DOING BUSINESS

IN KAZAKHSTAN

© COPYRIGHT, 2020

2020

Tier 25 Overall Position

Tier 4 for enforcing contracts

Tier 7 for protecting minority investors

Tier 22 for starting a business

Tier 24 for property registration

Tier 37 for dealing with construction permits

25

47

22

24

37

4

37

DOING BUSINESS IN KAZAKHSTAN

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

76

53 51

35 36

2825

0

10

20

30

40

50

60

70

80

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

KAZAKHSTAN’S RATINGS IN DB BY YEAR

DOING BUSINESS IN KAZAKHSTAN

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

KAZAKHSTAN IN NUMBERS

TERRITORY POPULATION MAIN INDUSTRIES ECONOMYBUSINESS AND

TAXATION

POPULATION

19 million

Urban population

percentage is 58% of the

total population

AGE STRUCTURE - 2019

0–15 years (29.9%)

16–62 years (59.1%)

63 and above (11.0%)

LANGUAGES

Kazakh (official language)

Russian (interethnic

communication)

CAPITAL CITY

Nur-Sultan

14 provinces and 2 cities of

national significance:

Almaty and Shymkent

LANDLOCKED AREA

2,724,900 km2

NEIGHBORING

COUNTRIES

Russia, China, Uzbekistan,

Kyrgyzstan and

Turkmenistan

Oil

Coal

iron ore

Manganese

Chromite

Lead

Zinc

Copper

Tractors and

other

agricultural

machinery

Titanium

Bauxite

Gold

Silver

Phosphates

sulfur

Uranium

iron

steel;

Electric

motors,

construction

materials

NOMINAL GDP

$170.326 billion (nominal,

2019 est.)

$540.984 billion (PPP, 2019

est.)

GDP growth

4.1% (2018), 4.5% (2019e) −

3.0% (2020f), 2.5% (2021f)

GDP PER CAPITA

(2018) US$9,813

GDP COMPOSITION BY

SECTOR

(2018) Agriculture (4.4%);

industry (28.2%); services

(55.5%)

EXTERNAL DEBT AS A

PERCENTAGE OF GDP (Q3

2019) 32.6%

Currency unit Kazakhstan

tenge (KZT)

LABOUR FORCE (2018)

9.139 million

UNEMPLOYMENT RATE

(December 2019) 4.8%

CPI INFLATION 5.4%

Stock exchange

Kazakhstan Stock

Exchange (KASE) Central

Bank National Bank of

Kazakhstan

CORPORATE INCOME TAX

RATE - 20%

INDIVIDUAL INCOME TAX

RATE - 10%

STATE VALUE-ADDED

TAX - 12%

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)

EXPORT GOODS

oil and oil products

natural gas

ferrous metals

Chemicals

Machinery

Grain

Wool

Meat

coal

MAIN EXPORT PARTNERS

Italy 17.9%

China 11.9%

Netherlands 9.8%

Russia 9.3%

Switzerland 6.4%

France 5.9% (2017)

$38 billion (2019)

IMPORT GOODS

machinery and equipment

metal products

Foodstuffs

MAIN IMPORT PARTNERS

Russia 38.9%

China 16.1%

Germany 5.1%

United States 4.3% (2017)

$161.6 billion (31 December

2017 est.)

ABROAD

$35.04 billion

(31 Dec 2017 est.)

CURRENT ACCOUNT

$5.353 billion (2017 est.)

GROSS EXTERNAL DEBT

$167.5 billion

(31 Dec 2017 est.)

PUBLIC DEBT

20.8% of GDP

(2017 est.)

BUDGET BALANCE

−1.8% (of GDP)

(2017 est.)

REVENUES

35.48 billion

(2017 est.)

EXPENSES

38.3 billion

(2017 est.)

