SEZ as an Open Door to CIS countries: Kazakhstan

We shall continue our series of articles discussing the major benefits your business may obtain from the Special Economic Zones (SEZs) of the CIS countries. In previous articles we presented overviews for the SEZs of Belarus and Russia (please scroll to the bottom to see links to those previous articles), we are now moving on to our next and final destination, Kazakhstan.

General Overview

Similar to Belarus, Kazakhstan also offers investors a choice between “basic” SEZs (in total 13) and Industrial Zones (in total 24). Meanwhile, within legislation, the investment benefits are basically affixed under the concept of the three types of investment projects (see chart below).

The First type (Special Investment Project) covers a regime of benefits in the SEZs, while the other two types (Investment Project and Investment Preferential Project) cover a regime of the benefits that may be received by residents of the Industrial Zones.

Overall, both SEZs and Industrial Zones, provide investors access to the ready-to-use infrastructure and Free Customs Zone regime for imported products. Main differences lie in the investment project requirements and benefits, in which an investor may choose the best option for their project.

Special Economic Zones (SIP regime)

1) Resident Requirements

Generally, to claim SEZ benefits a company-applicant must simultaneously meet the following conditions:

Note: Some SEZs may foresee specific supplementary requirements.

2) Major Benefits

– Tax Cuts

* General tax rate, which can differ sector by sector

** For objects located within a SEZ and used for the execution of the activities in a promoted sector

*** Exact tax rate would depend on the type of land

– Relaxation on Foreign Employee Recruitments

SEZ residents and their construction contractors are exempt from the quota and work permit requirements for their foreign employees.

Industrial Zone (IP and IPP regimes)

1) Resident Requirements

In the Industrial Zones requirements for the company-applicant would depend on the regime that it would like to apply for (see chart below).

* The minimum investment requirement is not fixed and is basing on the monthly calculation index, therefore may vary from year to year.

Note: Some Industrial Zones may foresee specific supplementary requirements.

2) Major Benefits

– Tax Cuts

– Relaxed Foreign Employees Recruitment (Only Under IPP Regime)

Similar to a SEZ, Industrial Zone residents may receive the exemption from the quota and work permit requirements for their foreign employees under the IPP regime.

Note: Application of this benefit is limited to the projects of development for new production facilities.

– Free or Reduced Price Renting of Land

Investors are offered a natural subsidy from the government which covers rental fees up to 30% of the investment project. In some cases, this may lead to free of charge use of the land. After the expiration of the rental agreement and execution of the investment project, the investor also has a right for the free acquisition of the land.

– Reimbursement of Construction Expenses (Only Under IPP Regime)

The IPP regime offers a subsidy for the reimbursement of up to 30% of the expenses inquired for the construction and installation works and equipment procurement to Industrial Zone residents.

Note: This subsidy does not cover the projects of renovation and/or expansion of existing production.

If you are looking to establish a business in a SEZ or in Kazakhstan, we at D’Andrea & Partners Legal Counsel have a team of experts to advise you.