, or • First time — a warning • Repeat violation within a year — • Community service for up to • Repeat violation — up to 50% of the a fine of 300% of tax payable on each 800 hours, or amount of contributions not remitted, concealed item withheld or paid on time. • Restriction of liberty for up to Concealment of information about 3 years, or Failure to remit or pay social insurance contributions and mandatory medical property outside Kazakhstan and funds • Imprisonment for up to 3 years in foreign bank accounts: insurance contributions in full and on Administrative sanctions for payroll time: • First time — a fine of 100 MCI violations (KZT 291,700/approximately • First time — a warning Understatement of taxes in tax returns — US$685) up to 50% of the understated amount of • Repeat violation — up to 50% of the • Repeat violation within a year — PIT and social tax amount of contributions not paid or a fine of 200 MCI (KZT 583,400/ remitted on time. Non-withholding or incomplete approximately US$1,370) withholding of taxes — up to 50% of the Concealment of taxable items: Failure to pay tax and other mandatory PIT not withheld • First time — a fine of 200% of tax payments owing to a failure to submit Failure to submit PIT returns on time: payable for each concealed taxable a tax return or the submission of item a tax return with knowingly false • First time — a warning • Repeat violation within a year — information if this caused tax to be • Repeat violation within a year — a fine of 300% of tax payable for each underpaid by more than 20,000 MCI a fine of 70 MCI (KZT 204,190/ concealed item (KZT 58,340,000/approximately US$480) US$137,200):

Doing business in Kazakhstan 37 Corporate income tax For certain activities (sea freight Deductions include all business-related shipping, bareboat charter and time and profit-oriented expenses plus (CIT) charter services, trading of goods via a number of other minor items. In CIT is imposed on the worldwide income the Internet, screening of national films addition to normal operating expenses, of resident entities and Kazakh-source in cinemas, activities under priority examples of deductible expenses include income of non-resident entities. The investment projects or in special interest (up to the thin capitalization basic principles are consistent with economic zones, etc.), CIT may be limit or the amount actually paid for those applied in most developed reduced by 100% (see the “Incentives certain borrowings), foreign exchange economies. However, the required for investors” section for details). losses, certain entertainment expenses standards of supporting documentation up to a limit of 1% of taxable payroll Taxable income are particularly high in Kazakhstan. and charitable expenses (up to 4% Taxable income is calculated as of taxable income). This list is not Payers aggregate annual income after exhaustive. Losses on entrepreneurial Residents are taxed on their worldwide certain adjustments minus statutory activities and from the sale of Group income, non-residents on income from deductions. Aggregate annual income I fixed assets (such as buildings) may Kazakh sources. Non-residents doing includes practically all forms of income, be carried forward over the following business in Kazakhstan through a per- including capital gains. 10 calendar years inclusively and manent establishment (PE) are taxed on Certain types of income are excluded offset against taxable income for those the PE’s profits, which are calculated in from taxable income, including dividends years. Capital losses from the sale of essentially the same way as for resi- and capital gains on shares held for over securities and other non-depreciable dents. Non-residents that derive Kazakh- three years if certain other conditions assets may generally be offset against source income otherwise than through are met. corresponding capital gains (with certain a PE are taxed by withholding (see the exceptions). “Withholding tax” section below).

38 Doing business in Kazakhstan Tax depreciation Tax legislation provides incentives in Tax rates and compliance To qualify as a fixed asset for tax the form of tax depreciation allowances The standard rate of CIT is currently purposes, an item must be defined as for fixed assets. For example, the value 20% of taxable income. In addition, net such in the entity’s IFRS accounts (with of production buildings and facilities, income (after the deduction of CIT) certain exceptions). machinery and equipment that are of a non-resident’s PE (branch) in brought into operation for the first Kazakhstan is subject to branch profit For tax depreciation purposes, fixed time in Kazakhstan and are to be used tax at the rate of 15%. This is usually assets are split into four groups. Assets in business activities for at least three reduced by tax treaties. may be depreciated at any rate (stated years may be depreciated before the in the entity’s tax register) up to the commencement of operation when The tax period is a calendar year. The maximum rates indicated in the table construction expenses are incurred or CIT declaration deadline is 31 March below. in equal amounts during the first three of the year following the reporting period. As a rule, all taxpayers (with The following items are not classed as years of operation. Capital costs for certain exceptions) are subject to amortizable fixed assets: the modernization and reconstruction of such fixed assets may be deducted the CIT advance payment procedure, • Land when they occur. These incentives do which requires them to estimate their tax liability for the year and pay tax in • Intangible assets with an indefinite not apply to participants in special monthly instalments no later than the useful life economic zones or producers of alcohol, tobacco or agricultural products, or to 25th of the current month. • Construction in progress, etc. assets used in subsurface development Expenses actually incurred for the use, activities or priority investment projects. EY offers the following services in the repair, maintenance and liquidation of However, subsurface users may apply area of CIT: fixed assets are defined as “subsequent double depreciation rates to assets • Helping companies with all aspects costs” and are generally deductible in brought into operation for the first time of tax compliance the tax period when they are actually provided they will be used in business incurred (unless capital in nature). activities for at least three years. • Tax accounting and risk advisory services • Drafting and review of mandatory Maximum Group Type of fixed asset tax accounting policies depreciation rate

I Buildings and structures (except for oil and gas wells and 10% • A comprehensive tax litigation transmission facilities) service, including, where permitted, representation of taxpayers in court II Machinery and equipment (except for machinery and 25% equipment for oil and gas production, computers and data processing equipment)

III Computers, software and data processing equipment 40%

IV Fixed assets not included in other groups, including oil and gas 15% wells, transmission facilities, and machinery and equipment for oil and gas production

Doing business in Kazakhstan 39 Controlled Foreign Company (CFC) Under amendments to the Kazakh tax (WHT) rules Code effective from 2021, an entity is (other than PIT) Kazakh tax law has controlled foreign not regarded as a CFC if it is registered company (CFC) rules that affect the in a country that has a tax treaty with WHT applies to most types of Kazakh- Kazakh taxation of groups ultimately Kazakhstan and in which the nominal source income paid to non-residents owned by Kazakh residents. Under the income tax rate is greater than 15%. that are not registered for tax purposes rules, a Kazakh resident must report any The list of such countries is to be in Kazakhstan and even to some who CFC (as defined below) to the Kazakh approved by the relevant authorized are if due care is not taken. The rules tax authorities and an appropriate part body no later than December 31 of the are complex and inconsistent, and of the CFC’s profit for the reporting year following the reporting period. there are some instances in which WHT period must be included in the resident’s Also excluded from the definition of a could apply to payments that involve aggregate annual income for Kazakh CFC are foreign entities that have a total no presence in Kazakhstan. It is vital income tax purposes (CIT or PIT income of less than about USD 1 million, to have a thorough understanding of accordingly). The CFC rules prescribe are in a loss-making position or are how WHT may affect your business. certain deductions, exemptions and owned by AIFC participants. There are also significant administrative tools for the elimination of double requirements that must be met in taxation. There are also new reliefs, including order to enjoy benefits afforded by tax an exemption for CFC profits in which treaties. Under the Kazakh Tax Code, an entity active income accounts for at least 80% (a legal entity or another form of and the reduction of CFC profits by Payers business activity, such as a trust) is amounts of Kazakh-sourced income. Tax agents withhold tax from a non- treated as a controlled foreign company resident’s gross Kazakh-source income. Some of the above reliefs are available if (i) 25% or more of interests or shares Any tax-registered entity that pays retrospectively (e. g., from 2018 or in the entity is directly, indirectly or Kazakh-source income is potentially 2020). constructively owned by a Kazakh a tax agent. resident, or if a Kazakh resident has While the documentation requirements Taxable income direct, indirect or constructive control for claiming CFC tax relief have been over the entity; (ii) the effective tax rate tightened, there are also beneficial Taxable income includes (but is not of the entity is less than 10% according changes, such as the exclusion of limited to): to financial statements for the current certain types of “paper income” when • Income of non-residents from the and two previous periods, or if the entity calculating the financial profit of a CFC. (or a legal entity responsible for keeping sale of goods or performance of work accounts of its income and expenditure or services in Kazakhstan or managing its assets) is registered in a • Income from management, financial blacklisted jurisdiction. (with some exceptions), consulting, engineering, legal (except for representation in court and notary services) and auditing services performed outside Kazakhstan • Any income of tax-haven entities, regardless of where the underlying operations take place

