The Astana International Financial Center (hereinafter referred to as the AIFC) and the International Technology Park Astana Hub (hereinafter referred to as the Astana Hub) operate in the Republic of Kazakhstan, the residents of which become recipients of certain tax benefits.
Astana International Financial Center
The AIFC provides benefits in the form of a 0% rate until January 1, 2066 for corporate income tax and value-added tax on income from the provision of the following financial services:
- banking services of an Islamic bank;
- reinsurance and insurance brokerage services;
- investment management services for the assets of investment funds;
- brokerage and/or dealer services, underwriting services;
- other financial services defined by a joint act of the AIFC, the MNE and the MoF.*
Also, persons providing legal, auditing, accounting and consulting services for AIFC participants provided a similar exemption from corporate income tax and value-added tax on the income until January 1, 2066.
Moreover, the AIFC provides personal income tax and corporate income tax relief on investment income until January 1, 2066. This exemption covers (1) capital gains on the sale of securities, shares and interests, (2) dividends on securities, shares and interests, and (3) securities considerations.
At the same time, the AIFC also allows the redomiciliation procedure, which means the transfer of a company from one jurisdiction to another jurisdiction. This procedure is quite widespread in developed countries and countries that seek to create favorable financial conditions for the activities of international companies. In this regard, it is worth highlighting the following advantages of redomiciliation:
- liquidation of the company and new registration are not required;
- termination of contracts or assignment of rights and obligations is not required;
- ownership rights to all types of property are preserved;
- credit ratings and reputation are preserved;
- optimization of human, financial and time resources
In accordance with paragraph 151 of the AIFC Companies Act, it is provided that a Foreign Company may apply to the AIFC to continue its activities within the AIFC. Further, in accordance with paragraph 152 of the AIFC Act “On Companies”, if the Foreign Company meets the requirements of the AIFC and provides the necessary documents, the AIFC issues a Certificate of continuation of activities, a unique identification number and enters the name of the company in the AIFC Register. Read more at the link.
In general, the redomiciliation procedure is very convenient for legal entities who would like to change jurisdiction, while maintaining the current portfolio of the company. In this direction, the AIFC is a rather attractive jurisdiction, where services are provided to high standards, while low costs of financial resources.
International Technology Park “Astana Hub”
Astana Hub residents are exempt from paying corporate income tax, personal income tax and value added tax for the period of their residency. Also, the advantage of the Astana Hub is extraterritoriality, i.e. the company has the opportunity to become a resident without the obligatory binding of the office to a specific place of residence.
However, the main condition for obtaining residency at the Astana Hub is the implementation of priority activities in the field of information and communication technologies and the criteria for own production, approved by order of the Minister of Digital Development, Defense and Aerospace Industry of the Republic of Kazakhstan dated April 11, 2019 No. 37/НҚ.
Priority activities are:
1) Design, implementation, maintenance, development, modification and implementation of software and software product;
2) Design, experimental and industrial operation, implementation, development, modification, maintenance of information systems (with the exception of information systems of state bodies);
3) Data processing activities (discovery of knowledge in databases) using software;
4) Basic and applied research, experimental development in the field of natural and technical sciences, the implementation of research, development in the field of information and communication technologies and the implementation of the results;
5) Design, implementation, maintenance, development, modification or individual stages of development (research, design (design), technical testing and production) of technologies, devices and systems of micro-, opto- and nanoelectronics, microelectromechanics, installation of printed circuit boards and implementation of the results of such developments;
6) Design, implementation, maintenance, development, modification or individual stages of development (research, design (construction), testing, technical testing) of technologies, devices and systems of robotics and implementation of the results of such developments;
7) Design, implementation, maintenance, development, modification (research, design (construction), testing, technical testing) of technologies, devices and systems of radar, radio navigation, radio communications, radio control, radio frequency identification and implementation of the results of such developments;
8) Design, implementation, maintenance, development and modification or individual stages of development (research, design (construction), prototyping, testing, technical testing), production of technologies, equipment and devices in the field of information and communication technologies, telecommunication technologies, devices and systems biometrics and implementation of the results of such developments;
9) Design, implementation, maintenance, development, modification, production, sale, installation, adjustment (all of the above works together or part of them) of technical, software information processing in a secure design, software and hardware in information security, including software and hardware methods and means of ensuring information security;
10) Design, development, modification, implementation, operation and maintenance of software and (or) hardware and software systems using cloud computing technologies;
11) Design, implementation, development, modification, maintenance of software and (or) hardware and software systems using or based on blockchain technology;
12) Design, implementation, maintenance, development and modification and implementation of unmanned vehicle control systems, as well as systems and devices for satellite navigation, mobile communications and emergency calls for operational services in transport;
13) Design, implementation, maintenance, development, modification or individual stages of development (research, design (construction), technical testing) of technologies, devices and systems of artificial intelligence and implementation of the results of such developments;
14) Activities for the provision of services to provide via the Internet of software and hardware capabilities for establishing contacts and making transactions between sellers and buyers (providing a trading platform operating on the Internet in real-time) using software developed by a participant in the Astana Hub International Technology Park;
15) Design, maintenance, development, modification, implementation, implementation of the concept of a computing and communication network of physical objects equipped with embedded technologies for interacting with each other or the external environment (Internet of things);
16) Design, implementation, maintenance, development, modification of computer, mobile, online games (video games);
17) Provision of training services in the field of information and communication technologies in the following areas: architecture and administration of software, architecture and administration of network systems, design and development of information systems, architecture and design of solutions in the field of the Internet of things, development of solutions based on software and hardware platforms, operating system development, web application development, algorithms (artificial intelligence, cryptography and others), analysis and work with big data, mobile application development, security in the field of information and communication technologies, development of interactive 3D applications, applications with virtual and augmented reality, video game development, programming languages. Development, implementation, maintenance, development, modification or individual development stages (research, design, technical testing) of virtual and augmented reality technologies, devices, programs and real lization of the results of such developments;
18) Services for providing a comprehensive computing infrastructure for performing computing operations and data processing.
