Transactions with non-residents, including loan agreements, are permitted in Kazakhstan but are subject to various legal requirements. To ensure a loan agreement with a non-resident is legally valid, it is essential to understand key aspects of currency regulations, civil law, and anti-money laundering (AML) compliance. Below is a breakdown of the main points.
Currency regulation and loan requirements
Both residents and non-residents may engage in currency transactions without restrictions unless otherwise specified by law. Non-residents can freely receive and transfer funds between themselves and their branches in Kazakhstan, as well as transfer dividends, remuneration, and other income from investments, securities, and loans, in compliance with Kazakhstan's currency laws.
However, certain conditions must be met
Under Article 716 of Kazakhstan's Civil Code ("the Civil Code"), loan agreements must comply with Articles 151 and 152 of the Civil Code. Specifically, Article 152 requires written agreements in the following cases:
- When the transaction is part of business activity, except for those completed immediately, unless otherwise stated by law or business customs;
- When the loan amount exceeds 100 MCI (approximately USD 785), unless the transaction is completed immediately;
- In any other cases specified by law or agreed upon by the parties.
To ensure legal clarity and compliance with regulations, it is highly recommended to formalise loan agreements in writing. This helps to prevent legal risks and protects the interests of all parties involved.
Mandatory registration of loan agreements with the National bank
If the loan amount exceeds USD 500,000, the loan agreement must be registered with the National Bank of Kazakhstan. The resident party to the agreement must apply for a registration number before either party starts fulfilling their obligations under the agreement.
To obtain the registration number, the resident must submit the following documents to the National Bank:
- An application (in the prescribed form);
- Copies of the loan agreement and any amendments. If the agreement is in a foreign language, a translation into Kazakh or Russian is required.
The National Bank may request the original documents and additional materials or information related to the capital movement or referenced in the submitted documents.
Anti-money laundering compliance
In addition to the above, parties entering into loan agreements must comply with Kazakhstan's anti-money laundering (AML) and counter-financing of terrorism (CFT) laws. This means such transactions may be subject to financial monitoring, and participants must ensure transparency, identify the parties involved, and provide necessary information to the relevant authorities.
Therefore, when securing loans from non-residents, it is crucial to consider not only currency regulations but also AML/CFT compliance to avoid the risk of transaction blockages and potential sanctions.
Choosing the governing law for loan agreements
When entering into a loan agreement between a resident and a non-resident, it is important to determine which jurisdiction's law will govern the agreement. The choice of law affects:
- How obligations will be fulfilled;
- How the parties' rights will be protected;
- How disputes will be resolved.
Under Kazakhstan's law, the parties to a loan agreement are free to choose the applicable law. This choice should be explicitly stated in the agreement (e.g., "This agreement shall be governed by the laws of the Republic of Kazakhstan") or inferred from the agreement's terms (e.g., if the parties, the place of performance, and banking operations are tied to Kazakhstan, Kazakh law may apply).
Choosing the governing law reduces legal uncertainties and ensures clear rules for resolving disputes. This choice can be made at the time of signing the agreement or later by mutual consent.
Precautionary measures when concluding loan agreements
- Formalise the agreement – ensure the agreement is in writing and includes key terms (amount, term, interest rate, repayment conditions).
- Due diligence on the counterparty – verify the financial stability of the borrower/lender and check sanctions lists.
- Compliance with currency laws – loans from non-residents may require registration with the National Bank and financial monitoring.
- Tax considerations – be mindful of the tax treatment of interest, especially for loans from non-residents.
- Securing the loan – collateral, guarantees, or bank guarantees can help reduce risks.
- Dispute resolution – pre-determine the court or arbitration body and applicable law.
Entering into a loan agreement with a non-resident requires
careful attention to legal requirements. Proper documentation and
compliance with currency regulations, AML laws, and registration
procedures will ensure the transaction's legality, reduce
risks, and foster greater trust between the parties involve.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
