The state support of investments meant to create favourable investment climate to boost economy and investments into development of new, expansion and renovation of the existing production facilities along with the use of modern technologies, upgrade qualification of Kazakhstani human resources and environmental protection.
The state support instruments for the investment activity are investment preferences (incentives). The laws of the Republic of Kazakhstan establish procedures of granting the investment preferences for the investment project, investment priority and special investment project.
The laws do not provide for any division into local and foreign investors and the definition investor means any individual or legal entity that makes investments into charter capital or expansion of fixed assets. All investors should have an equal access to investment preferences schemes.
The investment preferences shall mean the specifically targeted benefits provided under the laws of the Republic of Kazakhstan to the:
Legal entities duly registered under the laws of the Republic of Kazakhstan that implement investment projects;Leasing companies that import technological equipment for the legal entities under the financial leasing agreement , that develop investment project.
A legal entity of the Republic of Kazakhstan shall mean a legal entity, inter alia with foreign shareholders, which was set up in manner, prescribed by laws of the Republic of Kazakhstan.
The investment project preferences scheme comprises of the:
Exemption from customs duties and VAT for import (Duties and VAT free import);State In-Kind Grants, i.e. land plots, buildings, structures, machinery and equipment, computers, measuring and control instruments and devices, vehicles (except for motor vehicles), production and household equipment; the maximum value of any state in-kind grant is thirty percent of the volume of investments into fixed assets of a legal entity of the Republic of Kazakhstan.
The investment priority project preferences scheme comprises of:
Tax Incentives: Property Tax;Land Tax;Corporate Income TaxInvestment Subsidies (Cashback);Import duties exemption;State in-kind grants.
The special investment project scheme is based on exemption from:
Import duties;Taxes (VAT) pursuant to taxation laws of the Republic of Kazakhstan.
The investment project shall mean a set of actions that implies investing into creation of new, expansion and (or) renovation of existing production plants, inter alia plants that were set up, expanded and (or) renovated within the public private partnership projects, inter alia concession projects.
The investment priority project shall mean an investment project for the:
Development of new production plants and implying investing by a legal entity into construction of new production plants – fabrics, plant and shop, for the minimal amount of 2mln. monthly calculation indices (KZT 2405), established by the republican budget law and effective on the date of filing an application for investment preferences;Expansion and /or renewal of the existing production facilities with minimal investment amount equal to 5mln. monthly calculation indices, established by the republican budget law and effective on the day of filing an application for the investment preferences, into modification of basic assets, including renovation (renovation, reconstruction and modernization) of the existing of the production facilities that manufacture goods.
The investment priority project objected at creation of new production plants and/or expansion and renewal of the existing production plants should be implemented by a legal entity in one of the priority business activities against priority business activities list, established by the Government of the Republic of Kazakhstan.
The special investment project shall mean an investment project, implemented or is being implemented by:
a legal entity of the Republic of Kazakhstan, registered as a member of special economic zone ; orowner of free customs zone as per the customs laws of the Republic of Kazakhstan; orBeing developed by a legal entity of the Republic of Kazakhstan that made an agreement on industrial assembly of motor vehicles.
The investment preferences are available to the Kazakhstani legal entities only engaged ininvestment projects in the priority business activities prescribed by the Kazakhstani Government in the Decree No.13 of 14 January 2016. The priority business activities list contains two sections: Part 1 – activities list of investment projects and Part 2 – activities list of the investment priority projects. The conditions precedent list for the investment priority project scheme is considerable and set forth below, whilst the investment project scheme is available to companies that plant to implement projects in priority business activities and special investment project scheme is available only to special economic zone participants, free customs zone owners and companies – signatories of industrial assembly agreements with the Kazakhstani government.
Investment contract template
The investment preferences for the investment priority project are available subject to as follows:
1) The recipient is a legal entity of the Republic of Kazakhstan;
2) The investments amount is at least 2mln MCI for building new production plants or 5mln.MCI for expansion and renewal of the existing production plants;
3) A legal entity carries out priority business activities against the list of priority business activities for the investment priority projects;
4) A legal entity is not an:
autonomous educational organizations in accordance with the tax legislation of the Republic of Kazakhstan and the legislation of the Republic of Kazakhstan on education;organization operating in the territory of a special economic zone, in accordance with the tax legislation of the Republic of Kazakhstan and the legislation of the Republic of Kazakhstan on special economic zones.
5) The shareholding of the state and (or) a quasi-state entity (national company) does not exceed twenty-six percent as a founder and (or) participant (shareholder) of a legal entity of the Republic of Kazakhstan.
The state or quasi-state entity (governmental companies) can remain as a shareholder in the legal entity – applicant five years maximum from the date of registration of the investment contract. The state and (or) quasi-state entity should resign of the shareholders or participants (shareholder) of the legal entity of the Republic of Kazakhstan within five years from the date of investment contract registration.
Failure to comply with the resign condition will result in suspension of investment preferences scheme up to the complete resignation from the shareholders/participants of the legal entity of the Republic of Kazakhstan for one year.
