1

About Us

2

3

About Us

Consistently awarded and recognized by global rating agencies

20 + clients from National Business List

75 % of our clients are foreign corporations

Partnership with leading law firms from the EU, US, Asia and CIS

Offices in Astana, Almaty & London

Fluent in English, Kazakh, Russian and German

Innovative solutions to the most complex business and legal issues

Awards

4

M&A - Law Firm of the Year in Kazakhstan, 2013

Tax - Law Firm of the Year in Kazakhstan, 2012, 2013

Tax - Law Firm of the Year in Kazakhstan, 2013, 2014

European Women in Business Law - Law Firm of the Year in

Kazakhstan, 2011, 2012, 2013

Public Private Partnerships - Law Firm of the Year in

Kazakhstan, 2011

Corporate Tax Law - Law Firm of the Year in Kazakhstan,

2011 and 2012

HIGHLIGHTED ТRACK RECORD OF OUR SPANISH PROJECTS

5

2013 2012

Typsa Kazakhstan-Spanish Joint Venture «Tulpar-Talgo»

Corporate and M&A Corporate and M&A,

Tax & Investment privileges,

Government Relations

Construction & Infrastructure Industrial & Manufacturing

Comprehensive support for the Spanish Enterprise

in negotiations and entering into general

agreement for contracting and engineering works

on construction of LRT in Astana

Comprehensive advice for JV TULPAR-TALGO on

corporate, tax, contractual and customs issues in

the project related to building of

passenger cars

Legal Aspects of

Doing Business inKazakhstan

6

General Overview

7

GENERAL OVERVIEW

Kazakhstan is located in the heart of the Eurasian continent.

Territory – 2.7 million sq. km.

Population – 17 million people

Main ethnic groups:

Kazakhs: 65%

Russians: 25%

Other: 10%

Major languages

Kazakh (state language)

Russian (official, business language)

English (business language)

It is the CIS’ second and world’s ninth largest country. Kazakhstan borders with China, Kyrgyz Republic,

Turkmenistan, Uzbekistan and Russian Federation.

8

Setting Up a Business

9

START UP A BUSINESS IN KAZAKHSTAN

As a rule foreign companies start up their business in Kazakhstan by establishing a

legal presence in form of a representative office (RO), branch office (BO) or a subsidiary

company. The difference between a representative office and a branch office lies in the

scope of business activities that they can carry out under the RK laws.

10

SCOPE OF BUSINESS ACTIVITIES

REPRESENTATIVE OFFICE (RO) BRANCH OFFICE (BO) SUBSIDIARY COMPANY

Representation and protection

of interests of a mother

company, no business activity is

permitted

All or part of types of business

activities on behalf of and in the name

of the head company

Any types of permitted

business activities on behalf

of its name

RO v. BO

Both RO and BO are considered to be structural subdivisions of a legal entity

(company) and shall not acquire rights and obligations of a legal entity.

Unlike a legal entity, RO and BO:

Carry out activity on behalf and in the name of the head company;

Do not have any separate assets other than assets provided to a BO by the

head company;

Do not have full and sole liability for violation of obligations.

The head company vests assets and property in its BO or RO in Kazakhstan, thus both

RO and BO do not own any assets. All assets of a structural subdivision are owned by

the head company. Both RO and BO carry out activity on behalf of and in the name of

the head company and can hire personnel, open bank accounts, lease offices and pay

taxes.

11

BRANCH v. SUBSIDIARY

A difference between a branch and a subsidiary is in the legal status (i.e. structural

subdivision and legal entity).

A legal entity is liable for its obligations to the full extent of its property and assets

which it owns (including the rights of possession, use and disposal of), economic

jurisdiction or operation management (possession and use).

A legal entity can acquire and exercise proprietary and non-proprietary rights, be a

claimant and plaintiff in courts. A legal entity shall have autonomous balance sheet

and budget.

A subsidiary can be established in any of the legal forms as stipulated by the Civil

Code, however the most popular and commonly used legal forms are JOINT STOCK

COMPANY (JSC) and LIMITED LIABILITY PARTNERSHIP (LLP), the latter is more

simple form, thereby more used.

