Redomiciliation to Kazakhstan

What is Redomiciliation?

Redomiciliation refers to changing a company's country of incorporation while preserving its legal form, assets, balance sheet, and other key attributes after re-registering in a new jurisdiction. Importantly, this process does not involve liquidating the company in its original country; rather, it simply transfers the company's registration to a new location, allowing it to continue operations with its existing legal history, structure, assets, rights, and obligations.

For a general overview of corporate redomiciliation, please refer to our Corporate Redomiciliation article available here.

This article focuses on the redomiciliation of companies to Kazakhstan, one of Central Asia's largest and most influential countries. 

Legal Framework in Kazakhstan

While Kazakhstan’s general legislation does not provide regulations for corporate redomiciliation, the Astana International Financial Center (AIFC) offers an exception. The AIFC, a key financial center in Central Asia and Eastern Europe, allows inbound redomiciliation under its specialized legal framework. The AIFC's regulations are based on international standards and English law, providing a robust financial infrastructure, an independent judicial system, and an innovation-friendly environment, which facilitate attraction for foreign capital and investments.

Conditions for Redomiciliation to AIFC

Redomiciliation to the AIFC is possible only if the originating jurisdiction permits it. For instance, countries like Cyprus, Latvia, Luxembourg, and Austria allow companies to redomicile abroad.

Advantages of Redomiciliation to AIFC

1. Tax Preferences

The AIFC offers numerous tax benefits to its members – companies registered under AIFC law. For instance, until January 1, 2066, both individuals and legal entities are exempt from individual and corporate income tax on dividends received from an AIFC member company, as well as on income from the sale of shares or stakes in the authorized capital of an AIFC member company, among other benefits.

Dividends received by a Kazakhstan company from a foreign company are not subject to the 20% corporate income tax in Kazakhstan, as they are excluded from total annual income under national tax legislation. However, it is important to note that taxes may still be payable in the country where the dividend-paying company is incorporated. For example, dividends distributed by a Belarusian company would be subject to a 15% tax in Belarus on the distributed dividends.

As previously mentioned, income from the sale of shares or stakes in the authorized capital of an AIFC participant is not taxable in Kazakhstan. However, similar to dividends, taxes may still need to be paid in the country where the seller of the shares is a tax resident.

2. English Law

The AIFC operates under norms derived from English law, providing a familiar legal framework for international businesses. This system includes (1) the Constitutional Law of the Republic of Kazakhstan “On AIFC”, AIFC-specific acts incorporating English law principles, and (2) the law of Kazakhstan in the part that is not regulated by the acts of AIFC.

3. International Recruitment

The AIFC simplifies visa procedures, granting work visas up to five years for employees of member companies and their families. 

It also allows AIFC member companies to hire foreign workers without needing special work permits from local migration authorities.

4. Access to international and financial markets

Redomiciling to the AIFC offers access to the domestic market in Kazakhstan as well as to EAEU and Central Asian markets.

Furthermore, incorporating a company into the AIFC provides access to Kazakhstan's stock market. For instance, Polymetal International plc, which successfully redomiciled to the AIFC from Jersey, currently trades its securities on the AIFC's Astana International Exchange (AIX).

In addition, Kazakhstan Central Security Depository (CSD) interacts with such international depository systems as Euroclear and Clearstream, DTC (USA), etc.

Examples of Successful Redomiciliation

Several companies have successfully redomiciled to the AIFC, including:

Steps to Redomicile to the AIFC

The redomiciliation process is complex and requires gathering documents and information from both the jurisdiction the company is leaving and the jurisdiction to which the company is moving, in this case, Kazakhstan.

Thus, in the jurisdiction from which the company is redomiciling, normally it will be necessary to prepare corporate documents, notify creditors of the redomiciliation, conduct an audit, and obtain certificates from state authorities confirming that the company has no outstanding taxes, insurance premiums, or other obligations. Once all the required documents have been collected, the registrar will issue consent for the company to redomicile to another jurisdiction.

In Kazakhstan, it will also be necessary to gather documents for the AIFC to issue a Certificate of Continuation to the redomiciled company. Therefore, the basic redomiciliation process to the AIFC consists of two stages:

1. Preliminary Stage

This involves initial interactions with the AIFC, preparation and submission of documents for preliminary approval.

Furthermore, the AIFC implements a Strategic Fit Process, which entails a thorough review (Enhanced Due Diligence) to ensure that neither company nor its goods/services are subject to sanctions. This verification involves cross-referencing against the sanctions lists of SDN, OFAC, EU, and checking for inclusion on lists of dual-use goods. The process concludes with the issuance of a Legal Certification regarding exposure to sanctions pertaining to shareholders, beneficiaries, and business activities within the AIFC, including the nature of goods and/or services. This certification must be prepared and signed by a law firm with an internationally recognized Legal 500 rating.

2. Main Stage

At this stage:

  1. the final package of documents for the company's redomiciliation is submitted. This includes corporate documents such as the updated articles of association, which have been revised based on feedback from the AIFC during the Preliminary Stage.
  2. AIFC issues its approval for the redomiciliation of the company;
  3. a date is set for the company to cease to exist in the leaving jurisdiction in order to continue to operate in the AIFC;
  4. AIFC issues a Certificate of Continuation to the company;
  5. the registrar from the leaving jurisdiction will strike off the company from the various registers.

Please note that once a company is redomiciled to Kazakhstan (AIFC), its main activities should be conducted in AIFC.

Costs of Redomiciliation to Kazakhstan

  1. Expenses directly related to the company's redomiciliation procedure:
    • these include fees for consultants and auditors in both the originating and destination jurisdictions;
       
    • the cost of auditors in the originating jurisdiction for the preparation of financial statements and obtaining tax certificates.
       
  2. Expenses related to the maintenance of the company after its redomiciliation to Kazakhstan:
    • ongoing expenses include bank account maintenance;
       
    • office rental costs (the company's office must be located within the AIFC territory);
       
    • CEO and management expenses (CEO may be either a resident or a non-resident of Kazakhstan but having a Kazakhstan identification number is mandatory; there are no regulatory requirements that the CEO must be located in Kazakhstan to carry out his activities);
    • the cost of an accountant;
       
    • compliance officer expenses – relevant only for those companies whose activities fall under AIFC regulation and require licensing. For example, these are activities related to investment agent services, investment management, origination of investment transactions, accepting deposits, etc.;
       
    • filing costs (reports are filed annually, including registers of shareholders, directors and beneficiaries, and confirmation of the annual report);
       
    • other expenses that may relate to the company's operations in AIFC.

Conclusion

Redomiciling to Kazakhstan's AIFC is an attractive option for companies which (i) are seeking the benefits of a unique jurisdiction in AIFC while (ii) wish to maintain their existing legal structure via transferring it from another jurisdiction. 

REVERA’s legal team boasts extensive experience in facilitating corporate redomiciliation across diverse jurisdictions. With our own office in Kazakhstan, we provide our clients with comprehensive services, ensuring a smooth transition to the AIFC.

Disclaimer: This publication offers general insights and should not be construed as legal advice. Companies are encouraged to seek tailored legal advice for their specific redomiciliation needs.

Authors and contacts: 

Dear journalists, the use of materials from REVERA website in publications is possible only after our written permission. 

For approval of materials please contact e-mail: i.antonova@revera.legal or Telegram: https://t.me/PR_revera

 

Read on this topic

analytical materials

Corporate redomiciliation

Corporate redomiciliation