STANDARD & POOR'S

BBB+ (Domestic)

BBB (Foreign)

BBB+ (T&C Assessment)

Outlook:

Stable (2011)

MOODY'S

Baa2, Outlook: Stable

(2011)

FITCH

BBB-, Outlook: Positive

(2011)

FOREIGN RESERVES

$30.75 billion

(31 Dec 2017 est.)

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

Access to a common market with more than 180 million consumers

MEMBER OF EURASIAN ECONOMIC

UNION

MEMBER OF THE WORLD

TRADE ORGANIZATION

ASTANA INTERNATIONAL

FINANCIAL CENTRE

MARKET ACCESS

INVESTMENTS

Obtaining of license (if applicable)

Release from taxation: corporate income tax, property tax, by the customs duties

PPP projects

Attraction of foreign labor

Renewable Energy Projects

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

No limitations for participation of foreigners in the investment projects

No limitation on participation in a company, registered in

Kazakhstan (100% participation)*

ONE-STOP SHOP

AN OFFICE WHERE

MULTIPLE SERVICES

ARE OFFERED

Rendering of services to

foreign investors and

representatives of the

Kazakhstan business

Assistance in obtaining

necessary agreements

and permissions

Information, consulting,

organisational and other

support of the investor

Support of the

investment project

prior to production

ONE-STOP SHOP

LIST OF PRIORITY ACTIVITIES FOR IMPLEMENTATION OF INVESTMENT PROJECTS

RES

OIL & GAS

CONSTRUCTION

TEXTILE

TOURISM

AGRICULTURE

AND FOODMETALLURGY

LOGISTICS &

TRANSPORTATION

CONSTRUCTION

MATERIALS

FDI INCENTIVES

According to Kazakh Invest: https://invest.gov.kz/about-us/kazakh-invest/

CUSTOMS FACILITIES

Customs duty of 0% for

import:

• processing equipment and

accessories to it

• spare parts

• raw materials and materials

LAND GRANTS

The land plots, buildings, cars and the

equipment in property

TAX REMISSIONS

CIT – 0% 10 years

Land tax – 0% 10 years

Property tax – 0% 8 years

INVESTMENT GRANTS

Up to 30% of the actual costs of

construction and installation works and

equipment

STABILITY OF

LEGISLATION

Stability of the tax legislation

for all taxes except VAT and

excises (subject to investment

contract)

DEVELOPMENT OF HUMAN CAPITAL

DIGITALISATION OF INDUSTRIES

IMPLEMENTATION OF THE DIGITAL SILK ROAD

CREATING AN INNOVATIVE ECOSYSTEM

TRANSITION TO THE DIGITAL STATE

STATE PROGRAM «DIGITAL KAZAKHSTAN» FOR THE PERIOD 2018-2022

WHICH TYPE OF LEGAL ENTITY INVESTORS SHOULD CHOOSE

REPRESENTATIVE OFFICE is established

to represent a foreign entity’s interests in

Kazakhstan. A representative office

protects and represents the interests of

the foreign legal entity and carries out

preparatory and auxiliary activities, such as

marketing and advertising. Generally, a

representative office may not engage in

commercial activity. It is not a separate

legal entity.

Joint stock companies (JSCs) is a legal entity

that issues shares in order to attract investments

to finance its activities. Shareholders are not

liable for the JSC’s liabilities. It may have one or

more shareholders. The minimum capital

required for a JSC is almost US$ 350,000).

BRANCH is a structural subdivision of a

foreign legal entity that performs all or part

of the foreign entity’s functions. In

particular, it may engage in commercial

activity. It is not a separate legal entity.

In Limited liability partnerships (LLPs)

participants hold interests. An LLP may be

formed by one or more participants. The

participants in an LLP are not liable for the LLP’s

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.