12

JOINT-STOCK COMPANY

A JSC issues shares and raises funds for carrying its activity. It can be founded by

one or several legal entities and individuals. JSC founders have joint liability on

expenses and costs associated with the foundation of JSC prior to its state

registration.

The constitutive main document of a JSC is Articles of Association

A JSC’ supreme body is the General Meeting of Shareholders or sole shareholder.

Some organizations such as banks, pension funds, investment funds must be

created only in the form of a JSC.

A charter capital of a JSC, except for investment privatization fund, should be not

less than 50 000 fold of MAI.

MAI (MONTHLY ASSESSMENT INDEX is KZT 1 852 (approximately EUR 8) as of 01

January 2014.

The minimum amount is KZT 92 600 000 or nearly USD 508 792. Banking regulation

stipulates for different amounts for charter and net worth or shareholders’ stock.

13

JOINT-STOCK COMPANY

Specific requirements:

Compulsory agreement with the INTEGRATED SECURITIES REGISTRAR which

maintains a share register prior to registration of securities emission;

Placement of shares after registration;

Filing reports on placements of shares with the National Bank of Kazakhstan;

Placement of consolidated (in case of existence of BO and RO) or non-

consolidated financial statements in newspapers.

A JSC should submit a full bundle of documents required for state registration of

declared shares within 30 (thirty) calendar days from the date of its state

registration.

In general, a registration of a JSC , excluding registration of shares, takes 5-11

working days.

14

LIMITED LIABILITY PARTNERSHIP

An LLP can be established by one or several individuals and/or legal entities (also

known as LLP Participants). At the same time, the partnership consisting of one

participant cannot be a sole participant in another LLP.

Participants are not liable for their obligations and bear the risk of loss associated

with the activities of the LLP to the extent of their participatory interest.

An LLP is established with the charter capital divided into shares (also known as

Participatory Interest) the amount of which is determined and set out in the

constituent documents (Articles of Association and Foundation Agreement).

A minimum charter capital must be no less than KZT 100 for a small-scale LLP and

KZT 185 200 or nearly USD 1 000 for medium and large-scale LLP (100-fold of MAI).

State registration of an LLP takes 1-3 working days.

15

LIMITED LIABILITY PARTNERSHIP

The participant(s) shall approve the charter of LLP, a document that defines the

legal status of the partnership as a legal entity. Formation of an LLP requires:

Foundation Agreement (Memorandum of Association)

Charter (Articles of Association)

The General Director (CEO) of an LLP must have a work permit

As for the hiring citizens of member states of the Customs Union (Russia and

Belarus), as well as for foreign citizens holding a permanent residence permit in the

Republic of Kazakhstan, obtaining of such work permit is not required.

16

SCALE OF BUSINESS

All private businesses can be divided into small, medium and large scale business based on the criterion of

average annual number of employees and annual average income.

17

SMALL MEDIUM LARGE

CRITERION SOLE PROPRIETOR OR LEGAL ENTITY

ANNUAL AVERAGE

NUMBER OF

EMPLOYEES

NO MORE THAN 50

(FIFTY) EMPLOYEES

MORE THAN 50

(FIFTY) AND UP TO 250

(TWO HUNDRED FIFTY)

EMPLOYEES

MORE THAN 250

(TWO HUNDRED FIFTY)

EMPLOYEES

AND AND AND (OR)

ANNUAL AVERAGE

INCOME

UP TO

EUR 465 000

FROM

EUR 465 000

TO

EUR 23 MLN

FROM

EUR 23 MLN

AND MORE

LEGAL REGIME

BRANCH & SUBSIDIARY

18

Criteria Branch Office LLP

Charter capital No Medium and large scale business

– USD 1 000

Small scale business

– KZT 100 (EUR 0.4)

Confirmation from the tax authorities on

absence of outstanding debts to the state

budget at the head company

(during state registration, re-registration due to

change of participants)