40 Doing business in Kazakhstan • Capital gains on sales of shares or a refund (which is a complex and time- from WHT on remuneration for services: interests in Kazakh entities or foreign consuming process with an uncertain (i) income from the provision of services legal entities that derive most of their outcome). must not be exempt and must not be value from Kazakhstan deductible from or otherwise adjust the In addition, the Multilateral Instrument tax base of the entity concerned and (ii) • Capital gains on sales of Kazakh (MLI) entered into force in Kazakhstan the nominal tax rate in the jurisdiction of property that is subject to from 1 October 2020 and should affect its incorporation must be at least 15%. registration. all of its 55 DTTs. However, some of For entities in tax treaty partner countries those treaties will not be subject to MLI Certain types of income are exempt not covered by the MLI, additional as certain countries did not include from withholding tax, including divi- requirements are introduced regarding DTTs with Kazakhstan in their MLI dends and capital gains on shares held beneficial ownership of income. accession documents (e. g., Germany and for over three years if certain other Switzerland), while others have not yet All this means that, whereas previously, conditions are met. signed/ratified the MLI. the application of treaty benefits to Tax rates and compliance transactions with foreign entities was Kazakhstan acceded to all the minimum a relatively straightforward matter, the Most double tax treaties (DTTs) standards of the MLI. In terms of adoption of the MLI has made it essential concluded by Kazakhstan provide either limitation of benefits, Kazakhstan to consider additional requirements for exemption from Kazakh WHT or adopted the simplified limitation of relating to supporting documents. for reduced WHT rates of 5% to 10% benefits (SLoB) provision, which may subject to certain conditions being met. substantially limit tax benefits for holding WHT is remitted by tax agents. The However, these benefits are also subject and financing structures involving general time limits for remittance are: to documentation rules laid down in the intermediary companies. However, since • For amounts accrued and paid, no later Tax Code. The rules are very specific as only a few countries (Russia, than 25 calendar days following the to the documentation required, and it is and India) have decided to apply SLoB month in which payment was made generally recommended that a tax agent as well, most of Kazakhstan’s DTTs will should be in possession of the relevant be subject to the principal purpose test • For amounts accrued but not yet paid, documentation at the time payment is (PPT). if they are deducted for CIT purposes, made (or by the end of the tax year or no later than 10 calendar days At the same time, amendments to the 31 March of the following year at the following the filing deadline for CIT Kazakh Tax Code effective from 2021 lay latest) if treaty relief is to be applied. returns down additional requirements for foreign Otherwise, tax must be withheld in full entities based in treaty partner countries • For prepayments, no later than 25 and the payer must subsequently claim covered by the MLI in terms of exemption calendar days after the end of the month in which income accrued to the non-resident. Type of income Rate of WHT Interest, dividends, capital gains and royalties 15% Under the Tax Code, tax agents must submit a WHT return by the following Insurance premiums under insurance risk agreements 15% deadlines: (i) for Q1-Q3: no later than Income from international transportation services and insurance 5% the 15th of the second month following premiums under risk reinsurance agreements the quarter in which a WHT obligation Income of an entity registered in a 20% arose, (ii) for Q4: no later than Other income, including income from the provision of services 20% 31 March of the following year.

Doing business in Kazakhstan 41 Value added tax Even if an entity is not required to • A VAT declaration is not submitted register for VAT purposes, it may usually within six months of the due date European Union-style VAT applies in do so voluntarily by applying to the established by the Tax Code Kazakhstan. The VAT rate has fallen appropriate tax committee. progressively from 20% in the late • The VAT payer fails to submit a 1990s to 12% currently. Deregistration written explanation of the reasons for absence at its premises during a tax A VAT payer may apply for VAT Payers and registration inspection deregistration if the following conditions All taxpayers registered for VAT are simultaneously met: • The sole founder or head of a legal purposes are required to charge VAT on entity or an individual entrepreneur is their taxable supplies and calculate and • Taxable turnover for the calendar inactive, has unserved or unexpunged report their VAT obligations. year preceding the year in which convictions, etc. the application is submitted did not Taxpayers are required to register exceed 30,000 MCI (approximately • The VAT payer is declared inactive for Kazakh VAT purposes if their US$208,000) • The registration/re-registration of total turnover in a calendar year the VAT payer is declared invalid by exceeds 30,000 MCI (approximately • Taxable turnover from the beginning a court. US$208,000). of the current calendar year in which the application is submitted did not VATable turnover The deadline for VAT registration is exceed 30,000 MCI (approximately 10 business days after the end of the US$208,000). For a VAT payer, taxable turnover is the month in which the turnover threshold is total value of supplies (sale, exchange exceeded. The tax authorities will deregister a VAT or gift) of goods, work and services and payer without notification if (inter alia): purchases of work and services from non-registered non-residents. A limited

42 Doing business in Kazakhstan range of non-taxable and exempt Exempt supplies VAT calculation and offset supplies are excluded from this rule. Turnover and imports exempt from VAT carry-forward Definitions: include: A taxpayer’s VAT liability is calculated as output VAT (i. e., VAT charged by the • For Kazakh VAT, the term “goods” • Turnover relating to residential taxpayer) minus input VAT (i. e., VAT applies to practically any form of buildings property or property rights paid by the taxpayer to its suppliers, • Certain financial services reverse-charge VAT and import VAT) • Taxable supplies of work or services in a given reporting period. are any supplies of work or services, • Transfers of assets under finance both chargeable and free of charge, leases (insofar as interest is The amount by which input VAT exceeds as well as anything that is done for concerned) output VAT may generally be carried forward against future VAT liability. In consideration and is not a supply of • Certain services rendered by non- practice, obtaining a refund (if eligible) goods. profit organizations is a laborious process, although there A small number of transactions, such • Certain services in the areas of are special refund procedures for certain as transfers to a legal entity’s charter culture, science and education situations (such as continuous ). capital, are treated as non-taxable. • Goods and services related to medical Non-recoverable input VAT Goods and services are VATable if, and veterinary activities Input VAT on certain items cannot be under the place of supply rules, they are offset. These include: deemed to be supplied in Kazakhstan. • Imports of certain assets included in The place of supply rules are broadly a government-approved list • Goods, work and services not related similar to European Union rules; in • Goods imported by individuals to taxable turnover particular, they treat some supplies that not for entrepreneurial purposes • Cars purchased as fixed assets are made outside of Kazakhstan, such (certain limits apply) as consulting services, as made within • Goods, work and services when a Kazakhstan, and therefore taxable. • Turnover relating to international VAT invoice is issued that is not in transportation services compliance with the requirements of Zero rating • Imports of goods from an EAEU the Tax Code Turnover taxed at 0% VAT includes: member state within the same legal • Goods and services purchased • Export sales of goods entity (intra-entity transactions). out of petty cash in an amount • International transportation services Offsetting of VAT exceeding 1,000 MCI (approximately US$7,000), irrespective of the • Sales of oil and lubricants by airports VAT paid on goods and services frequency of payment when fuelling aircraft of a foreign purchased by a VAT payer (i. e., input air carrier engaged in international VAT), including reverse-charge VAT • Goods, work and services purchased transportation already paid and VAT paid at customs, from suppliers declared by courts as may generally be offset (credited) when inactive entities • Sales of certain goods into the determining the taxpayer’s VAT liability territory of a special economic zone • Goods, work and services where to the budget. However, no offset is which are wholly used for activities the courts regard them as having granted for VAT incurred on supplies that meet the objectives of the been purchased by private business that are exempt or deemed to be made special economic zone entities without actual intent to carry outside Kazakhstan. on entrepreneurial activities. • Sale of refined

Doing business in Kazakhstan 43 Recovery of excess VAT through Reverse charge VAT A VAT return for imports of goods into the control account Under the place of supply rules, certain Kazakhstan from other EAEU member With effect from 1 January 2019, services are deemed to be supplied states must be filed with the tax certain VAT payers that are participants where the purchaser of the services authorities and the relevant tax must be in the tax authorities’ official online belongs (e. g., consulting, auditing, paid to the budget by the 20th of the system, which is used for the receipt and engineering, design, marketing, month following the tax period (month). processing of electronic VAT invoices, accounting, advocacy, information Electronic invoicing may open a control account on a processing, etc.). Where such services voluntary basis. The control account is a are rendered by a non-resident From 1 January 2019, taxpayers are bank account with a Kazakh commercial not registered for VAT purposes in obliged to issue electronic VAT invoices bank for VAT transactions (e. g., Kazakhstan, the Kazakh purchaser for their transactions (with certain payment of VAT to the state budget or of the services is required to assess exceptions). to suppliers). and pay VAT to the budget on its An electronic VAT invoice can only own (similarly to the reverse charge Taxpayers that may recover VAT via a be issued using the official online mechanism). control account include: system provided by the state revenue It is the obligation of the Kazakh committee for the receipt and • Taxpayers that use goods acquired/ purchaser of services to pay the reverse processing of electronic VAT invoices. received or leased assets in the charge VAT, which it should be able to Electronic VAT invoices have a production of other goods. The list of offset against output VAT subject to the prescribed format and must be signed goods/leased assets is approved by a general rules on VAT offsetting. using an electronic signature. Electronic designated body invoices must normally be issued within • Taxpayers that export goods EAEU 15 calendar days from the date of a The Tax Code lays down certain taxable transaction. • Taxpayers that sell goods into the procedures and compliance territory of a special economic zone Taxpayers not registered as VAT payers requirements for exports and imports which are wholly used for activities are also required to issue electronic VAT of goods from/to Kazakhstan to/from that meet the objectives of the invoices in cases where: (i) goods are EAEU countries (Belarus, Kazakhstan, special economic zone. sold via the “virtual warehouse” module Russia, Armenia and Kyrgyzstan). Strict in the online system and (ii) the value VAT rate and compliance documentation and timing requirements of a transaction exceeds 1000 MCI apply (failure to observe these may The VAT rate is 12%. The tax period (approximately US$7,000). result, for example, in the 0% VAT rate for VAT is a calendar quarter. The filing for exports to EAEU countries being Virtual warehouse deadline for VAT returns is the 15th denied). day of the second month following the With effect from 1 January 2019, reporting period. The VAT payment Import VAT on goods is payable by the “virtual warehouse” module deadline is the 25th day of the second the importer at the rate of 12% in was introduced in the official online month following the reporting period. Kazakhstan (certain exemptions apply). system and is obligatory for the reporting of goods included in a

