Physical presence usually means following:
- Necessity to register a foreign company on the territory of the Republic of Kazakhstan as a branch or representative office;
- Necessity to have an equipped production site in Kazakhstan.
To be brief and follow the letter of the law the answer is no – effective legislation of the Republic of Kazakhstan does not envisage such necessity with respect to foreign companies.
By contrast, in art. 29.2 of the new Law of the Republic of Kazakhstan On Authorizations and Notifications it is mentioned that, in particular, that the licenses may be issued to the foreign legal entity without branch or representative office on the territory of the Republic of Kazakhstan.
This clause will be applicable on two conditions (following the norms of the same article):
- If a licensor is a local executive body or a local body of the central state body;
- If the legislation of the Republic of Kazakhstan do not provide otherwise.
First condition fits as a licensor of the activities of the design and construction/assembling works is the State Department Division of the State Architectural and Construction Control of the Akimats of the Regions, cities of Almaty and Astana (hereinafter referred to as – SACC) i.e. local executive body.
Second condition also impose no impediment to the foreign legal entities since other legal acts relating to the licensing in the field of design and construction/assembling works and exploration do not contain any compulsion for the foreign companies to register any separate division in the Republic of Kazakhstan.
According to the qualification requirements (last redaction of the qualification requirements was approved by the Order of the Acting Minister of the National Economy of the Republic of Kazakhstan of December 9, 2014 On the Approval Universal Qualification Requirements and a List of Documents Confirming the Compliance to Carry Out the Activity in the Sphere of Architecture, Urban Planning and Construction) to obtain a license it is necessary to have, inter alia, production site including a building (premises) with the working places and necessary equipment.
Let us use an example - the construction company based in Russian Federation interested in Kazakhstani market. Such company according to the qualification requirements to obtain Kazakhstani license for construction/assembling works should show to the inspecting authority, inter alia, that:
- This company owns (for the first category license for the construction/assembling works) or leases a production site (building, premises);
- This production site (building, premises) is equipped with working places, equipment and technology to carry out an activity for which this company applies.
What is not here clear-cut? Legislation of the Republic of Kazakhstan does not specify where an production site should be situated. Theoretically, it may be in Russia as well as somewhere beyond the Republic of Kazakhstan. Answer of the Minister of Regional Development if the Republic of Kazakhstan of June 17, 2014 to the question of June 11, 2014 №276216 (egov.kz) serves as an example to the previous statement. In this answer a conclusion is drawn that in order to obtain a license for a design activity it is permitted to own an production site beyond the territory of the Republic of Kazakhstan.
However, it is hard to imagine in practice that the SACC inspectors have the powers to leave the territory of the Republic of Kazakhstan whilst checking for compliance to the qualification requirements as it is not regulated by the effective legislation of the Republic of Kazakhstan. For this reason it is impossible for a Russian company having no presence in Kazakhstan to prove the availability of the production site equipped according to the qualification requirements.
We would like to draw your attention to the attitude of the representatives of the SACC to the fact that foreign company has not registered a branch and has not leased an production site in the Republic of Kazakhstan:
- Authorized inspectors do not understand how such foreign company is going to work in Kazakhstan without the branch and the fact that there is a loophole in our legislation that it is not necessary to register a branch in the Republic of Kazakhstan is not so important.
- Inspectors would be glad to go to the Russian Federation, in Moscow for instance, to check the availability of the production site beyond Kazakhstan but such procedure is not provided by the legislation of the Republic of Kazakhstan.
- It is just the oral instruction from the inspector’s management, to support local Kazakhstani staff, etc.
Our recommendations:
- If non-resident do not wish to register a Branch, it is sufficient to obtain a Business Identification Number (BIN) in Kazakhstan. For this purposes it is enough to address to the tax bodies with the aim to open a bank account in one of Kazakhstani banks.
- To lease for 8-11 months a building (premise) or an production site with the minimum of technical equipment on the territory of the Republic of Kazakhstan. After a license has been obtained it is necessary to repeat this action at a time of consequent planned or unplanned inspections held according to the Law of the Republic of Kazakhstan On the State Control and Supervision in the Republic of Kazakhstan (art. 51.3 of the Law of the Republic of Kazakhstan On the Authorizations and Notifications). The frequency of the unplanned inspections will depend on the degree of risk of the object of inspection. Unplanned inspection may be held only on the concrete facts and circumstances with the aim to prevent and (or) to eliminate the danger to life and health of a person, environment, lawful interests of the individuals and legal entities, the state (art. 16 of the Law of the Republic of Kazakhstan On the State Control and Supervision).
Prepared by
Artyushenko & Partners lawyers
26.02.2015
In Artyushenko & Partners online Store you can buy our fixed fee legal consultation:
- How the foreign construction or design company is possible to work legally in Kazakhstan. Initial consulting
- The licensing in construction and design in the Republic of Kazakhstan. Initial consulting for foreign companies
