Doing Business in Kazakhstan an Introductory Guide to Tax and Legal Issues 2 Doing Business in Kazakhstan Preface
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Doing business in Kazakhstan An introductory guide to tax 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 January 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 taxes 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 government ............................ 8 Transfer pricing ................................51 Time .......................................... 8 Employment regulations .........................51 Business hours .................................. 8 Import and export formalities and customs 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 income tax (“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 Eurasian Economic Union • Kazakhstan posted an annual average (EAEU) entered into force. The union US$24,263 GDP growth rate of 5.2% from 2005 of Armenia, Belarus, Kazakhstan, million to 2019, with GDP in 2019 reaching Kyrgyzstan and Russia 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 December 2012, the former from 4.1% in 2019.1 The country’s President of Kazakhstan, 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 Economy of Kazakhstan one of the world’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 World Bank’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 Republic 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 or rebuilt, including celerating Kazakhstan’s economic completion of the Western development.6 Europe — Western China 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), Arkalyk–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 Almaty–Shu section (111 km) • The first wave of privatization in Kazakhstan laid the foundations of • 6 runways were upgraded at the the market economy in the 1990s. airports of Uralsk, Petropavlovsk, At the end of 2015, Kazakhstan Almaty, Semey, Kostanay and announced a new privatization plan 1,400 km Balkhash. 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 Dostyk–Moyynty Trade 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 Nursultan Nazarbayev 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