This client update includes amendments and additions to the legislation of the Republic of Kazakhstan (“RK”) in October 2013.
The legislation outlined in this Client Update concern 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:
DRAFT TAXATION LEGISLATION
1) Majilis (the Lower House) of the Parliament of RK approved the Draft Law of RK «Concerning amendments to certain legislative acts of RK related to taxation».
Pursuant to this Draft Law, among others, excise tax for alcoholic and tobacco products, as well as transport and property tax have been increased.
In particular, the Draft Law increases a base value of dwelling per square meter for two timesup to KZT 60,000 for Almaty and Astana cities, and up to KZT 36,000 for regional centers, whereby the base for property tax calculation is increased. The above amendments do not apply to districts, rural settlements, villages.
In addition, the Draft Law increases land tax rates, which apply to land that has not been developed within certain time period after being granted.
The Draft Law was approved by Mazhilis on 23 October 2013.
1) Construction and/or Operation of Underground Structures not related to Exploration or Production.
The Decree of the Government of RK No. 981 dated 17 September 2013 introduced amendments to the Decree of the Government of RK No. 581 dated 26 May 2011 concerning rules for granting subsoil use right for construction and/or operation of underground structures not related to exploration or production. Pursuant to the amendments, the subsoil use right for construction and/or operation of underground structures, not related to exploration or production, is granted by signing contract with local administration of an oblast, a city of republican status, the capital city.
The Decree further sets the rules for holding direct negotiations with local administration.
The Decree enters into force in ten calendar days upon the first official publication.
1) Changes in the Law on Labor Migration.
The Senate of RK on 10 October 2013 adopted the Draft Law “On introducing changes and amendments in some legal acts of RK on labor migration” which aims at:
• Simplifying the procedure for granting work permits for foreigners in the country;
• Legalizing migrant workers;
• Improving the government regulation of migration processes, in particular in relation to granting work permits to labor migrants for employment with individuals.
The work permit is granted for the term as requested by a migrant applicant, which can be for one, two or three months. The work permit term can be extended multiple times, however, the maximum duration of continuous temporary stay of the labor migrant may not exceed 12 months.
The Draft Law also proposes amendments to the Law “On migration”, Labor and Tax Codes.
1) On 10 October 2013, the Senate of RK adopted the Draft Law “Concerning the Ratification of Convention between the Government of RK and Government of the Grand Duchy of Luxembourg for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Income and Capital Taxes and Protocol on introducing amendments to the Convention”.
The Protocol amends articles concerning the permanent establishment of a non-resident, the exchange of information, and sets forth that penalties for late payment shall not be regarded as interest for the purposes of Article 11 of the Convention, namely, interest arising in a Contracting State and paid to a resident of the other Contracting State which may be taxed in that other State.
1) Rules for Creating Provisions.
The Decree of the Board of the National Bank of RK No. 65 dated 25 February 2013 approved Rules for Creating Provisions in accordance with International Financial Reporting Standards and statutory accounting and financial reporting requirements for banks (save for the bank, which is the national development institution, the majority interest of which is owned by the national managing holding company) and organizations undertaking certain types of banking transactions.
Pursuant to these Rules, provisions shall be created in accordance with statutory accounting and financial reporting requirements and International Financial Reporting Standards.
Within one month after the Decree became effective, banks and organizations undertaking certain types of banking transactions must prepare and approve the Provisions Calculation Methodology in accordance with the Rules.
The Decree became effective upon the first official publication, i.e. on 27 October 2013 and is retroactive as from 1 January 2013.
STRATEGIC ENTITIES LIST
1) Pursuant to amendments in the Decree of the Government of RK No. 651 dated 30 July 2008 “On approval of the strategic entities list transferred to the charter capital of and/or owned by national holding companies and/or national companies or their affiliates, as well as other legal entities with state participation and strategic objects owned by entities not affiliated with the state, as well as by individuals”, “Serebryanski zavod neorganicheskih proizvodstv” LLP (the entire 100% of participating interest),“Astana-Energia” JSC (the entire 100% of shares) and “Astanaenergoservice” JSC (99,5% of shares) were added to the strategic entities list.
Also the strategic entities list now includes a section “Objects of the electric power industry”, in particular TETS-2 of Astana city (heating and power plant).
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.