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Business in Kazakhstan - Law on Investments

Law 373 -11 of the Republic of Kazakhstan on Investments
8 JANUARY 2003 (AS AMENDED BY LAW 48-111 OF THE REPUBLIC OF KAZAKHSTAN ON 04.05.05)
This Law shall govern the relations associated with investments in Kazakhstan, define
the legal and economic framework for encouraging investments, guarantee the protection of the
rights of investors making investments in Kazakhstan, and establish measures for state support
for investments and procedures for settling disputes that involve investors.
CHAPTER 1. GENERAL PROVISIONS
Article 1. Definitions of Main Terms as Used in this Law
As used in this law the term:
1) "Investments" means all types of assets, other than private consumption goods, which are
invested by an investor in the authorized capital of a legal entity or in increasing the fixed
assets used in business activities, including assets under capital lease from the date of the
lease agreement as well as the rights thereto;
2) "Investment Activity" means an activity of an individual or a legal entity related to
participating in the authorized capital of business organizations, or creating or increasing
fixed assets used in operations;
3) "Investment Preferences" means advantages of a targeted nature, which are granted in
accordance with the laws of the Republic of Kazakhstan to Legal Entities of the Republic
of Kazakhstan which implement Investment Projects;
4) "Investment Project" means a set of measures, which envisage Investments in establishing
new or expanding and renovating existing production operations;
5) "Investment Dispute" means a dispute arising from contractual obligations between
investors and state authorities in connection with the Investment Activities of the
investor;
6) "Investor" means individuals and legal entities which make Investments in the Republic of
Kazakhstan;
7) "State Grants in Kind" means assets owned by the Republic of Kazakhstan, which are
transferred free of charge into temporary use or tenure of a legal entity of the Republic of
Kazakhstan for implementing an Investment Project and subsequently conveyed free of
charge into ownership or land tenure;
8) "Contract" means an investment agreement stipulating Investment Preferences;
8-1) "Minority investor" is an investor who realizes the investment at the rate less 10% of the
voting stock (less 10% of the voices from the total voices of participants);
9) "Model Contract" means a standard contract approved by the Government of the Republic
of Kazakhstan which is used when making Contracts;
10) "Authorized Body"' means the central executive body which is directly authorized to
make Contracts and monitor Contract performance;
11) "Legal Entity of the Republic of Kazakhstan" means a legal entity, including a legal
entity with foreign participation, which is incorporated in accordance with the procedure
established by the laws of the Republic of Kazakhstan.
Article 2. Legislation on Investment in Kazakhstan
1. The legislation of Kazakhstan on Investments shall be based on the Constitution of the
Republic of Kazakhstan and consist of this Law and other regulations of the Republic of
Kazakhstan.
2. This Law shall not regulate the relations associated with:
Investments from the state budget funds;
Investments in non-profit organizations, including for educational, charitable, scientific or
religious purposes;
3. Regulations of this rule are used in the part, which doesn't contrary to such rules of the
Republic of Kazakhstan, relations occurred by the realization of the investments and relative
to the incidence of the other rules of the Republic of Kazakhstan.
4. If an international treaty that has been ratified by the Republic of Kazakhstan sets forth
the provisions other than those which are contained in this Law, then the provisions of such
international treaty shall apply.
Article 3. Types of Investments
1. Investors shall have the right to invest in any property and types of business activity other
that those specified in legislative acts of the Republic of Kazakhstan.
"The rights and obligations of the investors in respect of objects and types of the
entrepreneurial activity in which are realized the investments are determined by this rule, the
others legislations of the Republic of Kazakhstan and by the applicable agreements".
2. The legislative acts of the Republic of Kazakhstan may define the types of activities and (or)
territories in respect of which Investments shall be either limited or prohibited as necessary for
protecting the national security.
CHAPTER 2. THE LEGAL REGIME OF INVESTMENTS
Article 4. The Guarantee of Legal Protection of Investor's Activities in the Territory of the
Republic of Kazakhstan
1. Investors shall be granted full and unconditional protection of rights and interests, which
is ensured by the Constitution of the Republic of Kazakhstan, this Law and other regulations of
the Republic of Kazakhstan, as well as international treaties ratified by the Republic of
Kazakhstan.
