Why should Russian business open a representative office in Kazakhstan in 2024?

Over the past few years, the demand for the service of opening representative offices of companies from Russia in Kazakhstan has grown significantly. Companies from this country are not obliged to sell foreign currency earnings; they can receive payments from any foreign companies, and also enter into agreements with government agencies in Russian.

Opening a company

In Kazakhstan there are 4 main organizational and legal forms: joint stock company, representative office, branch and LLP (partnership limited liability. For Russian companies, there are two options for registering their presence: branch or LLP.

Main conclusions:

• It is easier for LLPs to maintain management accounting;
• LLP is easier to register;
• in the case of LLP, less reporting is required;
• LLP has a reduced level of responsibility and risks. In particular, in the event of potential litigation, the LLP risks only its own authorized capital, while the failures of the branch jeopardize the property of the parent company;
• LLP, being “local” legal entity, does not experience problems with payments from foreign structures, which is especially important in the current situation;
• Kazakh LLPs, unlike Russian exporters, have no obligation to sell foreign currency earnings.

Company registration

There is no big difference in the procedure for registering a branch or LLP. In the latter case, an additional series of documents will be required — a power of attorney to perform this operation, as well as papers certifying the person’s authority as a manager.

If the company is registered by an individual:

First you need to get an Individual Identification Number (IIN). This is an analogue of the Russian TIN, which is done through public service centers (PSC). A fairly simple procedure that takes no more than 2 days. To obtain an IIN, you must contact any of the Public Service Centers; you only need to have your international passport with you. An electronic digital signature (EDS) is also issued at the PSC.

Then it is necessary to prepare constituent documents: Charter, resolution of constituent documents, constituent agreement (if necessary). After this, the company can be registered through the e-government portal and opena bank account.

If the company is registered by a legal entity with foreign participation:

The procedure is slightly different. To do this you will need:

• Execution of a power of attorney to create a legal entity in the Republic of Kazakhstan. For the first manager — order of appointment to a position (with the seal of the legal entity) or a certificate from the place of work (with the seal of the legal entity)
• Obtaining an IIN for the first manager
• Obtaining digital signature of a legal entity for the first manager
• Drawing up the Charter, Memorandum of Association, decision on the creation of a legal entity
• Registration of legal entities through the government portal
• Opening a bank account

If we take local regulations, then all operations will take approximately 10 working days. But more may come out — it all depends on the quality of the documents you collected and the questions that government agencies or the bank may have. The period may extend to 1.5–2 months.

Despite the fact that the legislation of Kazakhstan allows you to open a legal entity using a power of attorney, we recommend that the manager independently register the company. This will reduce potential risks — In the course of business, it may happen that additional confirmation from a trusted person is required.

Features of taxation in Kazakhstan

The principles on which the tax legislation of Kazakhstan is based are not much different from the principles adopted in other countries. They include the mandatory nature of taxation, its certainty, fairness, integrity of the taxpayer, as well as the unity of the tax system and the transparency of tax legislation.

It is worthwhile to dwell specifically on the principle of good faith of the taxpayer. The following approach is declared in Kazakhstan: if a company is faced with an unclear point in the legislation and does not understand how much taxes it must pay, then it requests clarification from government agencies and follows their recommendations. But our practice shows that there may be cases when the tax office, contrary to explanations, charges a large amount of taxes. In this case, you will have to pay in accordance with the final decision of the tax office.

Controversial situations occur due to the reluctance of government bodies to take responsibility. In response to requests for clarification, they prefer to give non-specific answers and limit themselves to general recommendations. Therefore, we recommend that in controversial situations you seek advice from independent audit companies.

Key terms used to calculate the tax base in Kazakhstan

MCI — indicator for monthly calculations, which is set by the state for one year. Used to determine the amount of fines, social payments, certain types of taxes and other payments to the budget. In 2023 it was 3,450 tenge;

Minimum wage — minimum wage. In 2023 it was 70,000 tenge

Key taxes in Kazakhstan and their rates

The most important and key — This is a corporate income tax with a base rate of20%. The payment amount is calculated based on the formula: income minus company expenses. By properly accounting for expenses, you can reduce your tax base. True, Kazakhstan has its own characteristics. For example, the maximum possible entertainment expenses are limited.

Important! In addition to income tax, branches of foreign legal entities are additionally subject to a tax on the net income of branches in the amount of 15%

Also, the base rate for value added tax in Kazakhstan is 12%. Legal entities and individual entrepreneurs whose annual turnover does not exceed 20,000 times the MCI (69 million tenge in 2023 or about 144.6 thousand US dollars at the exchange rate for October 2023). In addition, a number of services are not subject to VAT in Kazakhstan: for example, finance, insurance, medical services. These services also may not be taken into account in the total annual turnover and VAT may not be charged on them.

When exporting goods from Kazakhstan and to turnover on international transport services, a zero rate is applied.

Other types of taxes:

• Individual income tax — 10%
• Social tax: 9.5% (from January 1, 2025 - 11%)
• Social contributions: 3.5% (from January 1, 2025 — 5%)
• Mandatory pension contributions: 10% (maximum income for calculating the base — 50 minimum wage)
• Compulsory medical insurance, excise taxes

Individual entrepreneurs pay individual income tax, social taxes and pension contributions are calculated on employee salaries, and payment of compulsory medical insurance and some excise taxes is also required.

What tax regimes does Kazakhstan offer for investors?

In an effort to attract investors and revive the economy, the country's authorities have introduced various tax regimes. Each of the four options presented below has its own characteristics, which are not always obvious and understandable.

Tax regimes for investors

1. Astana International Financial Center (AIFC)— special tax regime applied in the capital of the country. It is intended mainly for companies providing financial services: banks, insurers, etc. From a legislative point of view, it can be called a “state within a state”: the center has its own tax system and separate, very stringent requirements. Residents of the international financial center receive various financial benefits, including the payment of dividends. The AIFC has a mechanism similar to a regulatory sandbox. It implies a limited application of legal norms in relation to a project if its development is hampered by certain provisions of the law. Of course, the restriction is temporary, but the relaxation makes it possible to arrange a kind of “test drive” for the project.
2. Astana Hub is a digital technology park. It is built for companies that operate in one of19 areas, primarily including high-tech industries. In exchange for tax benefits and startup visas, residents are required to have a detailed business plan, from which they cannot deviate in the future. In addition, business activities can only be carried out strictly within the chosen direction.
3. Special economic zones (SEZ), of which there are 12 in the country, are distributed in areas — metallurgical, IT, agro-industrial, etc. More information about such zones and tax preferences can be found on the official website (available in Russian).
4. Special tax regimes are aimed at small businesses employing up to 30 people. They provide for many simplified procedures and reporting, as well as direct benefits. Income for the tax period should not exceed 24,038 MCI (about 150 thousand US dollars at the exchange rate for October 2023). In addition, there are some types of activities for which this regime cannot be applied. The philosophy of simplification common to all modes — income is everything that is reflected in invoices and acts of work performed. Which makes them unprofitable for companies that pass large volumes of other people's money through their accounts.

Each of the four options has different options, and within these options there are many nuances that require a competent look. The tax regime should be chosen based on the company’s business objectives. You can also get help with choosing taxation and get advice on entering the Kazakhstan market from specialists.