No Required

Tax registration of Director (CEO) Required Required

LEGAL REGIME

BRANCH & SUBSIDIARY

19

Criteria Branch LLP

Documents confirming location of an entity

(lease agreement, sale-purchase agreement)

Required

Physical presence of CEO in Kazakhstan for

signing tax declarations and

financial statements

Required

Registration in local area, where

business is carried out

Required

Tax residence (for tax purposes)

Permanent establishment of a

non-resident

Resident

LEGAL REGIME

BRANCH & SUBSIDIARY

20

Criteria Branch LLP

Local content requirement (for subsoil use

contracts – content of local personnel, works

and services are established)

Minimum Extensive

Foundation of another legal entities No, the founder

will be a mother

company

Shareholder of participant will be

an LLP. An LLP with a sole

participant cannot create another

LLP

Licensing Required for certain types of business activities

Corporate Income Tax 20%

VAT 12%

LEGAL REGIME

BRANCH & SUBSIDIARY

21

Criteria Branch LLP

Property tax From 0,1 up to 1,5%

Social tax 11%

Net revenue tax

(revenue less corporate

income tax)

15% None

Repatriation of incomes Net revenue can be repatriated with no

need to pay any additional taxes and

to comply with the currency control

Transfer of net profit in form of a

dividend to participants will be

levied with withholding tax at rate

of 15%. If it is transferred in form of

a fee for some services on the basis

of contract, it will be subject

currency control, transfer pricing,

withholding tax at 15% and VAT at

12%

LEGAL REGIME

BRANCH & SUBSIDIARY

22

Criteria Branch LLP

Work permit Must be obtained for all

foreigners in personnel except

for CEO or Director

Must be obtained for any

foreigners, including

management staff and CEO

Engagement of accounting firm

or hire an accountant for keeping

and filing tax returns,

declaration, statements and etc. Strongly recommended

Currency control Either KZT or any other foreign

currency can be used on the

territory of the RK

Can work with residents only

with KZT, some transactions with

foreign currency are subject to

currency control

23

Work Permits

WORK PERMITS

Employing a foreign citizen:

Annual quote for foreign employees, set by the legislation;

Age of an attracted employee (not younger 23 and older 63 for men and 58 for

women);

Required proportional ratio of foreign employees in relation to local staff, for

example no more than 30% of foreigners in the management staff;

Region of Kazakhstan;

Personal characteristics of a foreign employee;

Plans on training, replacement and attraction of locals;

Job positions.

24

WORK PERMITS

A foreign citizen who is being employed by a Kazakhstani employer should get a work

permit of a certain category. The table below shows the existing categories of work

permits in Kazakhstan.

UNIFIED RATING AND SKILLS GUIDE for jobs and occupations of workers sets out and

specifies qualification requirements for foreign citizens that are being attracted for II-IV

categories.

25

I II III IV

Chief Executive, Top

Managers (head) and

Deputies

Directors of structural

units (departments,

offices)

Experts, managers,

specialists and other

employees

Workers

WORK PERMITS

There is no need to obtain a work permit, if a foreign citizen is attracted for the

following job positions, but not limited to this:

Head (Director) of BO or RO;

CEO of companies, which signed investment agreements with the Kazakhstani

government for USD 50 000 000;

CEO of companies which are carrying out business activity in priority economic

sector as per the Law on Investments and, accordingly signed investment

agreement;

Ship and rivercraft crew, ballet dancers, professional entertainers and etc.

The government annually establishes quote for work permits issuance to foreigners. In

2014 quote equals to 0,7% to economically active population. Employers shall request

quotes for work permits for the next year before this 1st day of September.

26

Currency Control

27

CURRENCY CONTROL

National Bank of the Republic of Kazakhstan is the main state agency on currency

control.

In order to gather statistical data about capital movement operations (financial

loans, foreign direct investments, commercial credits, foreign bank accounts) the

Law on Currency regulation and control provides for regimes of registration and

notification.

