Doing Business in Kazakhstan

2020 DOING BUSINESS IN KAZAKHSTAN

Tier 25 Overall Position

Tier 4 for enforcing contracts

22 Tier 7 for protecting minority investors 25 24 Tier 22 for starting a business

Tier 24 for property registration

Tier 37 for dealing with construction permits 37 37

According to the World Bank: https://www.doingbusiness.org/en/rankings DOING BUSINESS IN KAZAKHSTAN

KAZAKHSTAN’S RATINGS IN DB BY YEAR

DB 2014 DB 2015 DB 2016 DB 2017 DB 2018 DB 2019 DB 2020 0

30 25 28

40 35 36

50 53 51 60

80 76

According to the World Bank: https://www.doingbusiness.org/en/rankings KAZAKHSTAN IN NUMBERS

BUSINESS AND TERRITORY POPULATION MAIN INDUSTRIES ECONOMY TAXATION

POPULATION CAPITAL CITY Oil Titanium NOMINAL GDP LABOUR FORCE (2018) 19 million Nur-Sultan Coal Bauxite $170.326 billion (nominal, 9.139 million iron ore Gold 2019 est.) Urban population 14 provinces and 2 cities of Manganese Silver $540.984 billion (PPP, 2019 UNEMPLOYMENT RATE percentage is 58% of the national significance: Chromite Phosphates est.) (December 2019) 4.8% total population Almaty and Shymkent Lead sulfur GDP growth Zinc Uranium 4.1% (2018), 4.5% (2019e) − CPI INFLATION 5.4% AGE STRUCTURE - 2019 LANDLOCKED AREA Copper iron 3.0% (2020f), 2.5% (2021f) 0–15 years (29.9%) 2,724,900 km2 steel; Stock exchange 16–62 years (59.1%) GDP PER CAPITA Kazakhstan Stock 63 and above (11.0%) NEIGHBORING (2018) US$9,813 Exchange (KASE) Central COUNTRIES Tractors and Electric Bank National Bank of LANGUAGES Russia, China, Uzbekistan, other motors, GDP COMPOSITION BY Kazakhstan Kazakh (official language) Kyrgyzstan and agricultural construction SECTOR Russian (interethnic Turkmenistan machinery materials (2018) Agriculture (4.4%); CORPORATE INCOME TAX communication) industry (28.2%); services RATE - 20% (55.5%) INDIVIDUAL INCOME TAX EXTERNAL DEBT AS A RATE - 10% PERCENTAGE OF GDP (Q3 STATE VALUE-ADDED 2019) 32.6% TAX - 12% Currency unit Kazakhstan tenge (KZT)

According to the World Bank: https://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS?locations=KZ KAZAKHSTAN IN NUMBERS

EXPORTS IMPORTS FDI STOCK PUBLIC FINANCES CREDIT RATING

$58 billion (2019) $38 billion (2019) $161.6 billion (31 December PUBLIC DEBT STANDARD & POOR'S 2017 est.) 20.8% of GDP BBB+ (Domestic) EXPORT GOODS IMPORT GOODS (2017 est.) BBB (Foreign) oil and oil products machinery and equipment ABROAD BBB+ (T&C Assessment) natural gas metal products $35.04 billion BUDGET BALANCE Outlook: ferrous metals Foodstuffs (31 Dec 2017 est.) −1.8% (of GDP) Stable (2011) Chemicals (2017 est.) Machinery MAIN IMPORT PARTNERS CURRENT ACCOUNT MOODY'S Grain Russia 38.9% $5.353 billion (2017 est.) REVENUES Baa2, Outlook: Stable Wool China 16.1% 35.48 billion (2011) Meat Germany 5.1% GROSS EXTERNAL DEBT (2017 est.) coal United States 4.3% (2017) $167.5 billion FITCH (31 Dec 2017 est.) EXPENSES BBB-, Outlook: Positive MAIN EXPORT PARTNERS 38.3 billion (2011) Italy 17.9% (2017 est.) China 11.9% FOREIGN RESERVES Netherlands 9.8% $30.75 billion Russia 9.3% (31 Dec 2017 est.) Switzerland 6.4% France 5.9% (2017)

According to the World Bank: https://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS?locations=KZ MARKET ACCESS

MEMBER OF THE WORLD TRADE ORGANIZATION

MEMBER OF EURASIAN ECONOMIC UNION Access to a common market with more than 180 million consumers

ASTANA INTERNATIONAL FINANCIAL CENTRE INVESTMENTS

Release from taxation: corporate No limitation on participation in a income tax, property tax, by the company, registered in customs duties Kazakhstan (100% participation)*