2. Investors shall be entitled to compensation of damage caused by adoption by state
authorities of acts which do not comply with the legislative acts of the Republic of
Kazakhstan, as well as damage resulting from illegal actions (failure to act) of officials of
such authorities in accordance with the civil legislation of the Republic of Kazakhstan.
3. The Republic of Kazakhstan shall guarantee stability of terms and conditions of Contracts
made between Investors and state authorities of the Republic of Kazakhstan, except where the
Contracts are amended upon agreement of the parties.
These guarantees shall not apply to:
1) changes in the legislation of the Republic of Kazakhstan and (or) entry into force and (or)
amendments to the international treaties of the Republic of Kazakhstan which modify the
procedures and terms and conditions of import, production and sale of excisable goods;
2) amendments which are made to legislative acts of the Republic of Kazakhstan with an aim of
ensuring national security, ecological safety, public health and ethics.
Article 5. The Guarantees for Using Income
Investors shall have the right:
1) to use at their own discretion the income from their activities after the payment of taxes
and other compulsory payments in accordance with the laws of the Republic of Kazakhstan;
2) to open bank accounts with banks within the Republic of Kazakhstan in the national
and (or) foreign currency in accordance with the banking and currency laws of the Republic
of Kazakhstan.
Article 6. The publicity of activity of the e authorities in respect of investors and providing
access of the investors to the information presented the realization of the investment activity.
1. The official messages of the state authorities of the Republic of Kazakhstan and statutory
legal acts infringing investor's interests are published by way of determined legislation of the
Republic of Kazakhstan.
2. Easy access to the information about the registration e legal entities, about their charters,
about the registration of the real estates business, licenses issued, and to the other information,
which is anticipated by the legislation of the Republic of Kazakhstan are provided to investors,
including minority investors the information is presented the realization of the investment
activity and doesn't contain the trade or preserved secrets by the rule.
Article 7. Supervision and Monitoring of Investors Activities by the State Authorities
1. Investors activities shall be supervised and monitored by state bodies, which have been duly
authorized in accordance with the legislative acts of the Republic of Kazakhstan.
2. The laws of the Republic of Kazakhstan shall establish the terms and procedures of the
supervision and monitoring of Investors activities.
Article 8. The Guarantees of Investors Rights in the Event of Nationalization and Requisition
1. Forced seizure of Investors' assets (nationalization, requisition) for state needs shall be
allowed in exceptional cases as specified in legislative acts of the Republic of Kazakhstan.
2. In the event of nationalization, the Investor shall be compensated by the Republic of
Kazakhstan in full volume for any losses resulting from the adoption of legislative acts of the
Republic of Kazakhstan on nationalization.
3. Requisition of Investors' assets shall be carried out upon payment of the market value of
the assets to the Investor.
The market value of the assets shall be determined in accordance with the procedure
established by the laws of the Republic of Kazakhstan.
4. The Investor may challenge the amount of compensation for requisitioned assets in court.
5. Upon expiry of the causes of requisition, the Investor shall have the right to demand the
return of the remaining assets, in which case the Investor shall be obliged to return the
received compensation less losses due to depreciation.
Article 9. Settlement of Disputes
1. Investment Disputes may be settled through negotiations, including those with engagement
of experts, or in accordance with a dispute settlement procedure which has been previously
agreed upon by the parties.
2. Where an Investment Dispute can not be resolved in accordance with the provisions of
paragraph 1 hereof, such disputes shall be settled in accordance with the ininternational
treaties and laws of the Republic of Kazakhstan in the courts of the Republic of Kazakhstan,
as well as in international arbitration tribunals as may be agreed by the parties.
3. Disputes other than Investment Disputes shall be settled in accordance with the laws of the
Republic of Kazakhstan.
Article 10. The Transfer of Investor's Rights to another Entity
If a foreign state, or a state body authorized by such state, makes payments to an Investor
under a guarantee (insurance agreement) granted in regard to Investments in the Republic of
Kazakhstan and the rights of the Investor with regard to said Investments are transferred
(assigned) to such foreign state or the authorized state body, such transfer (assignment) of
rights shall only be deemed legal in the Republic of Kazakhstan if the Investor makes
Investments in the Republic of Kazakhstan and (or) performs certain contractual obligations.
