Company registration in Kazakhstan for Russians: legal grounds, procedure

Contents:

• What types of companies are available for Russians to start in Kazakhstan in 2023
• Company registration procedure in Kazakhstan for non-residents
• Opening a business in Kazakhstan by Russians: possible difficulties
• Taxation regimes in the Republic of Kazakhstan

Setting up a company in Kazakhstan for Russians is one of the available opportunities for Russian citizens to explore new foreign sales markets without any extra legal and economic difficulties. 

Why do Russians choose Kazakhstan? A number of positive characteristics of this republic contribute to it:  

• A good geographical location, which allows seamless movement of goods both to Europe and to Asia.  
• The ability to employ highly qualified specialists with knowledge of the Russian language. 
• A fast-growing economy oriented towards Western markets. 
• Transparent tax system with the possibility of applying preferential tax rates for certain categories of businesses. 
• Possibility to register a sole proprietorship, a company or a branch without having Kazakh citizenship. 
• Availability of a specialised customs system that allows declaring goods remotely. 
• Ability to simultaneously work with a wide list of foreign countries, including Russia and EU Member States. 
• Low administrative and state fees. 
• Low entry threshold to the local business environment. 
• Opportunity to take a loan for enterprise development on favourable terms. 
• Well-developed logistics network. 
• Comfortable standard of living with the presence of large metropolitan areas. 

What types of companies are available for Russians to start in Kazakhstan in 2023

Investors from Russia can choose one of three forms of business in the Republic of Kazakhstan that best suits the entrepreneur. 

1. Individual Entrepreneurship (IE). 

Starting a sole proprietorship in Kazakhstan is regulated by the Kazakh Entrepreneurial Code, which requires three types of businesses – Kazakh citizens, ethnic Kazakhs and private commercial entities. But the good news for Russians is that it is possible to open a sole proprietorship in Kazakhstan without citizenship, but with a residence permit (residence permit). This has become possible thanks to the conclusion of a relevant agreement between the EAEU countries, which include Russia and Kazakhstan. 

Thus, to open a sole proprietorship, a Russian must prepare and submit the following package of documents to the local tax office or electronically on the Egov.kz portal: 

• Original and copy of passport.
• Two 30×40 millimeters photographs.
• Receipt for payment of the state duty. 
• A lease agreement for premises at a legal address. 
• Application for opening an IE.

After registering a sole proprietorship, the entrepreneur can open a bank account. 

2. A representative office or a branch. 

If there is a main business in the Russian Federation, an entrepreneur may decide to open a branch or representative office in a neighbouring country. In this case, by a representative office, we mean a subsidiary company which protects the interests of the main legal entity by providing advertising and marketing services, as well as supporting local clients. 

A branch differs from a representative office in its ability to conduct full-fledged commercial activities, including production and sale of goods and services in the territory of the new country. 

It should be noted that when choosing a form of business it is important to consider the fact that a branch in the territory of Kazakhstan requires investment of more resources. Firstly, in order to register, it is necessary to travel in person to the tax authorities of the Republic. Secondly, a higher rate of taxation will have to be used in the operation.

3. A Limited Liability Partnership (LLP). 

An LLP is the counterpart of the Russian Limited Liability Company, which is a full-fledged legal entity. An LLP makes it possible to conduct business activities without restrictions, including procurement and participation in tenders. 

Since an LLP is one of the most popular forms among non-residents of Kazakhstan for business registration, we will take a closer look at the rules for registering this form of business. 

Company registration procedure in Kazakhstan for non-residents

To register a Limited Liability Partnership, a foreign investor must gather the following set of documents: 

• Application for opening an LLP. 
• A receipt on payment of a state duty. 
• For Russians – a business visa. 
• A copy and the original of passport of the foreign participant. 
• Foundation documents for a legal entity, provided that one of the owners is a Russian LLC. 
• The decision to form an LLP in two languages.
• The adopted Charter on the establishment of the LLP in two languages. 

