FAQ
FAQ

What is the role of the AIX?
AIX is a market institution in the AIFC providing domestic and international issuers (both private and government-controlled) and investors a modern well-regulated exchange platform to access the capital markets.
What forms of tax reports are submitted by AIFC participants?
AIFC participants prepare tax reports on CIT according to the forms and in accordance with the procedure approved in accordance with the tax legislation of the Republic of Kazakhstan, depending on a type of services rendered. The Constitutional Statute does not provide for special provisions on the procedure for submitting tax reporting forms (hereinafter – TRF), in connection with which the AIFC participant submits TRF in a generally established manner. For AIFC participants engaged exclusively in financial or ancillary activities, a simplified TRF 180.00 is provided, which is submitted with simultaneous compliance with the following conditions: - carry out activities in the Republic of Kazakhstan only within the AIFC; - receive exclusively the income exempt in accordance with paragraphs 3, 4 and 7 of article 6 of the Constitutional Statute; - are not trustees in accordance with article 40 of the Tax Code. The deadline for submitting TRF 180.00 is identical to the generally established deadline for TRF 100.00 - no later than March 31 of the year following the reporting tax period. In cases of failure to comply with the conditions for submission of the TRF 180.00, the TRF 100.00 is submitted, where the following is provided for the AIFC participants:  special form application 100.12;  special lines 100.00.040IV and 100.00.046II. All other TRFs shall be submitted according to generally established forms and within generally established deadlines.
Can an AIFC Participant and its employees choose a currency other than Kazakhstani Tenge in Contracts of Employment?
In accordance with paragraph 1 of article 5 of the Constitutional Statute of the Republic of Kazakhstan "On the Astana International Financial Centre", monetary obligations of the AIFC participants may be denominated and executed in a currency indicated in the agreement. So, there are no currency restrictions in the agreement for the AIFC Participant, but there may be some conditions for the other party of the agreement. As such, a non-resident of the Republic of Kazakhstan, who is an employee of the AIFC Participant, may choose Kazakhstan tenge or another currency in an employment contract, however, a resident of the Republic of Kazakhstan who is an employee of the AIFC Participant may be subject to certain conditions in accordance with the Kazakhstan legislation.
What would be correct interpretation of subparagraph 3) of paragraph 1 of Article 4 of Constitutional Statute? Does there need to be any specific act of the Governor or other AIFC authority in order to apply Kazakhstan law?
According to subparagraph 3) of paragraph 1 of Article 4 of the Constitutional Statute of the Republic of Kazakhstan On Astana International Financial Centre dated 7 December 2015 (the “Constitutional Statute”), the Acting of Law of the Republic of Kazakhstan applies in part to matters not governed by the Constitutional Statute and AIFC Acts. The abovementioned provision of the Constitutional Statute does not require development of a specific AIFC Act. In addition, practical implementation of the Article 4 of the Constitutional Statute is sustained and supplemented by AIFC Regulations on AIFC Acts 2017 adopted by the Governor of the AIFC on 20 December 2017. AIFC Regulations on AIFC Acts 2017 determine the hierarchy of the Acting Law of the AIFC, development, approval and adoption of the AIFC Acts. In particular, section 40 (Application) of AIFC Regulations on AIFC Acts 2017 determines descending levels of relevant jurisdiction to be ascertained to apply relevant law on civil or commercial matters, the rights and liabilities between Persons in any civil or commercial matter, including questions of application of the acting law of the Republic of Kazakhstan.
Disclaimer
This FAQ is designed to assist actual and potential AIFC Participants (‘Participants’) to be familiar with benefits provided to Participants. Neither this FAQ nor any of the answers to the questions in this document constitutes legal advice and should not be acted upon as if advice had been given. If there is any inconsistency between any statement in this FAQ and the relevant AIFC Regulations and Rules or associated Guidance, the AIFC Regulations, AIFC Rules and Guidance prevail. Participants should, where they consider it necessary, obtain their own legal advice in relation to their specific situations. This document does not cover each and every aspect of the AIFC Regulations and Rules. It selectively addresses frequently asked questions in relation to the AIFC. This FAQ is a living document – as we become aware of new or changing issues, we will amend the document as appropriate.
Does an AIFC participant need to submit a tax reporting form 180.00 if such a participant has preferential income under the Constitutional Statute and taxable income?
Since one of the conditions for drawing up and submitting TRF 180.00 is the fact of receiving exclusively income exempt from CIT in accordance with paragraphs 3, 4 and 7 of article 6 of the Constitutional Statute, in the case of also receiving income subject to CIT taxation in a generally established manner, such AIFC participant: - does not submit TRF 180.00; - submits TRF 100.00, which reflects both the preferential income and income taxed by CIT
Can an AIFC participant attribute the cost of purchasing a software development service to an increase in the intangible value?
It is necessary to be guided by the Tax Code and the IFRS. For purposes of accounting, an AIFC participant is required to keep records in accordance with Standard 38 of IFRS (IAS) "38" Intangible Assets". Regarding tax accounting, an intangible asset with an indefinite period of use, for which depreciation is not accrued, is not recognised as a fixed asset (sub-para. 2) of para. 2 of article 266 of the Tax Code). At the same time, the costs for revision of an intangible asset are recognised as subsequent costs, which (sub-para. 2) of para. 2 of article 272 of the Tax Code): - increase the value balance of the group (subgroup) corresponding to the type of asset, or - in the absence of the value balance of the group (subgroup) corresponding to the type of asset - the value balance of the group (subgroup) corresponding to the type of asset is formed at the end of the current tax period (para. 2 of article 272 of the Tax Code). Thus, if an intangible asset is not depreciated in accounting, then it is not a fixed asset for tax purposes and its value is subject to accounting only at the time of its sale in accordance with the procedure defined by article 228 of the Tax Code, and the amount of subsequent costs for its revision is included in the cost balance and amortised in a generally established manner. If an intangible asset is amortised in accounting, then it is included in fixed assets, including the costs of revision, the cost of which is deducted through depreciation deductions for tax purposes (sub-para 1) of para. 1 of article 266 of the Tax Code, para. 2 of article 272 of the Tax Code, para. 1 of article 271 of the Tax Code).