CHAPTER 3. STATE INCENTIVES TO INVESTMENTS
Article 11. The Aim of State Incentives to Investments
1. The aim of State incentives to Investments is formation of favorable investment climate
for the growth of the economy and encouragement of Investments in establishing new or
expanding or renovating existing production operations using advanced technologies,
professional development of the local human resources and protection of the environment.
State incentives for Investments shall be available in the form of Investment Preferences.
Article 12. Authorized Body
1. The state incentives to Investments shall be awarded Authorized Body, which is appointed
by the Government of the Republic of Kazakhstan.
2. Within its authority and in performance of its mission, the Authorized Body shall have the
right to engage specialist from relevant state bodies and consultants and expert among
individuals and legal entities of the Republic of Kazakhstan in accordance with the
procedure established by the Government of the Republic of Kazakhstan.
3. The activities of the Authorized Body shall be governed by a Regulation, which is adopted
by the Government of Republic of Kazakhstan.
Article 13. Types of Investment Preferences
Subject to this Law, the following preferences may be awarded the form of a Contract with the
Authorized Body:
1) Investment-related tax preferences;
2) Exemption from customs duties;
3) State Grants In Kind.
Article 14. The Procedure for Awarding Investment Preferences
1. Investment Preferences shall be awarded to the priority types of business, the list of which is
approved by the Government of the Republic of Kazakhstan at the level of the National
Classifier of Types of Business Activities.
2. For each priority type of activities, the Government of the Republic of Kazakhstan shall
establish the maximum volumes of Investments and the term of investment-related tax
preferences whereby the Investment Preferences are awarded by the Authorized Body.
3. In the event of exceeding the established maximum amount of Investments, the period of
validity of the applicable investment-related tax preferences shall be established by an
appropriate decision of the Government of the Republic of Kazakhstan.
4. Investment Preferences shall be awarded by in the form of a Contract with a Legal Entity
of the Republic of Kazakhstan, which implements an Investment Project.
Article 15. The Conditions for Granting Investment Preferences
Investment Preferences shall be awarded subject to:
1) Compliance of the intended Investment Activity with the list of priority types of
activities;
2) Performance of Investments into fixed assets of a Legal Entity of the Republic of Kazakhstan
with an aim of establishing new or expanding and renovating existing production operations
using advanced technology;
3) Submission of the required documents as set forth in Article 19 of this Law, which confirm
the financial, technical and organizational capability of the Investor applying for
implementation of an Investment Project.
Article 16. Investment-Related Tax Preferences
1. Investment-related tax preferences shall be granted for a period which is determined on
case-by-case basis depending on the type of activity and the amount of Investments into
fixed assets.
2. The commencement date of investment-related tax preferences shall be set forth in the
Contract in accordance with the Tax Code of the Republic of Kazakhstan.
3. The investment-related tax preferences shall not apply to the activities of legal entities
which are subject to a special tax regime, as well as activities under subsoil use contracts.
4. Investment-related tax preferences shall not apply to the fixed assets which are granted to
a Legal Entity of the Republic of Kazakhstan as a State Grant in Kind.
Article 17. Exemption from Customs Duties
1. Exemption from customs duties may apply where equipment and components thereof
are imported for implementing an Investment Project.
2. Exemption from customs duties shall be granted for the duration of the Contract, but
not longer than five years from the date of the Contract registration.
3. The notice of the decision adopted in accordance with paragraph 2 hereof shall be sent by the
Authorized Body to the authorized customs body within five business days.
Article 18. State Grants in Kind
1. In accordance with the procedure set forth in this Law the State Grants in Kind shall be
awarded by the Authorized Body, with the consent of the relevant body with the authority
for managing the state property and land resources, for temporary and payment-free use or as
a temporary and payment-free land tenure, and may be subsequently conveyed free of charge
into ownership or land tenure in the event of the fulfillment of investment obligations under
the Contract.
The State Grant in Kind shall be conveyed free of charge into ownership or land tenure by a
decision of the Authorized Body. The Authorized Body shall adopt the decision based on the
results of the inspection carried out in accordance with Article 21-1.2.3 of this Law.
2.The following assets may be granted as state Grants in Kind:
Land plots, buildings, constructions, machinery, and equipment, computers, measurements
and control instruments and devices, transport vehicles (other than passenger cars) and
manufacturing equipment and tools.