Obtaining of license (if applicable)

No limitations for participation PPP projects of foreigners in the investment projects

Obtaining of work permit for the employees Renewable (up to 1 month) Energy Projects

Attraction of foreign labor ONE-STOP SHOP

AN OFFICE WHERE MULTIPLE SERVICES ARE OFFERED

Rendering of services to Information, consulting, foreign investors and organisational and other representatives of the support of the investor Kazakhstan business

Support of the Assistance in obtaining ONE-STOP investment project necessary agreements SHOP prior to production and permissions LIST OF PRIORITY ACTIVITIES FOR IMPLEMENTATION OF INVESTMENT PROJECTS

OIL & GAS TEXTILE

RES TOURISM

CONSTRUCTION CONSTRUCTION MATERIALS

LOGISTICS & TRANSPORTATION METALLURGY AGRICULTURE AND FOOD FDI INCENTIVES

TAX REMISSIONS CIT – 0% 10 years Land tax – 0% 10 years Property tax – 0% 8 years

STABILITY OF CUSTOMS FACILITIES LEGISLATION INVESTMENT GRANTS Customs duty of 0% for import: Stability of the tax legislation Up to 30% of the actual costs of construction and installation works and • processing equipment and for all taxes except VAT and accessories to it equipment excises (subject to investment • spare parts contract) • raw materials and materials

LAND GRANTS The land plots, buildings, cars and the equipment in property

According to Kazakh Invest: https://invest.gov.kz/about-us/kazakh-invest/ STATE PROGRAM «DIGITAL KAZAKHSTAN» FOR THE PERIOD 2018-2022

DIGITALISATION OF INDUSTRIES

TRANSITION TO THE DIGITAL STATE

IMPLEMENTATION OF THE DIGITAL SILK ROAD

DEVELOPMENT OF HUMAN CAPITAL

CREATING AN INNOVATIVE ECOSYSTEM WHICH TYPE OF LEGAL ENTITY INVESTORS SHOULD CHOOSE

BRANCH is a structural subdivision of a In Limited liability partnerships (LLPs) foreign legal entity that performs all or part participants hold interests. An LLP may be of the foreign entity’s functions. In formed by one or more participants. The particular, it may engage in commercial participants in an LLP are not liable for the LLP’s activity. It is not a separate legal entity. debts beyond the value of their contributions. Participants’ interests are proportional to their contributions to the charter capital. LLPs in Kazakhstan are separate legal entities that are distinct from their participants. LLP is subject to state registration and taxation. REPRESENTATIVE OFFICE is established to represent a foreign entity’s interests in Kazakhstan. A representative office protects and represents the interests of Joint stock companies (JSCs) is a legal entity the foreign legal entity and carries out that issues shares in order to attract investments preparatory and auxiliary activities, such as to finance its activities. Shareholders are not marketing and advertising. Generally, a liable for the JSC’s liabilities. It may have one or representative office may not engage in more shareholders. The minimum capital commercial activity. It is not a separate required for a JSC is almost US$ 350,000). legal entity. STEP-PLAN ON REGISTRATION OF LEGAL ENTITY

01 02 03 04 05 06

1-3 weeks 1 business day 1-2 business days 2-3 weeks 15–30 (including business days apostille) Preparation of an Obtaining the Opening of a bank Employment electronic keys for account issues Preparation and official seal of the Obtaining a license the online submission of the partnership (if applicable) submission of tax documents for the reports registration of the partnership (legal entity) LAND RIGHTS

Foreigners can obtain lands Foreigners and legal entities provided for building or with with any kind of foreign already built up industrial and participation cannot obtain non-industrial complexes, lands near the border line. including residential constructions, and lands provided for the maintenance of Foreigners and legal entities such buildings. with any kind of foreign participation cannot obtain lands provided for agricultural purposes until December 31, 2021. TAX REGISTRATION OF NON-RESIDENT IN KAZAKHSTAN

CASES IN WHICH A NON- RESIDENT MUST BE REGISTERED AS A TAXPAYER

On receiving Kazakh- When opening On acquiring source income not accounts with Kazakh tax taxed at source in local banks resident status Kazakhstan TAXATION IN KAZAKHSTAN

CORPORATE INCOME TAX AND INDIVIDUAL INCOME TAX Legal entity: 20% Individual entrepreneur: 10%

