info@admvalner.com
+7 (727) 390 11 01

Legal Presence in Kazakhstan

Important facts

  • Kazakhstan is ranked 35th in the Ease of Doing Business rating, according to the World Bank’s Doing Business 2016 report. The country moved up 6 positions since the year before.
  • On 1 January 2015, the Treaty on the Eurasian Economic Union (EAEU) entered into force. The union of Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia comprises a market of 180 million consumers.
  • The new economic policy, Nurly Zhol (Riad to the Future), was launched in November 2014. Its core goal is to create an efficient transport and logistics infrastructure in Kazakhstan.
  • In 2018 planned investments into Nurly Zhol by national companies and institutions shall be around KZT 50.5 billion.
  • Astana International Financial Center is located at and based on the infrastructure of EXPO-2017. It will have a clearly defined territory, its own executive authority and an independent court. The foundation act was signed in 2015. The center will have a special legal regime, differing from the legislation of Kazakhstan and based on the principles of English law and best practice of world-leading financial centers. The participants will enjoy special tax, currency and visa regimes, as well as a framework for attracting foreign labor. The tax regime will offer a 50-year tax exemption and personal income tax exemptions for foreign employees. National Bank of Kazakhstan will allocate KZT6 billion to create the Center.

    Types of Business Organizations

    Foreign and local investors may use a number of organizational and legal forms to do business in Kazakhstan, including limited liability partnerships, joint stock companies (corporations), as well as representative and branch offices.

    Joint Stock Companies (JSC)

    A JSC is a legal entity that is separate and distinct from its shareholders, i.e., shareholders are not liable for JSC’s liabilities. It may have one or more shareholders. The minimum capital required for a JSC is 50,000 times the monthly calculation index (MCI) (approximately US$370,000).

    Limited Liability Partnership (LLP)

    The main difference between the two entities is that an LLP does not issue shares; instead, participants have interests in the partnership. An LLP may be formed by one or more participants. The minimum capital requirement for an LLP is 100 times the MCI (approximately US$745), with the exception of small businesses, for which the minimum is set at KZT 0.00. Participants’ interests are proportional to their contributions to the charter capital unless the foundation documents provide otherwise. Most investors use a LLP as their investment vehicle.

    Representative Office

    Kazakhstan law allows a foreign company to establish a representative office in Kazakhstan to represent its interests in Kazakhstan. A representative office protects and represents the interests of a foreign legal entity and carries out preparatory and auxiliary activities, required for representation purposes. Generally, a representative office may not conduct commercial activity. A representative office is not recognized as a separate legal entity.

    Branch 
    A branch is a structural subdivision of a foreign legal entity that performs all or part of the foreign entity’s functions and, in particular, can carry on commercial activity. A branch is not considered to be a legal entity separate from its foreign parent company (head office).

    Foundation Documents

    Founders of an entity shall agree on and sign its foundation documents: Foundation Agreement (if there is more than one founder of the entity) and Charter.

    The Foundation Agreement is an agreement between the founders of the entity (like shareholders agreement under western jurisdictions) which regulates it’s’ relations.

    The Charter is a document on establishment and operation of the company which regulates the relationship between entity, its founders and third parties (like Memorandum and Articles of Association under western jurisdictions).

Location (legal address)

A legal entity’s location is the address indicated in its foundation (e.g., charter) documents. Under Kazakh law, a legal entity is in the same place as its operating governing body (i.e., its director or board of directors). The location plays an important part in a legal entity’s registration and other legal events, such as determination of the court where an appeal should be filed (usually with a court in the defendant’s location) or the state revenue authority to which tax and other payments will be made.

State Registration

State registration in Kazakhstan follows a “one-stop shop” principle: all registration documents must be submitted to a single government authority, NJSC “State Corporation “Government for Citizens”. Under the law on state registration, the procedure should take 1-2 business days. Legislation requires that a standard set of documents be submitted to complete an entity’s state registration. The state registration fee is currently 6.5 times the MCI (approximately US$48).

Opening a Bank Account

Bank accounts can be opened with a local bank in Kazakhstan in the national currency and/or in a foreign currency. Kazakhstan legal entities are permitted to hold bank accounts outside of Kazakhstan without restrictions. All they have to do when opening such an account is to notify the National Bank of Kazakhstan within 30 calendar days after an agreement is concluded with a foreign bank and file statutory reporting.

Settlements between residents of Kazakhstan (Kazakhstan legal entities and citizens) must be made in Tenge. Settlements between nonresidents (foreign legal entities and citizens) and Kazakhstan residents may generally be made in any currency.

Currency Control

Pursuant to the Law “On Currency Regulation and Currency Control” dated , the currency operations are: (i) operations associated with the transfer of ownership and other rights to currency valuables, and the use of currency valuables as a means of payment; and (ii) import and money transfer into the Republic of Kazakhstan and the export and transfer from the Republic of Kazakhstan of currency valuables, national currency, securities and payment documents with “face-value” expressed in national currency, or securities issued by residents without a face value.

Should the currency operation involving transfer an equivalent of US$500,000 or more (e.g. contributions into the charter capital of the LLP) or should the currency operation provide for transfer of funds from Kazakhstan (e.g. royalty payments or distribution of net profits) exceeds the equivalent of US$100,000, such operations will require the prior registration with the National Bank of Kazakhstan.

For the purposes of registration, it is necessary for a local party to the currency transaction (most likely, the LLP) to provide an application in the form approved by the National Bank of Kazakhstan and an exhaustive copy of the relevant agreement to the National Bank of Kazakhstan.

Licensing

Many industries require special licenses and/or permits for their business activities. There is serious liability exposure for conducting activities without a license in Kazakhstan. This liability could include criminal and/or administrative liability and depends on the amount of the revenue received from the activities performed without a license. The entity may be subject to obtaining a license and/or special permits for its activities depending on its business activities.

Work Permits

To hire a foreign employee, the entity must obtain a work permit from the relevant local authority.

Contacts
If you would like further information, please contact:
Avaskhan Asanaliyev
Partner, Almaty
ADM Valner LLP

Tel.: +7 (727) 390 11 01
avaskhan.asanaliyev@admvalner.com

Disclaimer

The provided information does not constitute formal legal advice and should not be relied upon without further consultation with legal advisors.