In the contemporary economic landscape of Kazakhstan, the establishment of holding structures assumes paramount significance. Holdings play a pivotal role in orchestrating and harmonizing the operations of a complex of enterprises, while facilitating the optimization of tax and financial processes. In this article, we will delineate the stages of setting up a holding in Kazakhstan, taking into account the primary facets of the regulatory environment and the role of the Astana International Financial Center (AIFC) in this endeavor.
Definition of holding
A holding company is an organizational and legal structure that consolidates multiple entities under unified management and control, aimed at coordinating and optimizing their activities. In the context of the Kazakhstan economy, a holding serves as an effective instrument for business governance across various sectors including oil and gas industry, financial sector, transportation, among others.
- Management. The holding exercises centralized control through governing bodies such as the board of directors or the managing board. These bodies make strategic decisions and determine the overall development strategy of the holding and its subsidiaries.
- Control. The holding exercises management over its subsidiaries through investments in their capitals, appointment of managerial structures, as well as conducting financial and operational oversight.
- Financial integration. The holding fosters financial consolidation among its subsidiary entities, facilitating the utilization of shared assets, enhancing tax efficiency, reducing capital acquisition costs, and the like.
- Strategic management. The holding is engaged in the formulation and implementation of long-term strategies for its enterprises, including optimization of business procedures, investment in promising initiatives, expansion into new markets, etc.
- Diversification. A holding company may combine enterprises from various industries or adjacent sectors of the economy, thereby enabling it to mitigate risks associated with business concentration in a single industry.
The importance of holding structures for the economy of Kazakhstan
Holding structures exert significant influence on the economic prosperity of Kazakhstan, offering numerous benefits both for entities within their composition and for the state as a whole.
- Stimulating investment. Holding companies in Kazakhstan play a pivotal role in incentivizing capital inflows into diverse spheres of economic activity. By pooling resources and financial prowess of various enterprises, these conglomerates are capable of undertaking large-scale investment ventures. This, in turn, leads to increased production volumes, facilitates infrastructure development, and catalyzes growth in economic sectors with substantial potential for expansion.
- Increased competitiveness. The merger of enterprises into single holding structures allows them to share resources and knowledge, which leads to strengthening their position in the market. This becomes a decisive factor in the era of globalization and increasing competition in both domestic and international markets.
- Support for innovative development. Kazakhstani holdings incentivize innovative activity by promoting the adoption of cutting-edge technologies, fostering the development of new services and product offerings, as well as investing in scientific research. This contributes to increased production efficiency, enhanced product quality, and expanded market offerings.
- Influx of foreign capital. The presence of large-scale and prosperous holdings in the Republic of Kazakhstan increases the country’s reputation as a profitable place for investing money. This can attract the attention of global investors, stimulating the attraction of external capital into the economic sector of the state.
Review of the regulatory environment in Kazakhstan for creating a holding company
Establishing a holding company in Kazakhstan is a multifaceted and intricate endeavor, requiring meticulous familiarization with the country's regulatory framework. A comprehensive review of this environment is essential for grasping the fundamental legal, tax, and institutional aspects influencing the formation and operation of holding structures.
In this section, we will examine the key aspects of the regulatory environment of Kazakhstan for establishing a holding company, including legislation on holdings, the role, and functions of the AIFC.
Through the analysis of the specified aspects, we will be able to better understand the opportunities and obstacles that may arise when organizing the functioning of a holding company in Kazakhstan, as well as determine the optimal strategies for successfully launching entrepreneurial operations in this country.
Legislation on holdings in Kazakhstan
State laws on holdings in Kazakhstan are represented by a set of legislative acts regulating the establishment and functioning of holding structures. The most important of these are:
- The Civil Code of the Republic of Kazakhstan, adopted on December 27, 1994, establishes the general legal principles governing the functioning of holding companies, including rules for the formation and operation of holding companies in Kazakhstan.
- The Tax Code of the Republic of Kazakhstan, adopted on December 25, 2017, governs the taxation of holdings and their subsidiaries, including profit taxation, value-added tax, taxes on individuals' income, and others.
- The Securities Market Law, enacted on April 2, 2003, delineates pivotal facets governing the issuance, circulation, and registration of securities, thereby constituting a cornerstone for holdings vested in the shares of other companies.
The significance of the AIFC for the development of the financial industry in Kazakhstan
AIFC occupies a pivotal position in enhancing the resilience of the financial sector of the Republic of Kazakhstan, attracting foreign investments, fostering the implementation of financial innovations, and promoting the improvement of the entrepreneurial environment within the country's territory.
The AIFC provides participants with special tax and legal regimes, making it an optimal location for conducting financial services. It also contributes to the alignment of regulatory acts governing financial processes in Kazakhstan with international standards and practices, thereby enhancing the trust of cross-border capital investors and increasing the transparency of financial transactions.
The AIFC has exerted a significant impact on the economic development of Kazakhstan, becoming an integral component of the country's strategy for transitioning into an international financial hub and enhancing its global prestige.
The AIFC contributes to the formation of a favorable business environment, facilitating the formation and stimulation of the growth of holding structures in the Republic of Kazakhstan.
