This Client Update covers the key amendments to the laws of the Republic of Kazakhstan ("RK") and various legal developments introduced in November and December 2016, and January 2017.
NOVELTIES IN LEGISLATION
The laws covered by the present Client Update are related to both public and private sectors. Some of them may be of interest to you as they may affect your business in Kazakhstan.
We would like to draw your attention to the following legal acts.
Tax Residence Confirming Documents
On 14 November 2016, the President of the RK signed the Law1 ratifying the Agreement relating to mutual recognition of the official documents confirming the residence of the RK and of the Russian Federation and issued as part of the Convention on elimination of double taxation and prevention of income and capital gain tax evasion ("Agreement").
The Agreement sets forth the following:
- Documents issued and officially sealed by the competent authority of one contracting state must be recognized in the other contracting state without any special certification, including apostille or consular legalization;
- Official documents in one contracting state must have the same legal force in the other contracting state.
The Agreement applies to all official documents issued by government authorities of both contracting states as from 1 January 2011.
The Agreement came into force on 29 November 2016.
On 29 November 2016, the President of the RK signed the Law No.25-VI "On Republican Budget for 2017-2019".
The Law sets out the following rates:
- Minimum wage rate – KZT 24,459;
- Basic state pension – KZT 12,802;
- Minimum pension – KZT 28,148;
- Monthly calculation index for calculation of allowances, other social payments, fines, taxes and other payments in accordance with Kazakhstan laws – KZT 2,269;
- Living minimum wage for calculation of basic social payments – KZT 24,459.
The Law also outlines that as of 1 January 2017 age retirement and long service pension payments have been increased for up to 9%.
The Law came into force on 1 January 2017.
On 31 August 2016, the Chairman of the National Bank of the RK signed the Decree of the Management Board of the National Bank of the RK No. 202 "On Approval of the Rules for Rendering E-banking Services by Banks and Organizations Performing Certain Types of Banking Transactions".
The Decree now enables individuals to receive electronic payment and information banking services by means of biometric identification (unique client identification procedure for receiving e-banking services based on his/her physiological and biological features).
The Decree came into force on 18 November 2016.
No Work Permit Requirement For Certain Foreigners
On 15 December 2016, the Prime-Minister of the RK signed the Resolution No. 802 concerning the rules on attraction of foreign workers.
According to the Resolution, the following foreigners and stateless persons are exempt from obtaining a work permit in Kazakhstan:
- Heads of branch or representative offices of foreign legal entities;
- Business visitors with total duration stay not exceeding 120 calendar days within 1 calendar year;
- Citizens of the Member States to the Eurasian Economic Union Agreement dated 29 May 2014;
- Business immigrants engaged in business activity.
The Resolution came into force on 1 January 2017.
Internal Migrants Registration Rules
On 2 December 2016, the Prime-Minister of the RK signed the Resolution №757 concerning the rules for internal migrants registration.
The Resolution introduces the following key amendments:
- Internal migrants temporary registration;
- Foreigners and stateless persons granted the permission to reside in the RK by migration police territorial subdivisions must be registered based on the residence permit and stateless person certificate respectively.
The Resolution came into force on 20 December 2016.
Free Economic Zone ("FEZ") Priority Activities
On 20 January 2017, the Prime-Minister of the RK signed the Decree No. 10 approving FEZ priority activities.
Priority activities were established for "Astana-New City", "National Industrial Petrochemical Technopark", "Aktau Seaport", "Park of Innovative Technologies", "Ontustik", "Burabay", "Saryarka", "Khorgos-Eastern Gateway", "Pavlodar", "Chemical Park Taraz".
Below are some selected priority activities:
- Non-metallic minerals production;
- Petrochemicals production;
- Finished metal goods production;
- Leather and related goods production;
- Software development;
- Electronic information storage services;
- Food production, etc.
FEZ organizations, depending on FEZ activities, enjoy special tax benefits as follows:
- Zero coefficient for calculating land tax and/or land plot use fee;
- Zero rate to the average annual cost of taxation objects when calculating property tax;
- Zero corporate income tax; and other benefits.
The Decree came into force on 4 February 2017.
