Kazakhstan: Legal Update.

Legal News & Analysis - Asia Pacific - Kazakhstan

31 October, 2019

 

Unicase is pleased to share the following changes in the legislation of the Republic of Kazakhstan, reflecting the relevant sectors of theeconomyand clients’ interests.

 

Please click here for the full report.

 

Visa free entry to the Republic of Kazakhstan

 

The Republic of Kazakhstan increases the list of the countries whose citizens do not require to obtain the visa for visiting the Republic of Kazakhstan with the stay period less than 30 calendar days.

 

In particular, beginning from the September 30, 2019 the citizens of the following countries do not require to obtain the visa to Kazakhstan for a stay not exceedin 30 calendar days a:

 

  • the Kingdom of Bahrein;

  • Vatican City State;

  • Socialistic Republic of Vietnam;

  • Republic of Indonesia;

  • State of Qatar, Republic of Colombia

  • State of Kuwait;

  • Principality of Liechtenstein;

  • Sultanate of Oman;

  • Kingdom of Saudi Arabia;

  • Kingdom of Thailand and the Republic

    of Philippines.

     

Republic of Kazakhstan is the party to UN treaty On mediation

 

Beginning from August 7, 2019 the Republic of Kazakhstan is the party to the United Nations Convention on International Settlement Agreements Resulting from Mediation which was adopted on December 20, 2018. The UN Convention is signed by 46 countries, including Australia, USA, People’s Republic of China, Switzerland, Japan, etc. The UN Convention will facilitate international business by enabling disputing parties to easily enforce and execute mediation agreements across borders.

 

Amendments to the Constitutional Law of the Republic of Kazakhstan on 7 December 2015 “On the International Financial Center Astana”

 

The principle of investment residency was envisaged in order to stimulate the inflow of  new investments. The investor and its family members receive a multiple entry visa to the Republic of Kazakhstan.

 

Also, for the purpose of additional tax incentives, investors will be exempted from paying individual and corporate income taxes on income received outside the Republic of Kazakhstan. It is assumed that investors will invest their funds in financial instruments and securities traded on the AIFC exchange.

 

Legislation allows the AIFC bodies to adopt acts regulating the procurement of goods, works and services, as well as labour relations. Along with this, financing of the activities of the AIFC will be free charge out of public funds (republican budget). The project offers exemption from AIFC financial services, as well as professional services provided to the Center by non-residents and from VAT. It is also proposed to equate the AIFC court legal acts (resolutions, bylaws etc.) to the acts of the national courts.

 

Amendments to the Decree on 25 November 2015 No. 725 “On some issues of planning and implementation of PPP projects”

 

According to the amendments sectorial central government agencies will conduct an examination of tender documentation for local projects with exceeding fee of 4 million MCI and the central authorized body for budget execution no longer agrees on the essential conditions of tender documentation.

 

In order to ensure transparency, the evaluation of tender documentation will be mandatory carried out by legal entities determined by the authorized local executive bodies. The local authorized state planning body is no longer empowered to independently conduct an examination of the business plan.

 

Now, it is not necessary to include a representative of the authorized body for budget execution in the tender committee if the PPP project does not include any government obligations.

PPP projects for communal property for the  construction of easy rail lines located in the city of republican status are considered as PPP projects of special significance.

 

The Law on Combating the Legalization (Laundering) of Criminal Proceeds and Terrorism Financing (“The Law on AML”) entered into force on 9 March 2010.

 

On August 13, 2019, the Republic of Kazakhstan approved the Rules for organizing a “one contact” for investors (hereinafter “the Rules”).

 

The rules give a clear definition of the concept of the “one-stop shop” principle for investors, describing it as a centralized form of assisting investors from the National Company and its regional representatives, and representative offices, regional organizations in obtaining state and other services provided by other organizations, providing the minimization of investors' participation in the collection and preparation of documents and limitation of their direct contact with authorities.

 

The rules approved a special system called the front office system. It represents a three-level system (external, central and regional level), providing interaction between concerned bodies and organizations, carried out on specially designated sites with the necessary infrastructure for providing consultations, state and other services, meetings, negotiations and presentations of investment opportunities of the Republic of Kazakhstan.

 

The subjects of front-offices of the external level are foreign institutions of the Republic of Kazakhstan, the subjects of the central level are the National Company, financing and organization of their activities is carried out from the republican budget. The subjects of the regional level are local executive bodies of the Republic of Kazakhstan, their financing is carried out from the local budget.

 

The provision of services on a “one-stop-shop” basis is carried out by the National Company in relation to investors implementing projects with investment volumes of over 150,000 MCI in all sectors of the economy. In relation to other investors, with an investment volume of less than 150,000 MCI, it is carried out by regional organizations if they are created.