3. The State Grant in Kind shall be appraised on the basis of the market value in accordance
with the procedure established by the laws of the Republic of Kazakhstan.
4. The maximum value of the State Grant in Kind shall not exceed thirty percent of the amount
of Investments in fixed assets of a Legal Entity of the Republic of Kazakhstan.
If the appraised value of the requested State Grant in Kind exceeds the maximum value, the
Legal Entity of the Republic of Kazakhstan shall have the right to receive the requested assets
upon payment of the difference between the appraised value and the maximum value of the
State Grant in Kind.
Article 19. Requirements to Applications for Investment Preferences
An application for Investment Preferences shall be accepted and registered by the Authorized
Body upon submission of:
1) a notarized copy of the Certificate of State Registration of the legal entity;
2) a notarized copy of a statistical card of the legal entity;
3) a notarized copy of the articles of association of he legal entity;
4) a business plan for the Investment project, which has been drawn up in accordance with the
requirements of the Authorized Body;
5) a notarized copy of documents justifying the estimated cost of construction and cost
associated with purchase of fixed assets to be used for implementing the Investment
project;
6) a notarized copy of documents which establish sources and guarantees for financing the
project. I the Investment project is financed with the applicant's own resources, the written
prove of the availability of such resources shall be enclosed;
7) documents which confirm the amount (cost) of the State Grant in Kind requested by the
applying Legal Entity of the Republic of Kazakhstan and preliminary approval of the
grant.
8) A balance sheet as of the first day of the quarter in which the application is made;
9) the statement of the tax authorities proving that the applicant has no tax arrears and
outstanding liabilities on social and pension payments.
Article 20. The Terms for Consideration of Applications for Investment Preferences
1. An application for Investment Preferences shall be submitted for consideration of the
Authorized Body, which shall take a decision on awarding Investment Preferences in
accordance with the requirements set forth in Article 15 hereof and send a written reply to
the applicant within thirty business days of the registration of the application.
2. The Authorized Body shall establish the terms for admitting, registering and considering
applications for Investment Preferences.
Article 21. Contract Award
1. Within ten business days of adopting the decision to award Investment Preferences, the
Authorized Body shall Prepare the Contract for signing, taking into account the provisions
of the Model Contract.
2. The Contract shall be registered by the Authorized Body within five business days of its
signing and shall become effective upon its registration.
3. Currency of contract identifies by currency of investment preference. Date of working
time on executable code ends not later than three months until date of con tract time ends.
Article 21-1. Monitoring the Contract Performance
1. Contract terms maintenance control accomplishes by authorized body in following forms:
1) controlling through cameras - control accomplishing by authorized body on the bases of
research and analyses of reports, presented in accordance with item 2 of this article;
2) with visiting areas of investment activity including considering documents on
implementation of executable codes and terms of contract.
2. After contract conclusion, legal entity of the Republic of Kazakhstan who concluded a
contract presents to an authorized body followings:
1) over implementation of executable codes by form of authorized body fixed on statistics:
an interim statement on executable code implementation not later than twenty fifth of June;
an annual report on executable code implementation (later than twenty fifth of January
interpreting by recoded assets purchased in accordance with executable code;
2) during a month after putting into operation documents recorded assets confirming put into
operation of assets;
3) during a month after work termination by executive code confirmed by auditors'
report:
a report on executive code implementation;
a revenue and expenses statement by results of investment activity;
an interpretation of recorded assets purchased in accordance with executive code.
Auditor's report should contain analyses of financial and |cal activities results for all period
of executive codes' validity.
3. Alterations to an executive code can make by sides agreement once a year.
4. Verification with visiting investment activity area real-he bases of decision made by
authorized body during three months after termination of work finish on executive code.
Exceptional verification with visiting investment activity area realizes by authorized body
decision:
1) in case of detection after camera control results on breach of terms of contract;
2) by addresses of law machinery.
5. By results of verification a representative of authorized body and a manager of a legal
entity concluded a contract signs statement of current state of contract executive code
implementation.
6. In case of non fulfillment or improper implementation of contract executive code
authorized body detaches a written notice to a legal entity of the Republic of Kazakhstan
who concluded a contract naming breaches and identifies date not more than three months in
order to eliminate breaches.