Registration and notification regimes cover only large capital movement operations

which assume capital (goods, money) inflow exceeding an equivalent of USD

500 000, and capital (goods, money) outflow exceeding USD 100 000.

Registration regime reckons for providing the National Bank of Kazakhstan with a

copy of a document (contract) on the basis and (or) in pursuance of which capital

movement operations are carried out before the conduction of such operation, while

notification regime calls for providing information about capital movement

operation (including a copy of a contract) after the operation was conducted.

Registration and notification regimes spread only on residents of Kazakhstan.

28

Construction

29

CONSTRUCTION

The legal framework of construction activity does not contain a specific law on

construction and technical regulation on construction only, instead there is a LAW

ON ARCHITECTURAL, TOWN-PLANNING AND CONSTRUCTION ACTIVITIES which is

the central and main legal act regulating construction activities. This law provides

for definitions of each of these business activities.

If a company or an individual decides to carry out one of these activities, they

should get a special permit from the relevant state agency, which is commonly

called in Kazakhstan as the “Construction License” (the “Construction License”).

These three business areas – architectural activity, town-planning and constriction

are subject to licensing and cannot be carried out without a license.

30

CONSTRUCTION LICENSE

31

I CATEGORY II CATEGORY III CATEGORY

FACILIITIES: Technical and production facilities; FACILITIES: Technical and production facilities,

labour safety rules;

FACILITIES: Technical and production facilities,

labour safety rules;

STAFF: similar to criterion of II category and not

less than 20% of engineering staff must be

permanent employees and do not combine jobs

OR NOT REQUIRED FOR AN APPLICANT

FOUNDED BY A COMPANY WITH 30 YEARS OF

INTERNATIONAL EXPERIENCE;

STAFF: not less than one engineering staff worker

duly qualified and experienced (5 years – higher

education and 7 years – medium education) and

admission tor works in zones of high seismic

hazard;

STAFF: not less than one engineering staff worker

duly qualified and experienced (3 years – higher

education and 5 years – medium education) and

admission tor works in zones of high seismic

hazard, and

APPLICANT”S EXPERIENCE: not less than 10 (ten)

years of experience from the day of obtaining a

license or similar foreign permissive document or

five years of experience as a II category license

holder,

FOR AN APPLICANT FOUNDED BY A COMPANY

WITH 30 YEARS OF INTERNATIONAL

EXPERIENCE - 6 (six) years;

APPLICANT”S EXPERIENCE: not less than 5 (five)

years of experience from the day of obtaining a

license or similar foreign permissive document or

five years of experience as a III category license

holder;

APPLICANT”S EXPERIENCE: NOT REQUIRED.

COMPLETED PROJECTS – not less than 10 of II

and III level of complexity as a general contractor

and not less than 20 of I and II level of complexity

as subcontractor; NOT REQUIRED FOR AN

APPLICANT FOUNDED BY A COMPANY WITH 30

YEARS OF INTERNATIONAL EXPERIENCE

COMPLETED PROJECTS – not less than five of II

and III level of complexity as a general contractor

and not less than 10 of I and II level of complexity

as subcontractor; and

CLIENT REFERENCES - not less than five

received as a general contractor or ten as a

subcontractor

NOT REQUIRED FOR AN APPLICANT FOUNDED

BY A COMPANY WITH 30 YEARS OF

INTERNATIONAL EXPERIENCE

CLIENTS GOOD REFERENCES - not less than five

as a general contractor or ten as subcontractor

CONSTRUCTION

Foreign companies cannot get a license in Kazakhstan without legal representation

here, i.e. branch office or a limited liability partnership (LLP).

Based on review of qualification requirements for getting the Construction License

and our experience, including dealing with the competent state agency, WE ADVISE

FOREIGN COMPANIES TO SET UP A BRANCH IN ORDER TO GET THE

CONSTRUCTION LICENSE, as a newly set up company cannot get the Construction

License of I category and is eligible only for III category license, whilst a branch of a

foreign company with long and extensive experience can get the Construction

License of I category.

