Legislative News. September-October 2016

This Client Update covers the key amendments to the laws of the Republic of Kazakhstan (“RK”) and various legal developments introduced in September and October 2016.

NOVELTIES IN LEGISLATION

The laws covered by the present Client Update relate to both public and private sectors. Some of them may be of interest to you as they may affect your business activity in Kazakhstan.

We would like to draw your attention to the following legal acts.

LAWS

Payments And Payment Systems

On 26 July 2016, the President of the RK signed the Law No. 12-VІ “On Amendments To Certain Legislative Acts On Payments And Payment Systems” (“the Law”).

The Law provides for the following amendments and novelties to the Civil Code of the RK:

• Any funds of citizens and legal entities, available in bank accounts can be arrested pursuant to court rulings and by judicial enforcement agents pursuant to court award enforcement acts;

• No arrest is allowed for money in the bank account designated for social benefits and welfare.

The Law provides for the following amendments and novelties in the Tax Code of the RK:

• Taxpayers must:

o notify tax authorities of receiving money and/or other property;

o submit to tax authorities data on receipt and disposal of money and/or other property from foreign states, international and foreign organizations, foreigners, stateless persons in the amount exceeding 5% of total amount of outbound wire payments of the bank and the taxpayer in case of rendering legal assistance.

• This requirement does not apply to:

o government agencies/institutions;

o public servants;

o second-tier banks, insurance companies;

o major taxpayers approved by the Government of the RK;

o educational organizations;

o persons engaged in advocacy or notarial services, activities of private bailiffs, mediators, arbitrators, appraisers, auditors;

o diplomatic and consular representative offices of foreign states;

o money and/or other property obtained as profit under cross-border trade contracts;

o money and/or other property obtained for organization and implementation of international transport services and international postal services;

o money and/or other property obtained under investment agreements concluded in accordance with the laws of the RK;

o dividends, fees, winnings, for which personal income tax has previously withheld; and other cases.

DECREES

E-Money Issuance, Disposal and Repayment Rules

On 31 August 2016, the Chairman of the National Bank of the RK signed the Decree of the Management Board of the National Bank of the RK No. 202 “On Approval Of Rules For Issuance, Disposal And Repayment Of E-Money, As Well As Requirements Set For Issuers Of E-Money And E-Money Systems In The RK”.

The Decree provides for the following provisions:

• e-money means unconditional and irrevocable financial obligations of the issuer of e-money stored in electronic form and accepted as a payment in e-money systems of other system’s participants;

• the e-money issuer means the payment service provider entitled to emission and repayment of e-money;

• the issuer must notify the National Bank of the RK on changes in denomination of e-money system trademark or issuer or operator within 15 days from the date of such changes;

• in addition to second-tier banks in the RK, JSC “Kazpochta” implements e-money denominated in foreign currency and issued by non-residents of the RK pursuant to contracts concluded with non-resident issuers of the RK;

• the issuer notifies the National Bank of the RK on both commencement and cease of e-money issuance;

• in case of cease of e-money issuance, issuer within 30 calendar days before cease of e-money issuance must accordingly notify e-money owners via e-money system web-site (if available) and e-money owner profile, mass-media, notification by e-mail and/or mobile phone;

• after expiry of deadline for outstanding e-money repayment unsettled e-money stored in e-purses of sole entrepreneurs, physical persons and legal entities must be compulsorily redeemed to their bank accounts.

The Decree came into force on 8 November 2016.

Countermeasures against Counterfeit Products

On 26 October 2016, the Prime-Minister of the RK signed the Decree No. 625 “On Execution Of Agreement On Cooperation In The Sphere Of Countering Against Production And Distribution Of Counterfeit Products”.

Pursuant to the Decree the Government approved the Draft Agreement and issued the decree to sign the Agreement.

The parties (CIS states) of the Draft Agreement shall:

• cooperate when fighting against production and distribution of counterfeit products, manufactured with violation of IP rights;

• determine measures for effective suppression of counterfeit products turnover in CIS states;

• carry out exchange of information for the purposes of countermeasures against production and distribution of counterfeit products, in particular those related to detecting places of production of counterfeit products and channels of distribution thereof;

• introduce criminal liability for production and distribution of counterfeit adulterated pharmaceuticals into their respective laws.

The Decree came into force on 26 October 2016.

ORDERS

Gas and Oil Services for Natural Monopoly Subjects

On 22 June 2016, the Minister of National Economy of the RK, and on 5 August 2016, the Minister of Energy of the RK signed the Joint Order No. 275 and No. 378 “On Amendments To Certain Joint Orders Of Chairman Of The Agency Of The Republic Of Kazakhstan For Regulation Of Natural Monopolies, The Minister Of Energy And Mineral Resources Of The Republic Of Kazakhstan And The Minister Of Oil And Gas Of The Republic Of Kazakhstan”.