7. Contract cancellation information in an effort to proof economic interests of the state
detaches following:
1) to an authorized state body controlling taxes on discharging of tax obligations before
state and in necessity to other state bodies in order to take appropriate measures;
2) by contracts in accordance of that presented state natural grant to an authorized state body
controlling taxes on discharging o tax obligations before state, state bodies managing state
property and/ or land resources and local executive board.
8. Legal entity of the Republic of Kazakhstan concluded a contract during contract validity has
no right:
1) to change end use of presented state natural grant and property purchased in accordance with
executive code;
2) to alienate presented state natural grant and property purchased in accordance with
executive code.
Article 22. Contract Termination
1. Investment Preferences shall be terminated upon expiry of the term of the Contract or may be
terminated prior to the expiration thereof in accordance with the procedure set forth herein.
2. The Contract may be terminated prematurely:
1) by agreement of the parties, or
2) unilaterally.
3. The Authorized Body may terminate a Contract unilaterally upon expiry of three months from
the date of a written notice to the Legal Entity of the Republic of Kazakhstan, which is a party
thereto, if:
1) misrepresentation or concealment of the information, which has been presented by the
applicant and affected the decision on awarding the Investment Preferences, has been
revealed;
2) the Legal Entity of the Republic of Kazakhstan, which is a party to the Contract, fails to
perform its obligations hereunder; or
3) misrepresentation or concealment of the information in the reports submitted by the
Legal Entity of the Republic of Kazakhstan which is a party to the Contract in accordance
with Article 21-1.1 hereof have been revealed.
In such events the said legal entity shall pay taxes and customs duties, which have not been paid due
to the Investment Preferences awarded under the Contract, subject to fines and penalties as set forth
by the laws of the Republic of Kazakhstan.
4. In the event of premature and unilateral termination of the Contract by the Legal Entity of the
Republic of Kazakhstan, the said legal entity shall pay taxes and customs duties, which have been
not paid due to the Investment Preferences awarded under the Contract, subject to fines and
penalties as set forth by the laws of the Republic of Kazakhstan.
5. In the event of premature termination of a Contract n agreement of the parties, the
Legal Entity of the Republic of Kazakhstan, which is a party thereto, shall taxes and
customs duties, which have not been due to the Investment Preferences awarded under
Contract.
6. In the event of premature termination of a Contract, Legal Entity of the Republic of
Kazakhstan, which party thereto, shall return the assets in kind which have been granted
to the legal entity as the State Grant in Kind, or its initial value as of the date of the
transfer in accordance with the Contract.
7. The Legal Entity of the Republic of Kazakhstan shall return the State Grant in Kind
within thirty calendar days after the Authorized Body has made a decision to maturely
terminate the Contract.
CHAPTER 4. FINAL PROVISIONS
Article 23. Stability of Contracts
The exemptions granted on the basis of Contracts with authorized investment body prior
to the entry into force of this Law shall remain valid until the expiry of the period set forth
in such Contracts.
Article 24. On Repeal of Certain Legislative Acts of the Republic of Kazakhstan
The following legislative acts of the Republic of Kazakhstan shall be deemed invalid:
1) The Law of the Republic of Kazakhstan On Foreign Investments of 27 December 1994 (The
Bulletin of the Supreme Council of the Republic of Kazakhstan, 1994, No.23- 24, Article 280; and
1995, No.20, Article 120; The Bulletin of the Parliament of the Republic of Kazakhstan, 1996,
No.14, Article 274; 1997, No. 11, Article 143; No.13-14, Article 205; No. 17-18, Article 218; 1998,
No. 5-6, Article 50; 1999, No. 21, Article 786; and 2000, No. 10, Article 244);
2) The Decree of the Supreme Council of the Republic of Kazakhstan On the Procedure
for the Implementation of the Law of the Republic of Kazakhstan on Foreign Investments of
27 December 1994 (The Bulletin of the Supreme Council of the Republic of Kazakhstan,
1994, No.23-24, Article 281 and 1995, No.1-2, Article 15);
3) The Law of the Republic of Kazakhstan On State Sup port to Direct Investments of 28
February 1997 (The Bulletin of the Parliament of the Republic of Kazakhstan, 1997, No.4,
Article 50; and 1999, No.21, Article 786).
Nursultan Nazarbaev
President of the Republic of Kazakhstan
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