44 Doing business in Kazakhstan special list (e. g., motor vehicles, certain household devices, sugar, etc.). The “virtual warehouse” allows for the systematization of inventory accounting, automatic calculation of ending inventory and monitoring of the movement of goods from entry into Kazakhstan until sale to the final consumer.

Electronic waybills Electronic waybills must be generated when there is a movement or supply of certain goods. Starting from 1 January 2020, electronic waybills must be generated for the production and supply of biofuel. Requirements to generate electronic waybills for other goods will be introduced during 2021. The list of goods for which electronic waybills must be generated will be established by the authorities.

EY offers help with identifying VAT risks and calculating VAT compliance costs, as well as with cross-border VAT planning.

Doing business in Kazakhstan 45 Subsurface use taxes New tax obligations and other provisions Tax audits that are disadvantageous to taxpayers Many taxpayers are audited, and it is Please refer to EY’s publications dealing may not be introduced retroactively. vital to manage the tax audit process. with the taxation of oil and gas and Tax audits may take the following forms: mining companies. These changes should have a positive effect as they bring more structure to • Comprehensive audit the process of amending the Tax Code. Tax administration • Thematic (targeted) audit Tax returns • Cross-check audit Kazakhstan has complex tax Tax returns (declarations and administration rules. Substantial fines calculations) are prepared by the • Time study. and penalties may be imposed even for taxpayer or the tax agent or by their minor infringements. Tax audits may be divided into two representatives. Tax returns may be types: those initiated based on Timing and frequency of Tax Code prepared on paper or electronically in risk assessment procedures, and amendments the Kazakh or Russian languages. unscheduled tax audits. The former type A recent legislative amendment Tax accounting policies may be initiated against taxpayers that addressed concern over the frequency have been assigned a high risk profile. Tax accounting policies consist of a with which changes are made to the Tax Thus, all organizations that have been document adopted by a taxpayer/tax Code. notified as having a high risk profile agent that regulates tax accounting should check the “tax audit list” for Administrative changes that benefit in accordance with the Tax Code. the first and second half-year periods, taxpayers may be adopted more often All taxpayers/tax agents must have tax which is published on the website of than once a year, but not later than accounting policies. the Prosecutor General’s Office of the 1 December of the current year. Republic of Kazakhstan.

46 Doing business in Kazakhstan Tax audits may cover any period Tax assessments Desk (in-house) inspection report within the statute of limitations. Upon completion of a tax audit, the After receiving a desk (in-house) From 1 January 2020, the statute of tax authorities usually issue a tax audit inspection report, the taxpayer has limitations is generally three years, report (if no tax violations are found, 30 (thirty) business days either to: except in the case of subsurface users a statement to that effect is made in (a) remedy violations set forth in the and taxpayers subject to tax monitoring, the report). Based on the findings of report; or (b) file an explanatory letter for which it is five years. Tax audits the report, the tax authorities issue a with the tax authority that issued the can be intrusive and time-consuming, notification of assessments of taxes and report. and may sometimes even result in other compulsory payments payable to criminal proceedings, as discussed in the the budget, as well as any penalties and It should be noted that once the “Penalties and interest” section below. interest. The tax authorities also issue taxpayer files that explanatory letter, there is no specific timeline within In the case of certain types of taxpayers a statement of administrative offences which the tax authority must review it. (those that have investment contracts, committed, if any, indicating the amount After reviewing the explanatory letter, are subject to tax monitoring or have a of administrative penalties due. the tax authority either voids the desk total tax liability in excess of 20,000 MCI Contesting tax audit or desk (in-house) inspection report or issues a (approximately US$142,000 in 2021)), (in-house) control reports decision declaring the taxpayer’s failure the tax authorities issue a preliminary to comply with the notice to remedy tax audit report setting out the results of Tax audit report violations. a tax audit. The taxpayer has the right to After receiving a report on a tax audit, submit objections to the preliminary tax That decision may be contested by the taxpayer has 30 (thirty) business audit findings before the final tax audit appealing to either (a) a higher tax days to file an appeal against the report. report is issued. authority (i. e., a local tax office), or The appeal must be filed with the (b) the Ministry of Finance, within 5 Ministry of Finance of Kazakhstan. Standard audit file (five) business days. If, after reviewing The standard audit file was introduced In some cases, the Ministry of Finance the appeal, the tax authorities issue from 1 January 2019. It is a means for may, after receiving the appeal, carry a decision with which the taxpayer taxpayers to submit accounting data to out additional tax control measures with disagrees, the tax authority must initiate the tax authorities online on a voluntary a view to gathering additional evidence. a targeted audit to review the underlying basis and enables the taxpayer’s data If, after considering the appeal, the issue in greater detail. It should be noted to be analysed via the tax authorities’ Ministry of Finance issues a decision that the tax authorities do not always information systems. The submission which does not yield the desired initiate targeted audits on time. of a standard audit file enables (i) a tax outcome, the taxpayer may appeal audit based on risk management against it to the courts of Kazakhstan. Horizontal monitoring procedures to be conducted within 5 Horizontal monitoring is a regime calendar days of the delivery of the tax It is essential to point out that an appeal of co-operative compliance which audit order, and (ii) an unscheduled to the court may be filed even without was introduced in Kazakhstan’s tax audit to be conducted within 10 the pre-appeal process described above. tax legislation on 1 January 2019. calendar days after the delivery of the The time allowed to file an appeal with It involves the voluntary exchange of tax audit order. a court of first instance is 3 (three) information and documents between months from the date on which the state authorities and a taxpayer taxpayer learned of the Ministry of (special requirements must be met). Finance’s decision on its appeal. Horizontal monitoring is implemented

Doing business in Kazakhstan 47 from 1 January of the year following any irregularities will be ironed out by • violations identified as a result of in- the signing of the horizontal monitoring 31 December 2023, after which the house inspection agreement and runs for three years with number of taxpayers participating in the • multiple instances of thresholds set the option to extend. Taxpayers subject horizontal monitoring will increase. by the Tax Code for the right to apply to horizontal monitoring are granted the special tax regimes almost being following benefits: Risk management system reached • the right to receive an advance The risk management system is based clarification from the tax authorities on risk assessment and includes • criteria that can reduce the level of regarding the tax treatment of a measures developed and applied by the risk planned transaction tax authorities to identify and prevent risk, which is in turn defined as the • criteria approved by the authorized • no tax audits will be conducted for probability of damage being caused to body jointly with the authorized body tax periods during which the taxpayer the state as a result of taxes not being for entrepreneurship was under horizontal monitoring paid in full. • criteria used to verify the difference (subject to certain exceptions) The tax authorities group taxpayers between input and output VAT. • no administrative penalties will be into low-, medium- and high-risk Penalties and interest imposed for a tax offence in the categories by analysing tax reporting The Administrative Offences Code following cases: data, information provided by state imposes administrative penalties for authorities and local executive • if the taxpayer agrees with the non-compliance with tax regulations, bodies and documents and/or other notification issued as a result of including the following: horizontal monitoring procedures information relating to a taxpayer’s and does not file a court appeal business activities. Information on the • under-declaration of taxes — 20% to against the results of horizontal exact criteria is confidential, except for 80% of the under-declared amount the following criteria: monitoring • understatement of an advance CIT • if the offence was discovered as a • tax burden payment by more than 20% — 20% of the understated tax result of a tax audit for a period in • average monthly salary per employee which horizontal monitoring was • failure to withhold taxes — 20% to 50% • amounts of expenses and income applied of the non-withheld tax stated in tax returns • the right to apply the simplified • concealment of taxable items — 200% • transactions with taxpayers that procedure for refund of excess VAT of taxes payable on the concealed have dealings with entities that have for the taxpayers under horizontal amount. monitoring — in the amount of been deregistered for VAT purposes no more than 90% of excess VAT (including liquidated, inactive and Interest is charged on late tax payments amount that was accumulated over insolvent entities) at a rate equal to 1.25 times the National Bank’s base rate (currently 9%) the reporting tax period. • tax losses reflected in tax returns in for each day of the delay. The tax authorities have launched a multiple tax periods Criminal liability may also arise for tax pilot project, running from 14 July • frequent amendment of tax returns offences in Kazakhstan. An organization 2020 to 31 December 2023, aimed already filed at refining the processes involved in is generally deemed to have committed horizontal monitoring. It is hoped that the crime of when underpaid