The main benefits of incorporation of a holding with the support of the AIFC
Establishing a holding company in Kazakhstan with the participation of the AIFC offers a number of significant benefits:
Types of organizational and legal forms for a holding in Kazakhstan
In various jurisdictions, including Kazakhstan, holdings may be established in accordance with diverse legal and organizational structures, the choice of which depends on the specific goals of the enterprise, management requirements, fiscal strategy, and other significant aspects. Let's thoroughly examine the key legal forms of organization for holdings applicable within the territory of Kazakhstan.
Joint Stock Company (JSC)
This type of corporate structure is extremely popular among holdings in Kazakhstan due to the opportunity to attract financing through the issuance of shares, the simplicity of transferring shareholder rights, and the limitation of participants' liability. Depending on the nature of the JSC (public or private), the degree of its publicity and regulation varies.
Limited Liability Partnership (LLP)
This form of entrepreneurship attracts due to its simplified and flexible management structure, making it a popular choice for small and medium-sized holding structures in the Republic of Kazakhstan. Founders of an LLP bear obligations only within the scope of their investments, ensuring reliable protection of their personal assets.
General partnership
This business format entails each participant bearing unlimited and joint obligations for the partnership's debt obligations from their own assets. This option is seldom utilized for holdings due to the high risk of personal liability.
Limited partnership
Within such an organizational framework, there is provision for the segregation of founders into limited partners, whose liability is restricted to the extent of their contributions, and general partners, who bear unlimited liability. This model is suitable for holdings where the differentiation of liability degrees among investors is paramount.
Stages of incorporation of a holding in Kazakhstan
Establishing a holding company in Kazakhstan entails a multi-stage process necessitating an in-depth comprehension of both local legislation and the specific requirements of the AIFC should registration occur through it. The following outlines the structure of the stages involved in creating a holding company, encompassing detailed descriptions of each step and instructions for registration via the AIFC.
Planning and strategy development
- Defining the business model and goals. A clear understanding of the structure of the holding, its long-term and short-term goals.
- Marketing research. Analysis of the market, competitors and potential sectors for investment.
- Legal analysis. Study of the regulatory framework relating to the creation and functioning of holdings in Kazakhstan and the specifics of the AIFC.
Selecting a legal structure, name and collecting documentation
- Determination of the organizational and legal form of the holding.
- Name selection: Verification and registration of the trademark and holding name in Kazakhstan.
- Collection of documentation. Preparation of constituent acts, including the charter and constituent agreement.
Registration of a legal entity
General procedure:
- Submitting an application to the registration authority. Submitting an application and the required set of papers to the registration authority – the Ministry of Justice of the Republic of Kazakhstan.
Registration of a holding company in the AIFC:
- Enterprises registering through the AIFC may avail themselves of special conditions, including tax benefits and a streamlined registration process. This necessitates submitting an application through the AIFC online platform and attaching scanned copies of the required documents.
Organization of a management system and corporate regulation in the holding
Determining the corporate governance structure of a holding company in Kazakhstan necessitates the selection of an optimal legal form, based on strategic objectives and the organization's specific activities. This choice impacts the organizational management structure, typically comprising the supreme governing body, board of directors, and executive authority. Each of these entities plays a distinct role in shaping the holding's operational directions, strategic planning, and day-to-day management.
An essential aspect of corporate governance is the development of corporate procedures and policies, encompassing the establishment of a corporate culture grounded in clearly defined values and standards. This entails the formulation and endorsement of constitutional and internal documents regulating the activities of all holding company governance bodies. Paramount attention is directed towards corporate reporting and transparency, necessitating the regular publication of financial and non-financial information for all stakeholders.
Internal control and risk management system constitute a fundamental element in corporate governance. This encompasses not only financial oversight and compliance with legislative requirements but also entails risk assessment and mitigation. Decision-making in risk management should be comprehensive, encompassing risk identification, analysis, and formulation of strategies for managing key risks.
The cohesive coordination and application of shared management standards across subsidiaries play a pivotal role. Developing and implementing an activity tracking system for these entities ensures uniformity in strategic objectives and vision.
Aspects of tax policy for holdings in Kazakhstan
Fiscal policy and preferences for holdings in Kazakhstan play a pivotal role in managing finances and strategic development of such companies. A thorough examination of the fiscal conditions applicable to holding structures, including special tax incentives, is crucial for optimizing tax liabilities.
Basic taxes for holdings
In Kazakhstan, holding companies, like any other legal entities, are required to pay various taxes, including:
- The general corporate income tax rate for legal entities is 20%.
- The standard VAT rate is 12%. Holding companies engaged in trading or other activities subject to VAT are required to pay this tax.
Benefits and features of taxation
In Kazakhstan, holding organizations investing capital in key economic sectors or specialized economic zones may avail themselves of tax incentives such as profit tax exemptions, reduced VAT rates, and property tax privileges.
The regime of the AIFC provides unique tax advantages for companies registered there:
- Exemption from income tax is granted to companies for a specified period and for specific types of activities.
- Exemption from tax on dividends and interest is offered to residents of the AIFC, which makes the center particularly attractive to global investors and holdings.
- VAT benefits are provided for AIFC residents if certain criteria are met.
- In Kazakhstan, a tax of 15% is imposed on dividends, but reduced rates may be applied within the framework of international agreements or the special regime of the AIFC.
YB CASE Company provides qualified services for support and consulting in the formation of a holding in Kazakhstan. With a full understanding of the industry and professional experience of our specialists, we offer comprehensive support at all stages of holding formation, providing a full range of legal and consulting services for the prosperity of your enterprise in Kazakhstan.
