Why does Kazakhstan need the international financial center?
The main objective of the Center is to develop a leading international financial services market of the country for attraction of investments into Kazakhstan, for development of the securities market and ensuring its integration with foreign markets, development of the insurance market, as well as of the banking and Islamic finance market.
The Center Participants
The participants of the Center are legal entities registered in accordance with the applicable law of the Center, as well as other legal entities which are accredited by the Center.
Applicable Law of the Center
• The Law of the Center is based on the Constitution of the RK and consists of:
• Constitutional Law;
• Acts of the Center, which may be based on the principles, regulations and case law of the Law of England and Wales and (or) standards of the world’s leading financial centers;
• Current law of the RK – to the extent not governed by the Constitutional Law and Acts of the Center.
Currency Regulation in the Center
Terms and procedure for currency operations related to provision of financial services within the Center are established by the Bodies of the Center. Currency regulation regimes set out in the Law of the RK “On Currency Regulation and Currency Control” do not apply to operations carried out by Participants of the Center.
Tax Privileges and Preferences
The Bodies and Participants of the Center are exempt from payment of corporate income tax till 1 January 2066. The latter, in particular, are exempt from tax on income obtained from rendering financial services within the Center, as well as legal, audit, accounting and consulting services provided directly to the Bodies of the Center and those Participants who provide financial services.
Furthermore, foreigners employed by Participant or Body of the Center are exempt from personal income tax on income obtained from the activity in the Center on the basis of employment contract.
Also by the same date individuals and legal entities are exempt from personal income tax and corporate income tax on income:
• from capital gains tax on sale of securities, shares or participating interests in charter capitals of legal entities – Participants;
• in the form of dividends and interest on securities, dividends on shares or participating interests in charter capitals of legal entities – Participants.
Finally, Bodies and Participants of the Center rendering the foregoing services are exempt from property and land taxes on property located within the Center.
As from 1 January 2017, foreigners and stateless persons employed by Participants and Bodies of the Center and their family members must obtain an entry visa to Kazakhstan for a period of up to 5 years. Citizens of the country-members of the Organization for Economic Cooperation and Development, the UAE, Malaysia, the Republic of Singapore and the Principality of Monaco, as well as other countries as determined by the Government of the Republic of Kazakhstan, are entitled to visa-free entry into the Republic of Kazakhstan for up to 30 calendar days from the date of entry.
Furthermore, foreigners employed by Participants and Bodies of the Center are not required to obtain a work permit in the Republic of Kazakhstan.
The Bodies of the Center are as follows:
1) Center Management Council: a collegiate body chaired by the President of the RK acting on the basis of the Regulation approved by the President Decree № 160 dated 31 December 2015. The Council primarily focuses on the strategic development of the Center;
2) Center Administration: a joint stock company established by the National Bank of the RK to manage current activities of the Cente;
3) Center Committee for Financial Services Regulation: a legal entity designed to regulate the financial activities of the Center;
4) Center Court: an entity which is not part of the judicial system of the RK that consists of first and appellate instances, does not conduct criminal/administrative judicial proceedings and reviews the following disputes as part of exclusive jurisdiction:
• among Participants of the Center, Bodies of the Center and (or) their foreign employees;
• related to any operation carried out in the Center and subject to the law of the Center;
• assigned by mutual agreement.
The judicial proceedings are based on procedural rules of law of England and Wales and (or) the standards of the world’s leading financial centers.
Language of the Center
The official language of the Center used within the Center (in documentation, acts, deals, judicial proceedings, etc.), is English with option of translation into Kazakh or Russian languages.
The Center which will operate based on the principles of a flexible case-law, preferential tax and visa regime, skilled labor, as well as independent court, will facilitate long-term and sustainable economic development of the RK, making its capital the heart of financial infrastructure of the entire Central Asian region. This is an ultimate “pro” of the Center.
At the same time, some experts take the utopian idea to be the main “cons”, citing the example of long gone project on establishment of the Regional Financial Center of Almaty city. In addition, many express concern that domestic lawyers and financiers may be left out on the sidelines due to introduction of English law and English language in the Center. In addition, the latter would probably be annoyed with tax benefits available for foreigners as discussed above given the fact that Kazakhstan citizens would continue paying taxes in full.
In any case, time will tell whether the way chosen by the Government is right or wrong.
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.