48 Doing business in Kazakhstan tax exceeds 50,000 MCI (approximately Ministry of Finance). The tax authorities Administrative Procedure Code US$354,000 in 2021). Tax evasion usually provide their opinion on specific On 1 July 2020, the President of the includes failing to submit a declaration, tax queries in the form of a letter which Republic of Kazakhstan signed the new misstating income or expenditure data is of an advisory nature and is not Administrative Procedure Code, which or concealing taxable items or the actual binding. enters into force from 1 July 2021. location of the taxpayer. Such violations Rulings trigger investigations by the Economic The purpose of the Code is: Investigation Service of the Financial The Tax Code also authorizes the • to ensure the protection of the rights Monitoring Committee and may even Ministry of Finance to issue “advance and freedoms of persons (individuals result in the prosecution of individuals rulings” in relation to planned and legal entities) against unlawful who are thought to be responsible. The transactions at the request of the actions of state authorities Criminal Code provides for individuals following categories of taxpayers when who have committed a tax offence to be submitted in the prescribed manner • to provide a set procedure for exempted from criminal liability if they accompanied by relevant documents: contesting the outcome of an appeal. voluntarily pay taxes and other amounts • Taxpayers that are subject to The Code replaces the Law on due to the budget and acknowledge that horizontal monitoring Administrative Procedures and the Law they are at fault. on the Procedure for the Consideration • Taxpayers that have investment of Appeals of Individuals and Legal Clarification letters and rulings contracts for priority projects Entities. Clarifications The Ministry of Finance may refuse to One of the new features of the Code is Taxpayers have the right to request issue an advance ruling. that it provides, inter alia, for damages clarifications regarding tax obligations, Late payment interest is not chargeable to be claimed for losses caused by the and the tax authorities are obliged to on tax assessments made as a result defendant (i. e., a state authority) as a provide them. A taxpayer may apply to of a tax audit if the taxpayer fulfilled result of the issue of an administrative the tax authorities where it is registered tax obligations in accordance with an order or an administrative action or to a higher body if necessary (certain advance ruling, unless new facts come (omission). Suits must be filed with categories of taxpayers may apply to the to light. a specialized district court or an equivalent administrative court.

Doing business in Kazakhstan 49 Overview of other laws that affect business 5administration

50 Doing business in Kazakhstan Transfer pricing There are a number of compliance Employment regulations requirements that apply to taxpayers, Kazakhstan’s transfer pricing (“TP”) including subsurface users, depending The Kazakh Labour Code, which came legislation has wide applicability to on the type of taxpayer and its revenue: into force in 2016, applies to employees businesses. The TP rules apply to all and employers located in Kazakhstan, cross-border transactions even if the 1. TP monitoring reporting (the deadline including branches and representative parties are unrelated. The TP rules is 15 May of the year following the offices of foreign legal entities also apply to certain types of domestic reporting year) registered under Kazakh law. transactions if they are related to 2. Notification of participation in a Employment relations between cross-border transactions, e. g., to multinational group (by 1 September an employee and an employer domestic sales by subsurface users of of the year following the reporting are regulated by an employment hydrocarbons and minerals that are year) agreement. An employment agreement subsequently exported. 3. Three-tier transfer pricing reporting, must be concluded with each employee The TP law prescribes the following including: and must reflect the employee’s rights methods for determining а market price: and obligations as well as the employer’s • Country-by-country reporting rights and obligations under the Labour • Comparable uncontrolled price (within 12 months following the Code. As a rule, an employee’s rights method reporting year or upon request) under an employment agreement may • Cost plus method • Master file (within 12 months upon not be inferior to those established by the Labour Code. • Resale price method request) Under the Labour Code, an employer is • Profit split method • Local file (within 12 months following the reporting year) responsible for the proper execution of • Net margin method. an employment agreement, which may 4. General TP documentation (upon be concluded for a fixed or indefinite Except for transactions involving request). term. An employment agreement may agricultural products, there is no “safe establish a probation period, which harbour” for deviation from the market generally should not exceed 3 months. price, although the TP law recognises EY’s transfer pricing services include that there can be a range of market assistance with all types of TP However, the probation period may be prices. In determining market prices compliance requirements, strategic extended to up to 6 months for heads under the comparable uncontrolled reviews to identify TP risks, preparation and deputy heads of organizations, price method, adjustments to prices are of TP policies and procedures, chief accountants and deputy chief allowed in at least some cases, except assistance during TP audits and accountants and heads of branches and where one of the parties to a transaction controversy, ad hoc advisory and all representative offices. is registered in a tax haven. other TP services.

Doing business in Kazakhstan 51 Kazakh labour law generally limits the The Labour Code provides for • a legal entity (branch, representative working week to 40 hours. Under the secondment arrangements, i. e., where office and/or other subdivision Labour Code, total overtime must not an employee of a legal entity (the therefore) in which shares exceed 120 hours per year. secondee) performs work for another (participating interests) are directly legal entity (or branches, representative or indirectly owned by an entity that The monthly salary of an employee offices and/or other subdivisions directly or indirectly owns shares must not be lower than the minimum of such an entity) or for branches, (participating interests) in the monthly salary established for the representative offices and/or other employer entity (secondment to a relevant financial year by Kazakh budget subdivisions of the same legal entity: sister company). legislation. The minimum monthly salary for 2021 is KZT 42,500 (approximately (i) within a certain field, skill area or It is prohibited to arrange secondment US$101). Salary must be denominated position (function) specified in their for the following purposes: and paid in tenge only. labour agreement, or 1) to replace employees of the receiving The minimum amount of paid vacation (ii) within another field, skill area or party who refused to perform work in under the Labour Code is 24 calendar position (function), subject to the cases and in accordance with the days. Additional vacation days must certain restrictions imposed by law. rules established by Kazakh labour be provided for employees working in law The Labour Code limits secondment dangerous or harmful conditions. only to cases where the host entity is: 2) to perform work where the receiving Maternity leave is from 126 to 163 party has temporarily suspended • a legal entity (branch, representative calendar days (70 days before the birth activities (introduced downtime), office and/or other subdivision of a child and from 56 to 93 days after the receiving party is implementing thereof) that is a founder, participant the birth). Additional unpaid childcare bankruptcy procedures, or the or shareholder of the employer or leave may be provided to one of the receiving party has introduced a part- indirectly owns shares (participating parents until the child is 3 years old. time working schedule in order to interests) in the employer company preserve jobs where there is a threat Kazakh law requires an employer to (secondment to a parent company) of redundancies. insure its employees against work- • a legal entity (branch, representative related injury within the first ten days of office and/or other subdivision the month following the month in which thereof) in which the employer entity the employer began work. directly or indirectly owns shares (participating interests) (secondment to a subsidiary)

52 Doing business in Kazakhstan Import and export Goods imported from third countries and Kazakhstan vary from 3% to 20% of the customs cleared in an EAEU member customs value or may be set as a specific formalities and customs state or produced/sufficiently processed amount in US$/euro per unit of measure. duties in an EAEU member state may be moved Customs clearance fees are regulated without customs control/declaration Customs regulation in Kazakhstan by the domestic laws of EAEU member within the EAEU. Kazakhstan forms part of the unified states. In Kazakhstan, the customs of the EAEU along Customs duties and classification of clearance fee is KZT 20,000 (US$47) with Armenia, Belarus, Kyrgyzstan goods per customs declaration. and Russia. The EAEU, which came EAEU member states apply the Common Some customs procedures allow for the into being on 1 January 2015, allows EAEU member states apply the Common granting of full or partial exemption from the free movement of goods, services, Customs to goods imported from customs duties and taxes, for example capital and labour within its borders. third countries. This comprises the to members of special economic zones, EAEU member states apply unified classification of goods and the applicable owners of free warehouses holding customs legislation and tariff and non- rates of import duty. Import duty rates special investment contracts, and holders tariff regulations. There are various are expressed as a percentage of the of investment contracts. There are also types of customs clearance procedures customs value of goods, varying from certain non-tariff regulations, such as with distinct rules for the payment of 0% to 80%, or as a specific amount in those limiting or prohibiting the import or customs duties and taxes, including US$/euro per unit of measure. export of certain goods. release for internal consumption, Each EAEU member state sets its own temporary importation, reimport, export duty rates for exported goods. customs (bonded) warehouse, free Export duties should be calculated using customs zone (for special economic the rates of the EAEU member state zones and free warehouses) and other in which goods are placed under the procedures. export procedure. Export duty rates in