VALUE – ADDED TAX : 12% ADDITIONAL TAXES In case the entity is registered Transport Tax, Land tax, as VAT-payer. The entities, the Property tax, activity of which is connected Environmental emission with the goods of social charges are calculated importance shall pay VAT at 8% individually in each case. rate till October 1, 2020 due to state of emergency. LICENSING REGULATION

Range of business and professional activities that require licensing is Penalties for not The exhaustive very broad having licenses can be list of licenses Investors need to determine whether significant (including, and permissions they need a license beforehand profit confiscation) (engineering and construction, import/export of goods, etc.) EMPLOYMENT ISSUES

TAXATION OF EMPLOYEES AGREEMENTS Mandatory pension Conclusion of employment contributions -10% agreement Individual Income Tax-10% Non-competence agreements (if applicable) Non-disclosure agreement (if applicable) Employment policies and procedures

TAXATION OF MINIMUM SALARY EMPLOYERS in 2020 in Kazakhstan is Social Tax-9,5% 42.500 KZT Social contributions-3,5% (approximately 100 US Mandatory Social Medical dollars) Insurance – 1,5% CONSTRUCTION PROCESS

PRIOR CONSTRUCTION CONSTRUCTION Getting a land plot; Notice on beginning of construction; Construction licenses and permits (3 Requirements to the construction (HSE, categories); environmental permits, warranties); Work permits to hire foreign labor; Architectural & construction control and Project documentation development, supervision; approval and expertise. Designer’s supervision; Technical supervision; Acceptance on the facility in operation: • State acceptance; • Acceptance by the owner. Registration of the completed facility. SPECIAL ECONOMIC ZONES IN KAZAKHSTAN

SPECIAL ECONOMIC ZONE (SEZ) is a part of Kazakhstan's territory, which has a special legal regime, with all the necessary infrastructure, to carry out activities in priority activities. On the territory of the Republic of Kazakhstan, there are 12 special economic zones with different sectorial orientations. SPECIAL ECONOMIC ZONES IN KAZAKHSTAN

Companies registered as participants of an SEZ enjoy the following benefits: • the SEZ territory is classed as a free customs zone • free land lease • tax incentives (subject to certain criteria), and specifically:  0% land tax/land use fees  0% property tax  0% corporate income tax  0% VAT on supplies of goods to the SEZ  VAT exemption for supplies of goods in the territory of the SEZ  0% social tax (only for the Innovative Technologies Park) • simplified procedures for engaging foreign labour

According to Kazakh Invest: https://invest.gov.kz/about-us/kazakh-invest/ ASTANA INTERNATIONAL FINANCIAL CENTRE

545 registered AIFC jurisdiction is companies based on the principles, norms and precedents of the law of England and The Astana Financial Wales Services Authority Fintech Innovative Trading Infrastructure: Astana International Exchange PUBLIC - PRIVATE PARTNERSHIPS

State support measures: state State’s payments: the co-financing, guarantees on infrastructure the reimbursement of investment bonds; state guarantees on loans; expenses, the payment of intellectual property exclusive operating costs, remuneration for rights transfer; in-kind grants; management of the facility, the state guarantees on consumption rent for the use of the object, of a certain amount of goods availability payment (works, services)

The ban on the Currency risk Step-in-right sequestration of (partially) (direct state’s financial agreement) obligations SUBSOIL USE RIGHTS IN KAZAKHSTAN

The subsoil land plot must exist in the . Also, investors may apply for inclusion of the subsoil land plot to the program. This program contains geographical coordinates of territories in the form of blocks, within which subsoil land plots is provided.

Note that investors obliged to: Potential investor has an access to the preliminary • provide local people with work (at least geological information about a subsoil land plot. 50% of the total volume of works in one calendar year); • finance studies and trainings of Kazakh practice shows that investors receive a subsoil Kazakhstani personnel during the plot for exploration, and in case of a successful production period; commercial discovery, they subsequently receive the • bear expenses for research, scientific, exclusive right for extraction. technical and experimental design work in Kazakhstan during the production period; • bear expenses for the socio-economic development of the region and its infrastructure during the production period. SUBSOIL USE RIGHTS IN KAZAKHSTAN

* This license is regulated granting the license* or executing only under the Law on a contract with the Government of Subsoil Use of the Republic of Kazakhstan dated Kazakhstan through its relevant December 27, 2017 competent authority Subsoil use rights may arise by

transfer of subsoil use rights and/or objects related to subsoil use rights under the contract

Note: The Ministry of Energy of the Republic of Kazakhstan is the competent authority for the oil and gas sector The Ministry for Investment and Development of the Republic of Kazakhstan is the competent authority for the solid minerals sector SUBSOIL USE RIGHTS IN KAZAKHSTAN