At the same time, potential applicants of the Astana Hub must provide the following documents:
1) document on state registration:
– legal entities – residents of the Republic of Kazakhstan – a certificate of state registration (re-registration) of a legal entity;
– legal entities – non-residents of the Republic of Kazakhstan – a document confirming the state registration in the country of incorporation, indicating the state registration number or its equivalent;
2) a copy of a document confirming the authority of the person acting on behalf of the Applicant when submitting the Application, if such a person is appointed by the Applicant;
3) the business plan of the project, created on the web portal by the Applicant determined by the Technopark; filling out the form is required;
4) information on the absence (presence) of debt, which is recorded in the tax authorities, exceeding six times the monthly calculation index established for the corresponding financial year by the law on the republican budget, issued no earlier than 10 (ten) calendar days preceding the date of filing statements. These documents are not provided by non-residents of the Republic of Kazakhstan;
Thus, if you are planning to engage in IT activities, then Astana Hub is an attractive platform since there are tax preferences and IT community, for exchanging opinions.
Taking into account the above tax preferences, we consider it useful to discuss the features of the establishment of a legal entity in Kazakhstan.
Opening a legal entity in the Republic of Kazakhstan
In Kazakhstan, the most common organizational and legal form of private entrepreneurship is a Limited Liability Partnership (hereinafter – LLP).
LLP is a legal entity founded by one or more individuals or legal entities (companies) whose authorized capital is divided into shares. The shares of all participants in the authorized capital and their shares in the value of the LLP property are proportional to their contributions to the authorized capital, unless otherwise provided by the constituent documents.
The initial amount of the authorized capital is equal to the sum of the founders contributions and cannot be less than the amount equivalent to one hundred times the monthly calculation index (in 2022: 100 x 3063 tenge = 306 300 tenge). However, this requirement does not apply to the following cases:
small business entities, as well as the state Islamic special financial company, the size of the minimum authorized capital of which is determined by the zero level;
Small businesses include:
— individual entrepreneurs and legal entities engaged in entrepreneurship:
with an average annual number of employees no more than 100 people;
with an average annual income not exceeding 300,000 times the MCI (in 2022: 300,000 x 3,063 tenge = 918,900,000 tenge).
- an organization carrying out microfinance activities;
- payment organization.
The obligations of participants and LLP are separated from each other. The LLP is not liable for the obligations of its participants, and the participants are liable for the obligations of the LLP only to the extent of the value of their contribution to the authorized capital. LLP participants who have not fully contributed to the authorized capital shall be jointly and severally liable for its obligations to the extent of the value of the unpaid part of the contribution of each of the participants.
Who can register an LLP?
- citizen of the Republic of Kazakhstan;
- a foreigner who has a residence permit in Kazakhstan;
- a foreigner who does not have a residence permit, but has a business immigrant visa;
- foreign legal entity.
In more detail, we have disclosed for you other necessary information for opening an LLP in Kazakhstan at the link. Here you will find answers to the following questions:
-How to register an LLP?
– I am a citizen of another country, how to register an LLP?
– I am a citizen of another country and do not have the opportunity to independently obtain an IIN, can a citizen of the Republic of Kazakhstan do this by proxy?
– I am a representative of a legal entity in another country, how to register an LLP?
– Opening a bank account for LLP
– Opening a bank account in Kazakhstan for foreign individuals residing in Kazakhstan.
Thus, the WE Legal team is ready to provide you with a wide range of services, including advice on choosing a favorable tax regime, company registration, legal, tax, and accounting support, when doing business in the Republic of Kazakhstan.