Doing business in Kazakhstan 53 30 November 2015 Kazakhstan and the WTO Licensing Import duties Kazakhstan becomes Licences for certain activities On 30 November 2015 Kazakhstan a WTO member Kazakh licensing legislation categorizes became the 162nd member of the permits/licences based on the risk level WTO. According to its schedule of of activities to be carried out: concessions, Kazakhstan undertook to reduce import duties by 2–5% on nearly • High-risk activities require licences 3,500 items, and to 0% on some items, referred to as “first-category within five years after accession to the permits” 3500 WTO. • Medium-risk activities require permits As part of recent amendments to EAEU referred to as “second-category items enjoy decreased legislation, Kazakhstan approved a full permits” import duties list of goods (almost 3,500 items) to • Low-risk activities require the which reduced rates of import duty may relevant government authority to be applied. Under EAEU legislation, be notified of the commencement/ goods included in this list that have been completion of activities. imported under the release for domestic consumption customs procedure There is an exhaustive list of activities at reduced rates have the status of that require licences, permits or conditionally released goods and cannot notifications. The list is contained in the be exported to other EAEU member Law on Permits and Notifications and states. includes 79 licences, 226 permits and 54 notifications. Export duties The range of business and professional Kazakhstan reserved the right to activities that require permits/licences is continue levying export duties on certain extensive. It is important for investors to goods that are currently subject to export determine in advance whether a licence, duty in Kazakhstan ( and permit or notification is needed. Kazakh related products, remnants and scrap of law prescribes various types of liability ferrous and non-ferrous metals, elements and substantial penalties for failure to of locomotive rolling stock, and comply with permit/licence regulations. hides of domestic animals, et al.). A licensing authority is required to issue On acceding to the WTO, Kazakhstan a permit/licence within 15 business undertook to begin calculating the export days of the submission of an application duty rate for crude oil using a formula together with all required supporting based on the monthly average market documents (except for certain permits/ price of crude oil. licences for which different rules apply),

54 Doing business in Kazakhstan provided that the applicant meets the Construction licences Import/export licences relevant requirements. If the applicant These are divided into three categories The government establishes a list of does not meet the requirements or depending on the complexity of facilities goods for which importation/exportation fails to provide supporting documents, to be assembled and/or constructed. is subject to licensing. A licence is issued the licensing authority may issue a To obtain a licence for assembly and/or for each item of goods and must be substantiated refusal. In this case, the construction works, the applicant must granted within 30 business days of an applicant may adjust the application and meet all the qualifying requirements application being received. The following supporting documents and re-apply. approved by the Kazakh government. types of licences are issued:: Since the law does not limit the number To obtain a first- or second-category • A general licence, which is issued to of submissions, this process may last for licence, the applicant must have 10 a foreign trade participant based on a considerable time. or 5 years of experience in assembly, a decision of an EAEU member state Withdrawal or suspension of a permit/ engineering and construction and allows a certain item of goods licence may be imposed for an respectively. No experience is required to be exported or imported in the administrative offence committed in for a third-category licence. quantity indicated in the licence carrying out activities authorized by the Please note that foreign companies • An exclusive licence, which grants a permit/licence. Withdrawal is imposed entering the Kazakh market may apply foreign trade participant an exclusive by a judge or an authorized body. The for first- or second-category licences right to export or import certain period of suspension of a permit/licence if they have the necessary experience. goods may not be less than one or more than However, they must apply via duly • A one-time licence, which allows a six months. registered branches in Kazakhstan. foreign trade participant to export or Below we present a summary of A foreign subsidiary in the form of import a specified quantity of goods the commonest types of licences in a newly established LLP would be under a foreign . regarded as a separate legal entity, and Kazakhstan. Holders of import/export licences are therefore no foreign experience would required to submit a report on the be recognised. Such an entity may apply use of the licence to the appropriate only for a third-category licence. authorities. Permit and licence applications and notifications may be submitted online via the website www.elicense.kz.

Doing business in Kazakhstan 55 Banking regulations as a whole. The NBK has the right to Moody’s also mentioned that the NBK’s introduce a special regulatory regime actions helped to ease the subsequent Banking system in order to ensure financial stability negative impact on the economy and and protect the interests of consumers increased the confidence of outside National Bank of Kazakhstan (NBK) of financial products for a maximum players in Kazakhstan’s banking system Kazakhstan has a two-tier banking period of 5 years. In 2019, the NBK in the context of the devaluation of the system. The first tier is the NBK, which conducted an Asset Quality Review Kazakh tenge and the worldwide decline is the country’s central bank. The main (AQR) of 14 major banks located in in the financial solvency of businesses. regulators of banking activities are the Kazakhstan, the principal aims of which NBK and the Agency for the Regulation were to help strengthen and develop Agency and Supervision of the Financial Market Kazakhstan’s banking system, increase The Agency is a special government and Financial Institutions (Agency). its ability to withstand crisis phenomena authority which is directly subordinate The NBK, on the one hand, provides and improve the transparency of the and accountable to the President of traditional banking services to its main financial system. Although the AQR did Kazakhstan and is responsible for client, i. e., the state as represented not identify a capital deficit at an overall regulating banks and the financial by its central authorities. On the other level, a number of banks were requested market. The Agency has also acted hand, it acts as a financial authority to inject additional capital. The AQR to protect users of online banking by (exercising currency control, issuing was conducted at the right time, as passing an order requiring banks, as regulatory acts, granting licences, etc.) the health of the banking system was of 1 January 2021, to create special and is responsible for the proper examined right before the ensuing departments to deal with cyber functioning of the financial system COVID-19 crisis. S&P Global Ratings and incidents.

56 Doing business in Kazakhstan Second Tier Banks Currency regulations non-resident status is stipulated in international treaties concluded by The second tier includes all other banks On 2 June 2018, the President of Kazakhstan prior to the entry into except for the Development Bank of Kazakhstan signed the Law on Currency force of the Currency Control Law) Kazakhstan, which has a special legal Regulation and Currency Control status. One of the features of the (No. 167-VI — the “Currency Control • Kazakhstan non-residents, i. e. Kazakh banking system is that only Law”). The law came into force on (i) foreign citizens and stateless private banks operate on the banking 1 July 2019 (except for provisions persons (other than those who services market. The Development relating to branches of foreign financial have permanent residency status in Bank of Kazakhstan and the Housing organizations, which came into force in Kazakhstan); (ii) foreign legal entities Construction Savings Bank, both with December 2020). and organizations not recognised state shareholdings, have special as legal entities under the laws of status and perform specific functions The Currency Control Law imposes foreign states and Kazakhstan-based in the financial sector to serve national certain formal requirements but does branches/representative offices interests. As a rule, banking operations not impede most international business of such entities that do not create in Kazakhstan must be licensed by the operations. a permanent establishment of a NBK. Foreign banks have been operating It distinguishes between the following non-resident in accordance with the in Kazakhstan since 1993. As of parties to currency transactions: Kazakh Tax Code; (iii) branches/ 16 December 2020, foreign banks are representative offices of foreign allowed to open branches in Kazakhstan • Kazakhstan residents, i. e., (i) Kazakh non-financial organizations that provided that specific financial and citizens (other than those who have have been accorded non-resident regulatory conditions set by Kazakh law permanent residency abroad); (ii) status under Kazakh currency are met, including the provisions of the foreigners and stateless persons law by agreements concluded on Tax Code. who have permanent residence behalf of Kazakhstan with foreign status in Kazakhstan; (iii) legal organizations which entered into Islamic Banking entities registered in Kazakhstan, force before 1 July 2019 (a list of Kazakhstan-based branches/ Islamic banks are also allowed to such branches/representative offices representative offices of such operate in Kazakhstan subject to is to be established by the Kazakh entities and diplomatic, trade and restrictions laid down in Kazakh law. government); (iv) international other official missions of Kazakhstan Since the government recognises the organizations, unless otherwise located abroad; (iv) branches of potential behind the development of specified by the international treaty foreign financial organizations which Islamic finance in Kazakhstan, specific governing their establishment; (v) have the right under Kazakh law provisions for Islamic finance are laid diplomatic and other official missions to engage in banking or insurance down at legislative level (including in of foreign states. activities in Kazakhstan (from the Tax Code). Islamic banking is subject December 2020); (v) branches of Individuals (residents and non-residents) to licensing by the NBK and must in foreign non-financial organizations may take foreign currency cash in and general be Shariah compliant. Islamic which are treated as permanent out of the country without restrictions banks cannot participate in the Kazakh establishments of those organizations subject to the customs legislation of deposit insurance system, and deposits in Kazakhstan (except for branches the Eurasian Economic Union and/or of an Islamic bank cannot be insured by and representative offices whose Kazakhstan. the Kazakh deposit insurance system.