The Construction License is issued with the attachment “Specific Conditions”, in

which the competent state agency writes the category and sets out specific

conditions.

The authorised state agency for architectural, town-planning and construction

activities is COMMITTEE ON CONSTRUCTION AND HOUSING AND UTILITIES

INFRASTRUCTURE IN THE MINISTRY OF NATIONAL ECONOMY OF THE REPUBLIC

OF KAZAKHSTAN.

32

CONSTRUCTION MATERIALS

Construction materials and products used for construction of buildings, erections

as well as for personal and daily needs of people during different construction and

repair works, can be brought to the Kazakhstani market only if they conform to

standards of Technical Regulations. «SAFETY REQUIREMENTS TO ERECTIONS,

BUILDINGS, CONSTRUCTION MATERIALS AND PRODUCTS” and identified.

A construction product is being identified with code of COMMON CUSTOMS TARIFF

of the Customs Union and relevant code of NATIONAL CLASSIFICATORY OF

ECONOMIC ACTIVITIES on the basis of marking, submitted documents, indicators

and other characteristics, sufficient for identification.

33

CONSTRUCTION

Construction materials and products, including imported ones, must be providedwith technical documentation for customers that is instructions for usage, qualitycertificate, conformance certificate, compliance declaration and other technicaldocuments, necessary for evaluation of possible construction risks.

Executive personnel, responsible for construction of building must ensureavailability of Certificate of Conformance or Compliance Declaration (depending onkind of material) for construction materials used during the process.

The conformity assessment is being done by the:

1) conformity agency by way of assessment and issuance of conformityassessment;

2) consumer of construction products by way of assessment by a conformityagency;

3) producer (executor) of a construction products by way of issuance ofconformance declaration.

Conformity assessment is compulsory and voluntary depending on the nature ofconstruction products.

34

35

Legal Tips

LEGAL TIPS

Prior to start business activity in Kazakhstan it is advisable to note the following:

A LLP is the most popular and commonly used legal form of a company;

Any settlement between residents should be made in national currency TENGE,

whilst settlements between non-residents including BO and RO of foreign

companies can be made in any currency;

Obtaining a work permit is a sophisticated process, however there are certain

exceptions;

Transfer of money into charter capital of a local company in participatory

interest shall be considered direct investments and subject to currency control;

More than twenty (20) business activities are subject to licensing and cannot be

carried our without a license.

36

LEGAL TIPS

Kazakhstan is a member of more than forty conventions on avoidance of double

taxation and prior to settle any tax payment one should check whether the tax can

be avoided under a convention;

CEO of BO and RO do not need to obtain a work permit;

Prior to purchasing participatory interest in an LLP or a JSC, capital gain tax must

be checked;

RK Laws establish extensive incentives for certain investors, setting out priority

economic sectors for investments and currently there are several SPECIAL

ECONOMIC ZONES on the territory of Kazakhstan, where investors can work under

special tax regime.

As of today there are ten (10) special economic zones – areas within the territory of

Kazakhstan with neatly-defined borders with special legal regime (tax and customs).

37

Investing in Kazakhstan

38

SECTOR-SPECIFIC INCENTIVES IN 10 DEDICATED SEZs ACROSS THE COUNTRY

• SLIDE TEXT

“NATIONAL EXPORT AND INVESTMENT AGENCY “KAZNEX INVEST” JSC | Ministry of Industry and New Technologies of the Republic of Kazakhstan

SEZ “Petrochemical park”(Oil and gas industry,

petrochemicals)

SEZ “Burabai”(Tourism)

SEZ “Astana new city”(construction industry) SEZ

“Pavlodar”(chemical industry)

SEZ “Saryarka”(metallurgy)

SEZ “Khorgos Eastern Gate”(Trade, logistics)

SEZ “Innovation TechnoPark”

(IT-industry, innovations)

SEZ “Chemical park Taraz”

(chemical)

SEZ “Ontystik” (textile industry)

SEZ “Marine Port Aktau”

(logistics, transport)