Kazakhstan laws prohibit natural monopoly subjects from rendering services which are not regulated. The laws, on the other hand, provide for the certain list of services that such entities can render.

The Order sets forth that oil and gas natural monopolies can render the following services:

• sale of liquefied petroleum gas to consumers via group reservoir installations;

• sale of liquefied petroleum gas to consumers in cylinders;

• operation and maintenance of gas-consuming systems and gas equipment of consumers.

The Order came into force on 2 October 2016.

New Construction Regulations

On 12 July 2016, the Chairman of the Committee for Construction and Housing and Communal Services of the Ministry of National Economy of the RK signed the order No. 31-НҚ “On Approval Of Construction Regulations Of The Republic Of Kazakhstan”.

The Order approves the following construction regulations of the RK: “Standardized Design”, “Engineering Survey For Construction. Seismic Microzoning”, “Duration Of Construction And Construction Backlog For Enterprises, Buildings And Structures”.

The Order came into force on 26 September 2016.

Foreign Labor Attraction and Intra-Group Secondment

On 27 June 2016, the Acting Minister of Healthcare and Social Development of the RK signed the Order No. 559 “On Approval Of Rules And Conditions Of Issue And (Or) Extension Of Permits For Employers To Engage Foreign Labor, As Well As Implementation Of Intra-Group Secondment”.

There are certain categories for foreign labor, such as directors and their deputies (I category), heads of structural departments (II category), specialists (III category) and qualified workers (IV category).

The ratio as against the RK employees must not exceed 30% for I and II categories, and 10% for III and IV categories. Such conditions do not apply to small business entities, government agencies and institutions, foreigners who obtained employment independently, in case of international cooperation for labor migration and social protection of migrant workers.

Permit is issued for 12 months, with the right of annual extension for I category, not more than 3 extensions for II and III category, with no extension for IV category and seasonal workers.

There are certain categories for intra-group secondment, such as directors, managers, specialists.

The ratio of managers and specialists as against the RK employees must not exceed 50%.

• Permit under intra-group secondment is issued subject to:

• at least one year experience in a WTO member country’s legal entity;

• compliance with qualification requirements;

• Kazakh language knowledge of at least elementary level, confirmed by specially established certificate “Evaluation of command of Kazakh language (KAZTEST)”;

• availability of vacancies and absence of job candidates.

Permit for intra-group secondment is issued for a period not exceeding 3 years with the right of extension for maximum one year.

For engaging foreign labor and intra-group secondment, application with supporting documents must be submitted via e-system “State database “E-licensing” or in hardcopies to the local akimat.

The Order will come into force on 1 January 2017.

Independently Obtained Employment by Foreigners

On 13 June 2016, acting Minister of Healthcare and Social Development of the RK signed the Order No. 503 “On Approval Of Regulations For Issuance Of Certificates To Foreigners Or Stateless Persons According To Their Qualifications For Independent Employment, List Of Priority Sectors (Types of Economic Activities) And In-Demand Professions For Independent Employment Of Foreigners And Stateless Persons”.

Issuance of certificate to foreigner or stateless person is carried out as follows:

• application with supporting documents is submitted to diplomatic representations of the RK abroad for issuance of certificate;

• the Commission checks the level of education and experience of foreigner or stateless person and holds assessment;

• certificate is issued for the period of 3 months, during which foreigner or stateless person can enter into employment agreements for up to 3 years.

The Order will come into force on 1 January 2017.

DRAFT LAWS

Increase of Tobacco and Alcohol Production Excise Rates

On 8 October 2016, the package of the Draft Law of the RK “On Amendments To Certain Legislative Acts Of The Republic Of Kazakhstan On Taxation And Customs Administration” was proposed for consideration to the Mazhilis of the Parliament.

The Draft stipulates amendments to the Tax Code of the RK envisaging gradual increase of tobacco and alcohol production excise rates. Increase of excise rates is contemplated in every 2 years. From 1 January 2017 to 1 January 2018 the following excise rates will be in effect: alcohol production – 2,000 KZT/l, cigarettes – 6,200 KZT/1,000 items; from 1 January 2018 to 1 January 2019 the following excise rates will be in effect: alcohol production – 2,275 KZT/l, cigarettes – 7,500 KZT/1,000 items.

Information contained in this Client Update is of general nature and cannot be used as legal advice or recommendation. Please note that Kazakhstan is an emerging economy, and its legislation and legal system are in constant development. Should you have any questions or want to discuss matters addressed in this Client Update, please contact us.