Doing business in Kazakhstan 57 The Currency Control Law states that Supervision of the Financial Market • the transfer of promissory notes transactions between Kazakhstan and Financial Institutions or under denominated in foreign currency in residents and non-residents may Law No. 262-VI of the Republic of fulfilment of monetary obligations take place in any currency. However, Kazakhstan of 3 July 2019 • payments for goods sold in duty-free transactions between residents must • payment for banking services relating shops and for goods and services only be in KZT, except for: to foreign currency transactions provided to passengers in international • transactions in which one of the parties traffic • transactions involving the acquisition, is the NBK, the Ministry of Finance sale, payment of interest on and/or • transactions between branches or an overseas diplomatic office of redemption of securities denominated (representative offices) of foreign Kazakhstan in foreign currency entities • transactions in which one of the parties • transactions between commission • transactions involving payment for is a resident who has the right to agents and their clients when services expenses of an individual in connection conduct foreign currency transactions are rendered by commission agents with a business trip outside the • transactions involving foreign currency involving the conclusion and execution Republic of Kazakhstan, including that are classed as banking operations of export or import contracts with non- hospitality expenses, and transactions and other operations which banks residents, including the repayment of involving the repayment of unused and authorized organizations have foreign currency to the principal advances issued in connection with a the right to carry out in accordance business trip outside Kazakhstan • the purchase and/or sale of refined with a licence issued by the NBK or gold bullion using national currency the Agency for the Regulation and

58 Doing business in Kazakhstan • gratuitous transfers of money or The range of currency transactions Currency regimes currency valuables by individuals to covered by the NBK’s monitoring other individuals or to legal entities system has increased, with simplified Registration of foreign currency whose statutory activities involve procedures introduced for the collection contracts involving capital movement charity of transaction information. In order According to the Rules on the to monitor currency transactions, the Monitoring of Currency Transactions • bank deposits by individuals in favour NBK (or authorized banks in certain approved by Resolution No. 64 of of other individuals cases) assigns registration numbers the Board of the National Bank of 10 • transactions between professional to currency contracts under which April 2019 (“the Rules”), the NBK participants in the securities market currency transactions take place, is responsible for monitoring and acting on behalf of their customers currency contracts involving the registering currency transactions and and individuals or legal entities movement of capital, accounts held currency contracts. involving the transfer of money and by residents (excluding banks and Registration is required for currency financial instruments from accounts branches/representative offices of contracts involving capital movement (to accounts) for the recording and foreign entities) with foreign banks and (financial loans, equity participation, storage of money and financial export or import currency contracts in transactions involving securities, equity instruments owned by customers respect of which payments are made interests and financial instruments, by way of the performance and through such accounts. acquisition of real estate, acquisition of termination of contracts for the Authorized banks that process foreign exclusive rights to intellectual property, provision of brokerage services currency payments or transfers are transfers of funds in the context of trust • transactions involving the payment of required to notify the NBK of the management activities, and gratuitous taxes and other mandatory payments transactions if the amount is equal to transfers of funds) where one of the to the budget in cases provided for by or exceeds a threshold set by the NBK. parties is a resident and the contracts the Tax Code The NBK is entitled to request a copy reach certain thresholds. of the currency contract and other • operations of the recipient of mineral According to the Rules, a capital information on the currency contract resources on behalf of the Republic movement currency contract is subject from the currency control agents or the of Kazakhstan connected with the to registration where it involves: resident sender. Please note that various transportation, storage and sale of ancillary regulations are currently in the 1) the receipt of property/money in mineral resources that are transferred process of being drafted. the Republic of Kazakhstan and/ to the state in accordance with the Tax or an obligation of a resident to Code by way of the in-kind fulfilment of return property/money to a non- a tax obligation by a subsurface user resident to a value exceeding • payments by individuals for goods, the equivalent of US$500,000 works and services in transactions (five hundred thousand) concluded and executed in the territory (approx. KZT210,000,000) of a special economic zone whose borders wholly or partially coincide with sections of the customs border of the Eurasian Economic Union.

Doing business in Kazakhstan 59 2) the transfer of property/money from Late registration of currency contracts the Republic of Kazakhstan and/ A Kazakh resident must ensure that concluded after 1 July 2019 will or an obligation of a non-resident currency proceeds under export or incur a warning in the first instance. to return property (money) to import contracts are repatriated to A repeat violation within a year will a resident to a value exceeding Kazakhstan (i. e., credited to a bank incur an administrative fine of MCI the equivalent of US$500,000 account with a local bank) within the 100 (Administrative Offences Code, (five hundred thousand) established time limit. Article 244). In 2020 that amounts to (approx. KZT 210,000,000). KZT 277,800 (approximately US$662). According to the rules for carrying out A resident (other than an authorized export-import currency control approved The repatriation requirement is bank and a branch/representative office by National Bank Resolution No. 42 of considered to be partially or fully of a foreign entity) that is a party to a 30 March 2019, as from 1 July 2019 satisfied where: currency contract must apply to the NBK an export or import currency contract • national and/or foreign currency before obligations under the contract is subject to registration if the amount is credited to accounts held by a are fulfilled by any parties. of the contract exceeds the equivalent resident with foreign banks that Non-residents may receive and transfer of US$50,000 (KZT 21,000,500) or were opened to fulfil the resident’s foreign currency from/to their branches if the contract amount is not specified obligations under the terms of a (representative offices) in Kazakhstan. (framework agreements). financial loan received from a non- resident or to support the activities The registration requirement does not If an export or import currency contract of branches/representative offices apply to capital movement currency is denominated in a currency other than opened by the resident abroad contracts whose parties include the NBK US$ and the exchange rate against or the Ministry of Finance or to currency US$ is not specified in the contract, the • foreign currency received by operations carried out by participants US$ equivalent of the contract amount residents from exhibitions and in the Astana International Financial should be determined using the market sporting, cultural and other similar Centre within the territory of the Centre. exchange rate at the date of signing of events held outside the Republic of the contract (or failing that, at the date Kazakhstan is used to cover costs Notification13 of entry into force of the contract). incurred during those events The notification regime requires The registration of currency contracts • foreign currency earnings are information to be provided to the where the contract amount is not credited to foreign bank accounts NBK on foreign currency transactions specified or exceeds US$50,000 of resident transportation exceeding the threshold of US$50,000 (KZT 21,000,500) and where a companies in order to pay port (KZT21,000,000) and on the opening contract is amended after 1 July 2019 dues and other charges outside of bank accounts with a foreign bank must take place before obligations begin Kazakhstan and cover expenses (for legal entities), as well as information to be fulfilled by one of the parties, but associated with the handling of on the purchase and sale of foreign not later than 30 calendar days from those companies’ transport facilities currency on behalf of a client, regardless the date on which the currency contract and passengers outside Kazakhstan of the amount. became subject to registration. and the maintenance of branches/

13 Notification by a resident is not required for payments and/or money transfers made by participants of the Astana International Financial Centre within the territory of the Centre or through bank accounts held by participants of the Centre with foreign banks.

60 Doing business in Kazakhstan representative offices of those Submission of information (reports) That list includes branches/ companies outside Kazakhstan by branches (representative offices) representative offices engaged in the of foreign non-financial organizations following activities: • an obligation of a non-resident According to the Rules on the is terminated by crediting a 1. production of crude oil and natural Submission of Information by Branches counterclaim under an export or and associated gas (Representative Offices) of Foreign import currency contract Non-Financial Organizations, approved 2. construction services • an obligation of a non-resident is by National Bank Resolution No. 41 3. services related to mining terminated by the replacement of the of 30 March 2019, as from 1 July original obligation between a resident 2019 branches/representative offices 4. architectural, engineering and other and the non-resident with another of foreign non-financial organizations technical services obligation between the same parties operating in the Republic of Kazakhstan 5. research and development work. with a different subject-matter or for more than one year must submit method of performance information (reports) on their activities Late submission of a report incurs a to the National Bank. warning in the first instance. A repeat • an insurance payment is received violation within a year will incur upon the occurrence of an insured Based on information received, local an administrative fine of 10 MCI. event under an agreement on branches of the National Bank make a In 2020, that amounts to KZT 27,780 insurance of the risk of non- list of branches/representative offices (approximately US$66). performance by a non-resident. that provide information on transactions with residents and non-residents.