 

Republic of Kazakhstan having signed the Declaration on the establishment of the EAG on 6 October 2004 and ratified the Agreement on the EAG on 21 February 2012 has undertaken a number of obligations, including the responsibility to take active steps to develop and enforce laws in the sphere of Anti Money Laundering (“AML”) and Combating the Financing of Terrorism (“CFT”). Thereupon, the Commission is to conduct a mutual evaluation of the Republic of Kazakhstan in 2021-2022.

 

In order to implement the targets set by EAG the Law on Combating the Legalization (Laundering) of Criminal Proceeds and Terrorism Financing (“The Law on AML”) entered into force on 9 March 2010.

 

For purposes of bringing the Legislation into compliance with international standards Kazakhstan published a new Law on Amendments and Additions to Some Legislative Acts of the Republic of Kazakhstan on Combating the Legalization (Laundering) of Criminal Proceeds and Terrorism Financing on 27 September 2019 (“The Draft Law”).

 

The recommendations received earlier according to results of the previous evaluation conducted by EAG in June 2011 were taken into account while implementing the novelties and amendments in the Law on AML. Therefore, enforcement mechanisms of the UNSC resolutions and FATF recommendations in the area of combating the terrorism financing were implemented and AML/CFT standards were brought into compliance with international standards. 

 

Based on the foregoing the Draft Law proposes following amendments:

 

Now the Сode on Administrative Violations of the Republic of Kazakhstan dated 5 July 2014 (“Administrative Code”) clearly defines the violations (including repeated ones), and provides the fines amount ranging from 20 to 600 MCI depending on the subject, elements, seriousness of offence and the extent of its negative consequences. Emphasis has been placed on creating a deterrent force.

 

It is also proposed to establish an authorized body responsible for financial monitoring in order to eradicate such problems as the absence of authority with the right to draw up a report on administrative offences in the Law on AML.

 

It was also important to establish a unified approach to the ethical requirements of auditors in accordance with the set of rules and standards of auditing issued by the International Federation of Accountants. State control of auditing activities will be carried out in the form of inspection and preventive control in accordance with the Entrepreneur Code of the Republic of Kazakhstan. Since the existing Administrative Code provides suspension of the audit license only for a single offense/violation, the new version of the Law on Audit Activity establishes a specific list of offences/violations that may cause the annulment or suspension of such license.

 

The new Draft Law also expanded the list of financial transactions which are subject of monitoring in the interests of preventing the outflow of capital from Kazakhstan, within the frameworks of which it have also been established a clear timelines, procedures and ways of providing information for adequate verification.

 

It is proposed to define requirements for the disclosure of information by foreign payment systems, in other words, to create mechanisms of public authorities aimed at obtaining the beneficiary/sender information from the provider, since foreign payment systems presently hide such information. Concurrently, it is recommended to establish a certain procedure for suspending or cancelling e-money transactions.

 

The Criminal Process Code of the Republic of Kazakhstan allows the establishment of restrictions and time limits for e-money (electronic money) without identifying of the owner. The legislator links it to the fact that e-money is used to sell illegal products (as drugs etc.).

 

The appointment and recording of criminal proceeds to be returned and returned to the Republic of Kazakhstan is also proposed as a tool to improve the efficiency of the asset recovery process and to ensure a comprehensive approach to judicial and business processes.

 

Now, along with the export control authorities the authorized financial monitoring body have the right to request information and documentation from the foreign economic activity participants. The contracts will be checked in order to find out whether they are related to prohibited items, investments, technologies etc. or not.

 

Also, it was offered to give to the National Postal Operator permission to maintain bank accounts of persons/organizations included in the list of organizations and persons connected with financing of terrorism and extremism which improves correspondent relations with foreign financial organizations.

 

The Draft law also provides for the denial of registration of a ship and ownership rights for persons/organizations included in the list of organizations and persons involved in the financing of terrorism and extremism.

 

The Draft Law has been submitted to the Majilis of the Parliament of the Republic of Kazakhstan for the preview. Speaking about the forecasts of the Draft Law adoption consequences, the first Vice-Minister of Finance B. Sholpankulov expressed the following: "Generally, the adoption of the Draft law will not cause negative social and economic impacts instead it will promote the effective implementation and execution of legislation which excludes further negative legal effect". 

 

 

For further information, please contact:

 

Saniya Perzadayeva, Managing Partner, Unicase Law Firm

saniya.p@unicaselaw.com

 

a Governmental Decree of the Republic of Kazakhstan No.693 dated September 18, 2019