On 19 October 2016, the Minister of Finance of the RK signed the Order No. 553 "On Approval of the Rules, Forms and Deadlines for Individuals, Legal Entities and (or) Structural Subdivisions of a Legal Entity to Notify Tax Authorities on Receiving Money and (or) Other Property from Foreign States, International and Foreign Organizations, Foreigners, Stateless Persons".
According to the Order, state revenue authorities must be notified at the place of residence/location on the money and (or) other property received from foreign states, international and foreign organizations, foreigners, stateless persons pursuant to the transactions for the sum exceeding KZT 1 for the following works/services:
- Rendering legal assistance, including sharing of legal information, legal defense, representation and consulting of individuals and organizations;
- Conducting analysis and public opinion polls, sociological surveys (save for the polls and sociological surveys made for commercial purposes) as well as distribution and placement of their results;
- Collecting, analyzing and distributing information save for cases when such activity is undertaken for commercial purposes.
The notification must be filed in due form within 10 working days following the execution date of the transaction.
The Order came into force on 29 November 2016.
Foreign Labor Attraction And Intra-Group Secondment
On 15 December 2016, the Minister of Healthcare and Social Development of the RK signed the Decree No. 1069 introducing amendments into the Rules and conditions for granting and (or) extending the work permits to employers and implementing intra-group secondment.
According to the Decree, representative and branch offices of foreign legal entities with no more than 30 employees must be also exempt from the requirement of having the definitive Kazakhstan personnel percentage.
The Decree has also introduced the following changes:
- Employers are exempt from written notification of the law enforcement agencies at the place of registration and the place of arrival when sending foreign employees on a business trip;
- When a foreign legal entity undertaking its business in Kazakhstan without establishing a branch or representative office sends its employees to Kazakhstan, host company's authorized representatives must file an application either electronically or in paper with the local municipality at the place of employment of the foreign employees. The Order sets the following requirements:
- The host company must furnish a document agreed between the foreign employee and the foreign employer (secondment letter or agreement) as opposed to the previously required services contract;
- KAZTEST certificate is no longer required for the purposes of intra-group secondment;
- Employees now enjoy 30 working days for filing a request with the municipality to reissue the work permit due to change of the surname, name, patronymic, series and number of identification document.
The Decree came into force on 1 January 2017.
In November 2016, a dossier for the Draft Law of the RK "On Amendments to Certain Legislative Acts of the Republic of Kazakhstan on Land Relations" ("the Draft") has been adopted.
The Draft proposes increasing informatization and transparency when granting agricultural lands.
The Draft envisages the following key amendments:
- Introduction of "land commission" – a permanent body set up by municipalities for granting land rights, changing the designated purpose of land plots and allocating lands of the water fund to the lands of other categories;
- Land plots located at the border and frontier zones of the state border of the RK cannot be privately owned by or be in land use of foreigners, stateless persons, Kazakhstan citizens married to foreigners and stateless persons nor foreign and Kazakhstan legal entities;
- Prohibition of the division of agricultural land plots located in suburban zones of the capital city as well as cities of the national and regional significance.
On 28 December 2016, a dossier for the Draft Law of the RK "On Natural Monopolies" was submitted for consideration to the Majilis of the Parliament of the RK ("the Draft Law").
The Draft Law envisages abolishment of the Law of the RK "On Natural Monopolies" dated 9 July 1998, and introduces the following novelties:
- Natural monopoly entities implementing investment programs (projects) with capital borrowed from international financial institutions and included in the list of natural monopoly entities, approved by the authorized body, no longer fall under the regulation of the Law of the RK "On Natural Monopolies";
- Granting permission to the natural monopoly entity to perform the following actions:
- Entering into transaction with the property of the natural monopoly entity intended for rendering services when the net value of the property exceeds 0.1% of the natural monopoly entity's total balance sheet value in accordance with the balance sheet as of the start of the current year;
- Reorganizing or
- Ensuring public involvement in tariff formation for services of natural monopoly entities by making all relevant information publicly available and by arranging public hearings.
1 Law No. 21-VI "On Ratification of the Agreement by Exchange of the Notes on an Order of Recognition of Residence Confirming Documents, Issued By Authorized Bodies of the Republic Of Kazakhstan and of the Russian Federation within the Convention between the Government of the Republic of Kazakhstan and the Government of the Russian Federation on Elimination of Double Taxation and Prevention of Income and Capital Gain Tax Evasion".
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.