Doing business in Kazakhstan 61 In addition, if a branch or representative instruction to its bank to sell the foreign 2009 on the Countering of Money office of a foreign non-financial currency (i. e., convert it to Kazakhstan Laundering and Terrorist Financing (the organization submits an incomplete and/ tenge) if that foreign currency is not “Anti-Money Laundering Law”). Under or inaccurate report on transactions utilized within 10 (ten) business days. that law, certain types of transactions with residents and non-residents, it will are subject to financial monitoring This restriction does not apply to receive a warning the first time. A repeat depending on the amounts involved. authorized banks and authorized violation committed within a year will This includes gratuitous payments organizations. Individuals may buy and incur an administrative fine of 10 MCI, and/or transfers made by individuals sell currency through foreign currency which currently amounts to KZT 27,780 and legal entities in favour of other exchange offices. for 2020 (approximately US$66). individuals or legal entities amounting Special currency regime14 to KZT 7,000,000 (approximately Sale and purchase of foreign currency The Currency Control Law authorizes US$16,667) or more, transactions All legal entities may buy and sell foreign the Government of Kazakhstan, at the to the value of KZT 10,000,000 currency on the domestic currency recommendation of the National Bank (approximately US$ 23,810) or more market only through authorized banks. and relevant government bodies, to entered into by legal entities that have A resident legal entity may purchase introduce a special currency regime in existed for less than three months, non-cash foreign currency up to the the event of a threat to the economic and other operations and transactions equivalent of USD 50,000 (inclusively) security and domestic currency market specified in the Anti-Money Laundering at one bank on any given day for of Kazakhstan. Law. “purposes not connected with the A special currency regime may include, Monitoring is conducted by the Financial discharge of obligations expressed in among other things, a requirement Monitoring Committee of the Kazakh a foreign currency”. Such purposes for a sum equal to a percentage of Ministry of Finance. include: (i) the transfer of foreign the amount of a currency transaction currency to a foreign bank account In addition, the Anti-Money Laundering to be deposited with an authorized held by that resident legal entity; Law contains the term “suspicious bank without interest being earned, a (ii) gratuitous bank transfers; and transaction”, meaning a transaction requirement to obtain a special permit (iii) the transfer of foreign currency to or attempted transaction with respect from the NBK to carry out currency bank accounts held by the entity with to which there are grounds to suspect transactions, the mandatory sale of Kazakh banks. that money and/or property used in foreign currency received by Kazakhstan the transaction is derived from criminal For amounts exceeding the equivalent residents, restrictions on the use of activity or that the transaction itself is of USD 50,000, a resident legal entity foreign banks and limits on settlements undertaken for the purpose of money must indicate the purpose of purchasing in foreign currency. laundering or the financing of terrorism the foreign currency and provide a copy or other criminal activity. The Kazakh Financial monitoring of the underlying contract or invoice government sets the list of criteria (any payment document) supporting It is important to consider the possible for characterizing transactions as the declared purpose of purchasing implications of the financial monitoring suspicious, such as inconsistency of a the foreign currency. A resident legal system established by Law No. 191-IV of transaction with the nature of a legal entity must also provide an advance the Republic of Kazakhstan of 28 August entity’s business as specified in its

14 A special currency regime is introduced by an act of the Government of the Republic of Kazakhstan based on a joint recommendation of the National Bank of Kazakhstan and relevant authorized bodies.

62 Doing business in Kazakhstan constituent documents, transactions Subsurface use regulations licences for exploration and production with non-profit organizations, As from 29 June 2018, subsurface use of solid mineral resources within the transactions relating to charitable in Kazakhstan is regulated by the new same block are considered in the order activities, et al. Furthermore, any Subsurface Use Code. The Subsurface in which they are received, and each transaction may potentially be Use Code establishes different application is considered only after the considered suspicious if an authorized regulatory regimes for subsurface preceding application has been rejected. person of a financial monitoring agent companies depending on the types of Under the Subsurface Use Code, the decides to treat it as such based on his/ mineral resources being explored and acquisition of subsurface use rights her experience and knowledge. produced. from subsurface use companies (e. g., Anti-monopoly regulations Subsurface use rights for the exploration farmouts) or of shares/participating Anti-monopoly law requires prior and production of hydrocarbons are interests in subsurface use companies permission from or notification of granted on the basis of contracts is subject to approval by the competent the anti-monopoly authority for concluded by the competent government authority. Furthermore, mergers and other types of economic government authority with winners where such acquisition relates to concentrations where the deal exceeds of auctions, which are determined by a subsurface use area of strategic 10,000,000 MCI (approximately the amounts of subscription bonuses importance, the state has the right of US$66,143,000); otherwise, the deal proposed by the participants in the first refusal over the rights or shares/ may be invalidated or terminated. Anti- auctions. From 1 September 2020 such interests being sold. Before subsurface monopoly law prohibits anti-competitive auctions are held online. sites can be acquired, therefore, it is necessary to obtain approval from the horizontal agreements (cartels) The Subsurface Use Code also envisages and vertical agreements, concerted competent government authority and a the right of the competent government waiver from the state confirming that it practices, abuse of a dominant market authority to conclude contracts position and unfair competition. All will not exercise its right of first refusal for exploration and production of over the sites. types of monopolistic activity (i. e., anti- hydrocarbons and through competitive agreements, concerted direct negotiations with national practices, abuse of a dominant position) companies of Kazakhstan. may lead to administrative fines of up to 5% of income with confiscation of Subsurface use rights for exploration monopolistic income for a period of up and production of solid mineral to a year, or criminal sanctions if actions resources are granted on the basis result in major damage or the receipt of of licences issued by the competent substantial income. Unfair competition government authorities. Such licences incurs an administrative fine of up to are issued on a first come, first served 1,500 MCI (approximately US$9,922). basis, meaning that all applications for

Doing business in Kazakhstan 63 EY 6in Kazakhstan

64 Doing business in Kazakhstan In 1992, EY was the first international professional services organization to open an office in Kazakhstan. It is part of our EMEIA practice, encompassing Europe, the Middle East, India and Africa. In Kazakhstan, EY has three offices: in Nur-Sultan, Almaty and Atyrau.

About EY Encouraging investment EY is a global leader in assurance, tax, EY is committed to enhancing the US$36,4 transaction and advisory services. business and investment environment Its combined global revenues in Kazakhstan. We organize a variety billion for the financial year 2019 were of professional events and knowledge- EY global revenues for US$36.4 billion. With a total headcount sharing sessions in order to promote of over 284,000 people, EY operates international leading practices and the financial year 2019 in more than 150 countries around the industry expertise, as well as to advise world. the investment community on the most recent or anticipated changes to the In 1992, EY was the first international regulatory environment. EY is involved assurance and advisory services in the work of the Foreign Investors’ organization to open an office in Council, chaired by the President of the Kazakhstan, reaching out to a wide Republic of Kazakhstan, and co-chairs 700 employees range of clients from various industry its working group on Investment Policy. sectors, including multinational work for EY Kazakhstan across EY is also actively involved in a number corporations as well as public three offices in Nur-Sultan, of business, professional and industry and private companies. Today, EY associations in Kazakhstan. Almaty, Atyrau Kazakhstan has 700 employees working in three offices in Nur-Sultan, Almaty and Atyrau. EY Kazakhstan provides over 85 services across all Supporting our clients industries, including assurance, tax in the dynamic landscape and law (financial, tax accounting At EY, we know that businesses in and HR outsourcing solutions, people emerging markets need innovative 85 services advisory services, immigration support, thinking and practical advice in order etc.), transaction and business provided by EY Kazakhstan to succeed. We support our clients advisory services and digital as well by facilitating their sustainable across all industries as professional education and training development strategy and helping them delivered by the EY of create new growth opportunities in Business. today’s dynamic economic environment.

Doing business in Kazakhstan 65 Our major services EY Kazakhstan at social media

• Assurance Business events, insights and thought leadership, legislative updates and more. • Tax & Law • Facebook @EYKazakhstan • Transactions • Instagram @EYKazakhstan • Advisory • Careers @EYCareersKazakhstan • Academy of Business • EY Academy of Business @EYAcademyKazakhstan

Office locations Nur-Sultan 16 Dostyk street, Talan Towers Offices, Nur-Sultan, Z05H9K3 Republic of Kazakhstan Tel.: +7 7172 58 0400 Fax: +7 7172 58 0410

Almaty Tower Al-Farabi Ave., 77/7, Almaty, 050060, Republic of Kazakhstan Tel: +7 727 258 5960 Fax: +7 727 258 5961

Atyrau Satpayev str., 19 Atyrau, 060000 Republic of Kazakhstan Tel.: +7 7122 55 21 00 Fax: +7 7122 55 21 01

66 Doing business in Kazakhstan Contact information For more information on how EY can help you find your bearings in Kazakhstan’s tax and legal terrain, please contact one of the following EY leaders:

Tax & Law Services

Erlan Dosymbekov Roman Yurtayev Managing Partner for Kazakhstan Associate Partner, Tax Services, and Business Tax Advisory Tel: +7 727 258 5960 Tel: +7 727 258 5960 [email protected] [email protected]

Dinara Tanasheva Saltanat Dauletova Partner, Tax & Law Services Leader for Associate Partner, International Tax Kazakhstan and Central Asia and Transaction Services, and Central Asia Financial Sector Tel: +7 727 258 5960 Tel: +7 727 258 5960 [email protected] [email protected]

Doniyorbek Zulunov Anuar Mukanov Partner, Tax Services, Associate Partner, International Tax and Transaction Services Transfer Pricing Services Tel: +7 727 258 5960 Tel: +7 727 258 5960 [email protected] [email protected]

Vladimir Fesenko Amangeldy Mussayev Partner, People Advisory Services Partner, Global Compliance and Tel: +7 727 258 5960 Reporting [email protected] Tel: +7 727 258 5960 [email protected]

Doing business in Kazakhstan 67 7Appendix

68 Doing business in Kazakhstan Double tax treaties The following table lists the WHT rates under Kazakhstan’s double tax treaties.