Granting the license* or executing a contract with the Government of Kazakhstan through its Subsoil use rights relevant competent may arise by authority

* This license is regulated only under the Law on Subsoil Use of the Republic of Kazakhstan dated December 27, 2017

Transfer of subsoil use rights and/or objects related to subsoil use rights under the contract Note: The Ministry of Energy of the Republic of Kazakhstan is the competent authority for the oil and gas sector The Ministry for Investment and Development of the Republic of Kazakhstan is the competent authority for the solid minerals sector SUBSOIL USE RIGHTS IN KAZAKHSTAN

Inter alia, for production operations if there is a commercial discovery on the basis of the subsoil use contract for exploration*.

English method. The main and The amount of subscription bonus the only criterion in identifying and investments into infrastructure the auction winner is the largest and social and economic amount of subscription bonus. development of the region.

* Moratorium for transfer of the subsoil use right for hydrocarbons within two years from the effective date of the contract, with some exceptions SCHEME OF SUPPORT OF RES IN KAZAKHSTAN

Purchase and sale of electricity Standard PPA-contract form – Financial and Settlement for 15 years on auction tariff Center for RES support in KZT (for 20 years in 2021)

Annual indexation of tariff – Standard form of grid taking into account exchange rate connection of the RES object for USD and consumer price index

Priority control and Free transportation dispatching of electricity of RES electricity

Investment preferences in the framework of Entrepreneurial Code ACCESS TO RES AUCTIONS

(*foreign legal entities provide the same documents in accordance with legislation of their country) (issued and agreed in accordance with Electrical regulations)

(in accordance with Land code)

(bank warranty /stand-by letter of credit) (2 000 KZT/kW - without documentation; 5 000 KZT/KW - with documentation) INVESTMENTS OF CHINA IN KAZAKHSTAN

Joint projects worth are heavily skewed toward fossil fuels and extractives

CNPC invested more that in oil&gas and in construction of pipes in Kazakhstan for supply of resources in Central Asia and China

CITIC and China Investment Corp both invested USD in Kazakhstan

Sinopec invested in extraction of hydrocarbons in Kazakhstan

Industrial & Commercial Bank of China and Bank of China operate in Kazakhstan

According to Kazakh Invest: https://invest.gov.kz/about-us/kazakh-invest/ CHINESE INVESTMENTS BY SECTORS

14% Chemistry and petrochemistry (oil and gas) US$ 13.91billion 1% 4% Mining and metallurgy US$ 5.98 billion

9% Energy US$ 2.38 billion 50% Machine building US$ 1.16 billion

Food industry US$ 0.39 billion 22%

Others US$ 3.77billion

According to Kazakh Invest: https://invest.gov.kz/about-us/kazakh-invest/ NEW SILK ROAD ROUTES KAZAKHSTAN AS THE BELT AND ROAD INITIATIVE HUB

of national Intercontinental of investments railways and highway in the development of of highways infrastructure, transport have been modernised and logistics

Astana International Financial The dry port 55 joint Kazakh- The sea ports of Aktau and Center ( ) Kuryk handle “ ” Chinese projects and worth more than 15,000 containers

According to Kazakh Invest: https://invest.gov.kz/about-us/kazakh-invest/ “Nurly Zhol” Development Strategy

FUNDING 6 trillion 598 billion tenge = $ 16 billion

RECONSTRUCTION 10,000 km of the republican road network REPAIR 11,000 km of the republican road network REPAIR 27,000 km of the local road network

According to Kazakh Invest: https://invest.gov.kz/about-us/kazakh-invest/ [email protected]

MANAGING PARTNER +7 707 913 74 23 +998 99 81 86 948

PRACTICE: EDUCATION: Energy and Renewables LLB from Cardiff Law School in the UK Infrastructure LLM from Queen Mary College in the UK Public-Private Partnerships Law Degree with distinction from Adilet Corporate and Commercial Law Higher Law School in Kazakhstan

She has worked with highly-qualified, She has been mentioned in Chambers cross-functional teams, government Global, The Legal 500, IFLR 1,000 and agencies, and investment banks, and Asialaw profiles as a leading expert has experience interfacing with focused on corporate law, mergers and institutional clients in order to foster acquisitions, project finance, and communication and connection securities. between all parties involved in a given

legal matter.

She advocates clients on corporate and » commercial matters, and is highly adept at navigating banking and financial …a sharp mind and matters with particular focus on debt manages projects » and deposit operations, cross-border effectively finance transactions, syndicated loans and securities transactions. – THE LEGAL 500