1-3 weeks

(including

apostille)

Preparation and

submission of the

documents for the

registration of the

partnership (legal

entity)

01

1 business day

Preparation of an

official seal of the

partnership

02

1-2 business days

Obtaining the

electronic keys for

the online

submission of tax

reports

03

2-3 weeks

Opening of a bank

account

04

Employment

issues

05

15–30

business days

Obtaining a license

(if applicable)

06

STEP-PLAN ON REGISTRATION OF LEGAL ENTITY

LAND RIGHTS

Foreigners can obtain lands

provided for building or with

already built up industrial and

non-industrial complexes,

including residential

constructions, and lands

provided for the maintenance of

such buildings.

Foreigners and legal entities

with any kind of foreign

participation cannot obtain

lands near the border line.

Foreigners and legal entities

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-

source income not

taxed at source in

Kazakhstan

On acquiring

Kazakh tax

resident status

When opening

accounts with

local banks

In case the entity is registered

as VAT-payer. The entities, the

activity of which is connected

with the goods of social

importance shall pay VAT at 8%

rate till October 1, 2020 due to

state of emergency.

VALUE – ADDED TAX : 12%

Legal entity: 20%

Individual entrepreneur: 10%

CORPORATE INCOME TAX AND

INDIVIDUAL INCOME TAX

Transport Tax, Land tax,

Property tax,

Environmental emission

charges are calculated

individually in each case.

ADDITIONAL TAXES

TAXATION IN KAZAKHSTAN

LICENSING REGULATION

Range of business and professional

activities that require licensing is

very broad

Investors need to determine whether

they need a license beforehand

(engineering and construction,

import/export of goods, etc.)

Penalties for not

having licenses can be

significant (including,

profit confiscation)

The exhaustive

list of licenses

and permissions

MINIMUM SALARY

in 2020 in Kazakhstan is

42.500 KZT

(approximately 100 US

dollars)

AGREEMENTS

Conclusion of employment

agreement

Non-competence

agreements (if applicable)Non-disclosure agreement (if

applicable)

Employment policies and

procedures

TAXATION OF

EMPLOYERS

Social Tax-9,5%

Social contributions-3,5%

Mandatory Social Medical

Insurance – 1,5%

TAXATION OF EMPLOYEES

Mandatory pension

contributions -10%

Individual Income Tax-10%

EMPLOYMENT ISSUES

CONSTRUCTION PROCESS

Notice on beginning of construction;

Requirements to the construction (HSE, environmental permits, warranties);

Architectural & construction control and supervision;

Designer’s supervision;

Technical supervision;

Acceptance on the facility in operation:

• State acceptance;

• Acceptance by the owner.

Registration of the completed facility.

Getting a land plot;

Construction licenses and permits (3 categories);

Work permits to hire foreign labor;

Project documentation development, approval and expertise.

PRIOR CONSTRUCTION CONSTRUCTION

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 companies

The Astana Financial Services Authority

AIFC jurisdiction is based on the principles, norms and precedents of the law of England and

Wales

Innovative Trading Infrastructure:

Astana International Exchange

Fintech

PUBLIC - PRIVATE PARTNERSHIPS

State’s payments: the co-financing,

the reimbursement of investment

expenses, the payment of

operating costs, remuneration for

management of the facility, the

rent for the use of the object,

availability payment

State support measures: state

guarantees on infrastructure

bonds; state guarantees on loans;

intellectual property exclusive

rights transfer; in-kind grants;

state guarantees on consumption

of a certain amount of goods

(works, services)

The ban on the

sequestration of

state’s financial

obligations

Currency risk

(partially)Step-in-right

(direct

agreement)

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.

Potential investor has an access to the preliminary

geological information about a subsoil land plot.

Kazakh practice shows that investors receive a subsoil

plot for exploration, and in case of a successful

commercial discovery, they subsequently receive the

exclusive right for extraction.