Aktau

Atyrau

Astana Pavlodar

Karaganda

Shymkent

TarazAlmaty

FOREIGN INVESTMENT

FISCAL INCENTIVES in SEZs

0 % Corporate Income Tax until 2020-2025 with possibility for extension

0 % for land and property tax until 2020-2025 with possibility for extension

VAT– 0 % (for products consumed in SEZ) until 2020-2025 with possibility for extension

Increase of marginal rate of depreciation for tax on the production of software to 40 %

For SEZ “Innovation technopark” – social tax is 0 % for 5 years, under certain conditions

For SEZ “Innovation technopark”– depreciation rate for software increased to 40 %

NON-FISCAL INCENTIVES

Provision of free land in SEZ for a period of up to 10 years from registration time as SEZ resident

Simplified procedure for the recruitment of foreign labour

40

FOREIGN INVESTMENT

There are some additional tax benefits for SEZ “Innovation Technology Park” participants:

Conditions for tax benefits:

registration as a taxpayer within SEZ territory;

registration as a SEZ participant;

absence of structural subdivisions outside the SEZ;

income from the sale of own-produced goods by the priority activities of SEZ shall be at least 90

percent of the total annual income (for SEZ "ITP" - 70%).

41

FOREIGN INVESTMENT

CUSTOMS PRIVILEGES

For goods IMPORTED into SEZ territory

Exemption from customs duties

For goods EXPORTED from SEZ territory*

CU commodities exported from the SEZ to the rest territory of the Customs Union, are not subject tocustoms duties.

CU commodities exported from the SEZ territory to outside the Customs Union, are subject to thepayment of export customs duties.

Foreign commodities with no status as CU goods (simple assembly) exported from the SEZ to the restterritory of Customs Union, are subject to the payment of customs duties.

In the case of foreign commodities which are not used and not processed within SEZ territory, at export(to the third countries), the commodities are exempted from "re-export" customs duties,.

In a case of foreign commodities processed within SEZ territory, at export,, export duties shall be paidaccording to the regulation # 520 of the Government of the Republic of Kazakhstan dated 07 June 2010.

More detailed information concerning customs benefits are reflected in the Agreement on the free (special)economic zones in the customs territory of the customs union and the customs procedure of customs-freezone (St. Petersburg, June 18, 2010).

• ** These benefits are applicable by January 1, 2017 only for participants registered before January 1,2012

42

FOREIGN INVESTMENT

43

Political Stability and Good Investment Climate Regionally Attractive Fiscal and Non-fiscal Regime

and Protection of Foreign Investment

A high level of trust in political institutions and the

effective allocation of funds (WEF 2012) in

comparison with the countries of the CIS

Attractive corporate tax rate (20%) Low VAT (12%)

Fiscal and non-fiscal incentives for investors,

including in SEZs

48 Bilateral Agreements on mutual protection of

investments (US also)

Main international arbitration instruments ratified

Stable Macroeconomic Indicators and High Growth Spring Board to Circa 3 Billion Potential Customers

GDP growth: 5.5% (IMF 2012)

Low Debt / GDP Ratio: 15.8% (IMF 2012)

Budget Deficit: 2.5% (IMF 2012)

Inflation Rate: 6.0% (IMF 2012)

3 of the 5 BRICS Countries are in 4 hours flight

Customs Union (Kazakhstan, Russia, Belarus) with

population of 170 million

total GDP of 2 trillion

Open economy (trade 70% of GDP) Entry into the

WTO is expected in 2014-2015

Thank You

44

WE WOULD BE HAPPY TO HELP WITH LEGAL ADVICE AND

DISCUSS ANY OF THE RAISED ISSUES…

45

AstanaAlmaty London

7 Imanov St, #21

Astana

Kazakhstan

010000

T + 7 7172 200 701

info@linkagemind.com

180 Dostyk ave,

6th floor

Koktem B/C

Almaty, Kazakhstan

050000

T + 7 7172 200 701

info@linkagemind.com

London, UK

T + 44 79 5183 4638

info@linkagemind.com

46