No. Country Dividends, % Interest, % Royalties, % No. Country Dividends, % Interest, % Royalties, % 1 . Armenia 10 10 10 35 . Poland 10/15 (c) 10 10 2 . Austria 5/15 (a) 10 10 36 . Qatar 5/10 (a) 10 10 3 . Azerbaijan 10 10 10 37 . Romania 10 10 10 4 . Belarus 15 10 15 38 . Russian Federation 10 10 10 5 . Belgium 5/15 (a) 10 10 39 . Saudi Arabia 5 10 10 6 . Bulgaria 10 10 10 40 . 10/15 (b) 10 10 7 . Canada 5/15 (a) 10 10 41 . Singapore 5/10 (b) 10 10 8 . China 10 10 10 42 . Slovak Republic 10/15 (e) 10 10 9 . Croatia 5/10 (b) 10 10 43 . Slovenia 5/15 (b) 10 10 10 . Cyprus 5/15 (a) 10 10 44 . Spain 5/15 (a) 10 10 11 . Czech Republic 10 10 10 45 . Sweden 5/15 (a) 10 10 12 . Estonia 5/15 (b) 10 15 46 . Switzerland 5/15 (a) 10 10 13 . Finland 5/15 (a) 10 10 47 . 10/15 (e) 10 10 14 . France 5/15 (a) 10 10 48 . Turkey 10 10 10 15 . Georgia 15 10 10 49 . Turkmenistan 10 10 10 16 . Germany 5/15 (b) 10 10 50 . Ukraine 5/15 (b) 10 10 17 . Hungary 5/15 (b) 10 10 51 . United Arab 5/15 (a) 10 10 18 . India 10 10 10 Emirates 52 . United Kingdom 5/15 (a) 10 10 19 . Iran 5/15 (c) 10 10 53 . United States 5/15 (a) 10 10 20 . Ireland 5/15 (b) 10 10 54 . Uzbekistan 10 10 10 21 . Italy 5/15 (a) 10 10 55 . Vietnam 5/15 (f) 10 10 22 . Japan 5/15 (a) 10 10 56 . Non-treaty countries 15 (g) 15 (g) 15 (g) 23 . Korea (South) 5/15 (a) 10 10

24 . Kyrgyzstan 10 10 10 (a) The lower rate applies to dividends paid to companies owning at least 10% of 25 . Latvia 5/15 (b) 10 10 the payer. The 15% rate applies to other dividends. 26 . Lithuania 5/15 (b) 10 10 (b) The lower rate applies to dividends paid to companies owning at least 25% of the payer. The 15% rate applies to other dividends. 27 . Luxembourg 5/15 (d) 10 10 (c) The lower rate applies to dividends paid to companies owning at least 20% of 28 . Macedonia 5/15 (b) 10 10 the payer. The 15% rate applies to other dividends. 29 . Malaysia 10 10 10 (d) The lower rate applies to dividends paid to companies owning at least 15% of the payer. The 15% rate applies to other dividends. 30 . 10/15 (b) 10 10 (e) The lower rate applies to dividends paid to companies owning at least 30% of 31 . Mongolia 10 10 10 the payer. The 15% rate applies to other dividends. 32 . Netherlands 5/15 (a) 10 10 (f) The lower rate applies to dividends paid to companies owning at least 70% of 33 . Norway 5/15 (a) 10 10 the payer. The 15% rate applies to other dividends. (g) For payments to entities registered in tax havens (as per the list of countries 34 . 12.5/15 (a) 12.5 15 with preferential tax regimes) the rate is 20%

Doing business in Kazakhstan 69 List of countries with preferential tax regimes

Approved by Order No. 142 of the 26. Republic of 6) Montserrat Minister of Finance of the Republic of 27. Republic of the Marshall 7) Turks and Caicos Islands Kazakhstan of 8 February 2018 28. Principality of Monaco 8) 1. Principality of 29. Republic of Malta 9) Channel Islands (, 2. State of Antigua and Barbuda 30. Mariana Islands , Sark and Alderney) 3. Commonwealth of the Bahamas 31. Kingdom of (only as 10) South Georgia Island 4. State of Barbados regards the city of Tangier) 11) South Sandwich Islands 5. State of 32. Union of 12) Chagos Islands 6. State of Belize 33. Republic of Nauru 46. United States of America (only as 7. State of Darussalam 34. Kingdom of the Netherlands regards the following areas): 8. Republic of Vanuatu (only as regards Aruba and the 1) US Virgin Islands 9. Co-operative Republic of dependent territories of the 2) Guam Antilles) 10. Republic of Guatemala 3) Commonwealth of Puerto Rico 35. Federal Republic of 11. State of Grenada 4) Wyoming State 36. New Zealand (only as regards the 12. Republic of 5) Delaware State Cook Islands and Niue) 13. Dominican Republic 47. Republic of 37. Republic of Palau 14. Commonwealth of Dominica 48. United Republic of Tanzania 38. Republic of Panama 15. Kingdom of Spain (only as regard 49. Kingdom of Tonga the Canary Islands) 39. Independent State of Samoa 50. Republic of Trinidad and Tobago 16. People’s Republic of China (only as 40. Republic of 51. Sovereign Democratic Republic regards the Macao and 41. Republic of Seychelles of Fiji special administrative regions) 42. State of Saint Vincent and the 52. Republic of the Philippines 17. Republic of Colombia Grenadines 53. Republic of France (only as regards 18. Federal Islamic Republic of 43. Federation of Saint Kitts and Nevis the following areas): 19. Republic of Costa Rica 44. State of Saint Lucia 1) Kerguelen Islands 20. Malaysia (only as regards the 45. United Kingdom of Great Britain 2) French Polynesia Labuan enclave) and (only as 3) French Guiana 21. Republic of Liberia regards the following areas): 54. Republic of 22. Lebanese Republic 1) Anguilla Islands 55. Democratic Republic of 23. Republic of Mauritius 2) Bermuda Islands 56. Jamaica 24. Islamic Republic of 3) British Virgin Islands 25. Portugal (only with regard to the 4) Madeira Islands) 5) Cayman Islands

70 Doing business in Kazakhstan Key macroeconomic indicators of Kazakhstan

2012 2013 2014 2015 2016 2017 2018 2019 GDP growth, % 4.8 6.0 4.2 1.2 1.1 4.1 4.1 3.8 GDP per capita, US$ 12,387 13,891 12,807 10,510 7,715 9,248 9,813 9,409 Inflation rate, % 6.0 4.8 7.4 13.6 8.5 7.1 5.3 4.6 Gold and foreign currency reserves (US$ billion) 28.3 24.7 29.2 27.9 29.7 31.0 30.9 29.5 KZT/US$ annual average exchange rate 149,11 152.13 179.19 221.73 342.16 326.00 344.71 416.7 Any other Kazakh-source income paid to non- 20% 20% 20% 20% 20% 20% 20% 20% residents that is not received from a tax agent (local legal entity)

Sources: Statistics Agency of Kazakhstan, National Bank of Kazakhstan

Doing business in Kazakhstan 71 EY | Building a better working world EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is EY exists to build a better working world, helping a separate legal entity. Ernst & Young Global Limited, a UK company to create long-term value for clients, people and limited by guarantee, does not provide services to clients. Information about how EY collects and uses personal data and a description of the society and build trust in the capital markets . rights individuals have under data protection legislation are available via ey.com/privacy. For more information about our organization, please Enabled by data and technology, diverse EY visit ey.com. teams in over 150 countries provide trust through EY works together with companies across the CIS and assists them assurance and help clients grow, transform in realizing their business goals. 5,500 professionals work at 19 CIS and operate . offices (in Moscow, Ekaterinburg, , Krasnodar, , Rostov-on-Don, St. Petersburg, Togliatti, Vladivostok, Almaty, Atyrau, Working across assurance, consulting, law, Nur-Sultan, , , Kyiv, Minsk, , Tbilisi, Yerevan). strategy, tax and transactions, EY teams ask better © 2021 Ernst & Young LLC. questions to find new answers for the complex All Rights Reserved. issues facing our world today . ED None.

This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global EY organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.

ey com/kz.