Note that investors obliged to:

• provide local people with work (at least

50% of the total volume of works in one

calendar year);

• finance studies and trainings of

Kazakhstani personnel during the

production period;

• bear expenses for research, scientific,

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

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 may arise by

granting the license* or executing a contract with the Government of Kazakhstan through its relevant

competent authority

transfer of subsoil use rights and/or objects related to subsoil

use rights under the contract

* This license is regulated

only under the Law on

Subsoil Use of the Republic

of Kazakhstan dated

December 27, 2017

SUBSOIL USE RIGHTS IN KAZAKHSTAN

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

* This license is regulated only under the

Law on Subsoil Use of the Republic of

Kazakhstan dated December 27, 2017

Subsoil use rights

may arise by

Granting the license* or

executing a contract

with the Government of

Kazakhstan through its

relevant competent

authority

Transfer of subsoil use

rights and/or objects

related to subsoil use

rights under the

contract

SUBSOIL USE RIGHTS IN KAZAKHSTAN

English method. The main and

the only criterion in identifying

the auction winner is the largest

amount of subscription bonus.

Inter alia, for production

operations if there is a

commercial discovery on the

basis of the subsoil use contract

for exploration*.

The amount of subscription bonus

and investments into infrastructure

and social and economic

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

Standard PPA-contract form

for 15 years on auction tariff

in KZT (for 20 years in 2021)

Standard form of grid

connection of the RES object

Free transportation

of RES electricity

Purchase and sale of electricity

– Financial and Settlement

Center for RES support

Annual indexation of tariff –

taking into account exchange rate

for USD and consumer price index

Priority control and

dispatching of electricity

Investment preferences in the

framework of Entrepreneurial Code

ACCESS TO RES AUCTIONS

(issued and agreed in accordance with

Electrical regulations)

(bank warranty /stand-by letter of credit)

(2 000 KZT/kW - without documentation;

5 000 KZT/KW - with documentation)

(in accordance with Land code)

(*foreign legal entities provide the

same documents in accordance with

legislation of their country)

INVESTMENTS OF CHINA IN KAZAKHSTAN

According to Kazakh Invest: https://invest.gov.kz/about-us/kazakh-invest/

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

CHINESE INVESTMENTS BY SECTORS

50%

22%

9%

4%

1%

14%Chemistry and petrochemistry (oil and gas)US$ 13.91billion

Mining and metallurgy US$ 5.98 billion

Energy US$ 2.38 billion

Machine building US$ 1.16 billion

Food industry US$ 0.39 billion

Others US$ 3.77billion

According to Kazakh Invest: https://invest.gov.kz/about-us/kazakh-invest/

NEW SILK ROAD ROUTES

Intercontinental

highway

of national

railways and

of highways

have been modernised

of investments

in the development of

infrastructure, transport

and logistics

55 joint Kazakh-

Chinese projects

worth

The dry port

“ ”The sea ports of Aktau and

Kuryk handle

and

more than 15,000 containers

Astana

International

Financial

Center ( )

KAZAKHSTAN AS THE BELT AND ROAD INITIATIVE HUB

According to Kazakh Invest: https://invest.gov.kz/about-us/kazakh-invest/

“Nurly Zhol” Development Strategy

According to Kazakh Invest: https://invest.gov.kz/about-us/kazakh-invest/

FUNDING6 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

MANAGING PARTNER

PRACTICE:Energy and Renewables

Infrastructure

Public-Private Partnerships

Corporate and Commercial Law

EDUCATION:LLB from Cardiff Law School in the UK

LLM from Queen Mary College in the UK

Law Degree with distinction from Adilet

Higher Law School in Kazakhstan

She has worked with highly-qualified,

cross-functional teams, government

agencies, and investment banks, and

has experience interfacing with

institutional clients in order to foster

communication and connection

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

matters with particular focus on debt

and deposit operations, cross-border

finance transactions, syndicated loans

and securities transactions.

She has been mentioned in Chambers

Global, The Legal 500, IFLR 1,000 and

Asialaw profiles as a leading expert

focused on corporate law, mergers and

acquisitions, project finance, and

securities.

…a sharp mind and

manages projects

effectively

– THE LEGAL 500

»

»

SANIYA.P@UNICASELAW.COM

+7 707 913 74 23

+998 99 81 86 948