It is important to bear in mind that before opening a company in Kazakhstan, a Russian citizen must obtain a local IIN (the equivalent of the Russian TIN) and an electronic digital signature (EDS), while a legal entity must obtain a business identification number. It is also important to come up with a company name in advance, which must be duplicated in the Kazakh language. Before opening a company, the founder should decide on the amount of the authorised capital, the minimum value of which in Kazakhstan is not less than 100 monthly calculation indexes (MCI), and choose the legal address. 

In general, the procedure for registering an LLP in Kazakhstan is not complicated. As a rule, it consists of the following steps:

1. Concluding a Memorandum of Association. This applies to situations where there are several founders. If there is only one participant, it is sufficient to make the relevant decision and approve the LLP’s Articles of Association. 
2. Prepare and submit the documents according to the list mentioned above. As a rule, the registration of any company in Kazakhstan is carried out via the Ministry of Justice (documents are submitted to the Public Service Centre) or the state government portal Egov.kz (an analogue of Russian Gosuslugi). When sending documents via the electronic service, it is necessary to have an EDS. 

It is important to note that when registering a company with foreign participation, a copy of a legalised extract from the commercial register and a copy of a foreigner’s passport must be submitted. Both documents should be certified by a notary and have a translation into the Kazakh language. It is also important to take into account the period of state registration of a legal entity. It is two months after crossing the state border of the Republic of Kazakhstan.

Opening a business in Kazakhstan by Russians: possible difficulties

Kazakhstan regulations oblige to open a company with foreign participation only if its founders have a C5 business visa. However, this rule becomes invalid under the condition that the countries are members of the Eurasian Economic Union, which includes Russia and Kazakhstan. 

In practice, there are cases when Russian investors are denied the right to register an LLP due to the absence of a business visa. Such refusal is unlawful on the basis of Articles 96, 97 and 98 of the EAEU Treaty, which is international and ratified by Kazakhstan. 

In case the state authorities refuse to register a company on the grounds of the absence of a business visa, you should seek qualified legal assistance from VALEN to appeal this decision. 

Taxation regimes in the Republic of Kazakhstan

You should get acquainted with the taxation system before registering a company in Kazakhstan. It is important to consider that there are two tax regimes in the country – general and simplified tax regimes. Each of them has its own peculiarities, thus, operating under the general system a company may or must: 

• Have any type of business activity. 
• Have any amount of income, and an unlimited number of employees and branches. 
• Pay 20% of profits as an LLP and 10% as a sole proprietorship.
• Pay 20% VAT on profits if income exceeds 20,000 MCI. 
• Submit quarterly and annual accounts.
• Have online cash register and current bank account. 

Conditions for application of the “simplified tax system” are stricter. In particular, these are:

• Restrictions on types of activities. The simplified tax regime cannot be used by the companies working with excisable goods, with oil products, in the field of glass and scrap metal collection, lottery producers, participants of the consulting services market, lawyers and auditors. 
• Income must not exceed 24 038 minimum wages in one half of the year. 
• Number of employees must not exceed 30 people. 
• Branch offices are prohibited. The only exceptions are companies operating in the field of rental housing. 

However, when transferring to this taxation regime entrepreneur receives good preferences which are:

• A reduced tax rate of 3% of income. 
• Filing of accounts once every six months. 

In addition to the income tax, business owners in Kazakhstan will have to pay vehicle tax, ecological tax, property tax, as well as social payments for the company’s employees.  

As for payment of duties and other charges for companies importing goods into the country, it depends on the final destination of the cargo. Thus, it is important to know that when importing goods from an EEU member country (for example Russia), the duty will be 12% at the rate of VAT, except for goods exempt from the tax. When importing a service from the EEU territory, only registered taxpayers will pay VAT. Customs duties will not be paid when importing goods into Kazakhstan from the territory of Russia, Belarus, Kyrgyzstan and Armenia.

It is important to know that transit through the territory of Kazakhstan is not import. In this case, there is no obligation to pay VAT.