This CLIENT UPDATE includes amendments and additions to the legislation of the Republic of Kazakhstan (“RK”) from 15 May through 15 June 2014.
The legislation outlined in this Client Update concerns both public and private sectors. Some of them may be of interest to you as it may affect your business in Kazakhstan in certain way.
This month we would like to draw your attention to the following legal acts:
IMPROVEMENT OF THE INVESTMENT CLIMATE
1) On 12 June 2014, the President of RK signed the Law “On changes and amendments to certain legal acts of RK in relation to improvement of the investment climate».
The Law introduces institution of an «investment ombudsman». Investment ombudsman is a public official, appointed by the Government of the RK, who is responsible for assistance with protection of rights and legal interests of investors.
Investment ombudsman is responsible for:
• examining investors’ applications in relation to matters arising out of investment;
• activity in the RK, and making recommendations for resolution of those matters, including through cooperation with government authorities, if necessary;
• assisting investors in solving issues arisen during extrajudicial and pre-trial procedure;
• drafting and presenting recommendations on legislation improvement to the Government of RK.
Also the Law introduces additional measures of government support for investors in the framework of signed contracts, which include the following:
• corporate income tax exemption for 10 years;
• land tax exemption for 10 years;
• property tax exemption for 8 years;
• reimbursement by the Government of up to 30% capital expenditures of the investor upon project commissioning;
• granting right for employment of foreign nationals or the entire period of investment project construction and for one year following the investment project commissioning.
The Law enters into force on 23 June 2014.
2) On 28 May 2014, the Government of RK approved the Resolution “On Approval of Integrated Action Plan for Attraction of Direct Foreign and Domestic Investments».
The Resolution introduces priority sector list for attraction of direct foreign and domestic investments, which includes:
• machinery manufacturing (e.g., agricultural equipment manufacturing, motor vehicle production, oil-producing and oil and gas refinery equipment, etc.);
• chemical industry;
• metallurgical sector;
• food-processing industry;
• pharmaceutical industry, medical equipment manufacturing;
• transportation and logistics;
• information technology.
Also the Resolution introduces additional measures of government support for investors, as follows:
• long-term guaranteed orders for investor’s goods and services from national managing holding companies, national holding companies and national companies;
• Introduction of “stability of laws” principle in investment agreements for 10 years while maintaining the balance of Government interests.
The Resolution entered into force 23 May 2014.
NEW PROCUREMENT RULES OF THE GOODS, WORKS AND SERVICES (“GWS”)
1) On 31 May 2014, the Government of RK adopted the Resolution “On changes and amendments into Resolutions of the Government of RK No. 133 dated 14 February 2013 «On Approval of the Rules for procurement of GWS for subsoil use operations through the government information system “Register of GWS for undertaking subsoil use operations, and producers thereof”» and No.134 dated 14 February 2013 “On Approval of the Rules for procurement of GWS for subsoil use operations” («Rules»).
The main novelty of the Rules is that the document processing is now handled through electronic register. Potential suppliers will not be required to file documents in hard copies any longer.
Also the Rules exclude the right of customers to engage experts for determining whether or not potential suppliers comply with tender documents requirements.
Pursuant to the Rules the documents filed in the state language will have priority in case of discrepancy between translations of tender documents approved by customer and (or) provided by potential supplier.
The Rules reduce the number of grounds for single source procurement. The time lines for review of documentation by the tender commission have also been reduced to 3 working days (as opposed to 10 calendar days as was the case before).
As of this Client Update the Resolution has not been published. The Resolution comes into force after 10 calendar days following the day of its first official publication.
ANTI-MONEY LAUNDERING AND COUTERING FINANCING OF TERRORISM
1) On 10 June 2014, the Presidnet of RK signed the Law “On amendments and changes in certain legislative acts of RK on countering legalization (laundering) of illicitly gained income, and financing of terrorism”.
The Law introduces two new criminal offenses in the Criminal code of RK – “manipulation in the securities market” and “illegal use of inside information”.
Pursuant to the Law manipulation in the securities market means actions of the securities market players aimed at establishing or maintaining higher or lower price of securities than that of established as a result of objective supply and demand ratio and at creating a daisy chain on the securities market.
Inside information means true information on securities and transactions with those securities, as well as information on the issuer of securities and its activities, which constitute trade secret, and other information unknown to third parties, which if disclosed can change the value of securities and adversely affect activities of the issuer.
Both of these crimes are punished by fine in the amount of 500 to 1,000 MCI (monthly calculation index) or correctional works for a period of up to 2 years, or restriction of freedom for a period of 6 months to 2 years.
Financial organizations are entitled to request data and documents necessary for identification of the client, identification of the beneficial owner. In addition, according to the Law financial organizations have the right to inquire, and the client must provide information on the tax residence, type of its activity and source of financing for the undertaken transactions.
The Law enters into force on 24 June 2014.
THE DRAFT LAW
LAW ON LEGALIZATION OF PROPERTY
1) On 19 June 2014, the Senate of Parliament of RK approved the draft law “On Amnesty of Citizens of the RK, Oralmans and Permanent Residence Permit Holders in the RK in relation to Legalization of Property” (“Draft Law”).
Pursuant to the Draft Law the following are subject to legalization:
• participating interest in the charter capital of legal entity;
• buildings (constructions), executed in the name of the wrong person;
• buildings (constructions), which comply with construction rules and regulations, and are also fit for the intended purpose of land plots, where these buildings are
• located, and owned by subjects of legalization;
• real estate located outside of RK.
Property obtained as a result of certain crimes, in particular offenses against the person, constitutional and other rights and liberties of the person, the constitutional order and security of the state, and also as a result of committing corruption and other offenses against interests of public service are out of scope of legalization.
Legalization of property requires obligatory fee of 10 percent:
• of the amount of money withdrawn from the savings account, or transferred to the other account;
• of the valuation price of the property which is located outside of RK.
Pursuant to the Draft Law legalization of property commences on 1 September 2014 and completes on 31 December 2015. Filing date starts on 1 September 2014 and completes on 30 September 2015.
Information contained in this Client Update is of general nature and cannot be used as legal advice or recommendation. Please seek for a specific advice in relation to any questions. Please note that Kazakhstan and Turkmenistan are emerging economies and their legislation and legal systems are in constant development. Should you have any questions or would like to discuss subjects addressed in this Client Update please contact us.