Failure to comply with the resign condition during the suspension period triggers the early termination of the investment contract and return of previously granted investment preferences.
These conditions are not applicable, when a quasi-public entity in which the state or other quasi-public entity holds less than fifty percent (50) carries out an investment priority project in the area of extraction of coal bed methane.
6) no public budget funds are raised or provided as the guarantees of financing for the implementation of the investment priority project;
7) no public-private partnership agreement, including a concession agreement, is made for the investment project.
|Investment preferences||Investment project||Investment priority project||Special investment project|
|Setup of new production plants(FABRICS, PLANT,SHOP)||Expansion and renewal of existing production plants(RENOVATION, RECONSTRUCTION AND REFURBISHMENT (modernization))|
|Customs duty exemption (duty free import)||+/ 5 years||+/5 years||+/5 years||+/15 years|
|State in-kind grants||+Max value size - 30% of investments amount||+Max value size - 30% of investments amount||+Max value size - 30% of investments amount||______|
|Tax preferences(Tax incentives)|
|Exemption from VAT (VAT free import)||+/5 years||____||____||+/ Force period of special investment contract|
|Corporate income tax||________||+/10 years||+/3 years||________|
|Land tax||________||+/10 years||______||________|
|Property tax||________||+/ 8 years||_______||________|
|Investments subsidies (cash back)||Minimum investments amount is5 000 000 monthly calculation indices(approx. $US 37 600 000)||_______|
|General conditions precedent||Recipient - applicant:Legal entity, duly registered in the Republic of KazakhstanPriority business activities: Governmental decree No.13 of 14.01.2016 (Part 1 Priority Business Activities for Investment projects)||Recipient - applicant:Legal entity, duly registered in the Republic of KazakhstanPriority business activities: Governmental decree No.13 of 14.01.2016 (Part 2 Priority Business Activities for Investment Priority ProjectsMinimal investments amount on the date of submitting an application:2,000,000 monthly calculation indices, approx.$ US 15,500,000 for building new production plants; or- 5,000,000 monthly calculation indices, approx. $US 37,600,000 for renewal and expansion production plants;A legal entity – applicant shall be neither of::An autonomous educational organization under the tax laws of the Republic of Kazakhstan and the education laws cannot be an applicant and, accordingly a recipient of investment preferences;An organisaton that carries out activitiy in the territory of Special Economic Zone under the tax laws and laws on special economic zones laws of the Republic of Kazakhstan;Shareholders/participants:The shareholding and/or participatory holding of the State or a quasi-state organization of the legal entity - applicant is maximum 26% and such membership of the State or a quasi-state organisation shall be ceased within five years from the date of investment contract registration.Default of this condition will trigger one year suspending of investment preferences to the date of full cessation of membership of the State or a quasi-state organization. Default of cessation condition within the suspension period causes early termination of an investment contract and, subsequently reimbursement of provided preferences.Exception: projects on production of coal bed methane provided that shareholding and/or participatory holding of the State or a quasi-state organization is maximum 50%.Funding sources:No public budget means are raised for funding or provision of financial guarantees.Public Private Partnership Agreement:No public partnership agreement, including concession agreement, was made for carrying out investment activity.||Recipient-applicant:1) Duly registered participant of Special Economic Zone under laws of the Republic of Kazakhstan on special economic zones;2) Duly registered holder of free customs zone under the customs laws of the Republic of Kazakhstan;3) legal entity – signatory party to Agreement on Industrial Assembly of motor vehicles;Business activities:Business activities must be against the Priority Business Activities List, approved by the government of the Republic of Kazakhstan.|
To create a legal entity, the following shall be made in the first instance:
•obtain M4 business immigrant visa;
•select a form of incorporation for the legal entity to be created, depending on the type of activity;
•determine a business entity category for the company to be created;
•if the company is created through reorganization or merger, or acquisition of shares and participatory interests — determine whether or not it shall be required to obtain permission of the state antimonopoly body;
•if the legal entity shall engage in the provision of financial services, permission of the National Bank of the Republic of Kazakhstan shall be required as well.
Non-state legal entities are entitled to engage in business activities through the creation of commercial legal entities pursuing deriving revenues as the main purpose of their activities.
Types and forms of legal entities
Usually, commercial legal entities are established in the form of business partnerships, joint stock companies. Forms of incorporation of non-state commercial legal entities are only be a business partnership and a joint-stock company.
Categories of Business Entities
When creating a company, it shall be necessary to provide for an approximate average annual income and headcount, including headcount of representative offices and branches as it is needed for the purposes of statistics and to obtain government support measures.
Depending on the average annual headcount and average annual income, there are:
••Micro Business — up to 15 persons / 30,000 MCI;
••Small Business — up to 100 persons / up to 300,000 MCI;
••Medium-sized Business — 100-250 persons / from 30,000 to 3,000,000 MCI;
••Large-sized Business — over 250 persons / over 3,000,000 MCI.