What are the essential terms of an employment agreement under the AIFC Employment Regulations? Can AIFC Participants use and adjust the model employment agreement for their own business needs?
Section 11(4) (Right to a written contract) of the AIFC Employment Regulations 2017 determines minimum provisions for inclusion into a contract of employment. Additional terms and conditions may be agreed mutually between Employer and Employee as well as other benefits and compensations. You can download the model employment agreement template under the AIFC Employment Regulations 2017 by visiting https://clck.ru/SdEYT.
How to calculate sick pay amount and what kind of criteria should be applied in the calculation?
Any terms and conditions relating to the sick pay must be determined by a contract of employment under section 11 (4) (Right to a written contract) of the AIFC Employment Regulations 2017.
Are AIFC Participants required to pay Social Security Contributions for own Employees? If yes, what is the amount of Social Security Contributions and when Social Security Contributions must be paid?
If the AIFC Participants employ the Kazakh nationals the Social Security Contributions must be covered by the employer in the amount of 9.5%. Such requirements as well as calculation method are carried out in accordance with the legislation of the Republic of Kazakhstan.
In case of exemption of income from the provision of financial services and all expenses (deductions) are related to the main activity. Income from declaration shall be adjusted, since the income is completely exempt from CIT. Is this loss due to expenses (deductions) carried forward to the next year or how to reflect it correctly?
In case of receiving exclusively income exempt from CIT in accordance with paragraphs 3, 4 and 7 of article 6 of the Constitutional Statute, as well as compliance with the other two conditions (the participant's activities in the Republic of Kazakhstan only within the AIFC, and also if the participant is not a trustee in accordance with article 40 of the Tax Code), the AIFC participant has the right to submit a TRF 180.00. Otherwise, the TRF 100.00 is submitted. According to paragraph 13 of the Regulations on keeping separate accounting of income subject to exemption of corporate income tax and subject to taxation, and expenses subject to allocation to deductions by the participants of AIFC, approved by the joint order of the AIFC Governor dated 08.12.17, the Minister of Finance of the Republic of Kazakhstan dated 11.12.17 and the Minister of National Economy of the Republic of Kazakhstan dated 12.12.17, (hereinafter referred to as the Regulations), the amount of direct and indirect expenses is recognised as expenses subject to activities for obtaining income subject to exemption from CIT in accordance with paragraphs 3 and 4 of article 6 of the Constitutional Statute. In accordance with paragraph 14 of the Regulations, the amount of other and third-party expenses is recognised as expenses subject to deductions for income-generating activities subject to taxation. Thus, since the amount of direct and indirect expenses in paragraph 14 of the Regulations is not included in the expenses to be deducted, such expenses are not deductible. In this regard, taking into account the absence of income taxed by the CIT in a generally established manner, based on these provisions of the Regulations, it is assumed that there is no amount of other and third-party expenses to be deducted, which, accordingly, causes the absence of the fact of losses.
Is the income from the sale of shares or partnership shares, as well as dividends from them, exempt?
Until 1 January 2066, natural and legal persons are exempt from individual and corporate income tax on income received from the following: - profits from the sale of shares or stakes in the capital of AIFC Participants that are legal persons registered under the Acting Law of the AIFC (paragraph 7 (2) of article 6 of the Constitutional Statute). - dividends from shares or stakes in the capital of AIFC Participants that are legal persons registered under the Acting Law of the AIFC (paragraph 7 (4) of article 6 of the Constitutional Statute). In other cases, taxation is carried out in a generally established manner.
Are the received income of investment funds registered with the AIFC, as well as the income of management companies, exempt from the activities of investment funds?
In order to provide an answer to these questions, it is necessary to distinguish between entities that are recipients of income. In particular, there are 2 subjects in the situation under consideration: 1) investment fund; 2) a management company that is a member of the AIFC and has the appropriate license of the Astana Financial Services Authority. Regarding taxation of income of investment funds The provisions of the Constitutional Statute do not provide for any special preferential provisions for the income of investment funds directly, and therefore, on the basis of paragraph 1 of article 6 of the Constitutional Statute, the taxation procedure for them is generally established and determined by the Tax Code. Thus, the Tax Code was amended with effect from January 2021 in part: 1) exceptions from the total annual income of investment income received by investment funds registered in accordance with the Acting Law of the AIFC and accounted for by the custodian or the management company of the investment fund (sub-para. 11) of para. 1 of article 241 of the Tax Code); 2) VAT exemption for operations of investment funds registered in accordance with the Acting Law of the AIFC, as well as services for the management of these funds (sub-para. 20) of para. 2 of article 397 of the Tax Code). Thus, if investment funds registered in accordance with the Acting Law of the AIFC have received investment income recorded by the custodian or the management company, then such income is subject to exemption from corporate income tax and value added tax. Regarding the taxation of the management company's income - Until January 1, 2066 AIFC participants are exempt from CIT and VAT on income received from providing investment management services for assets of investment funds, accounting and safekeeping services for investment funds, as well as service related to issuing, offering, trading, purchase and redemption of securities of investment funds in territory of the AIFC (sub-para. 3) of para. 3 of article 6 of the Constitutional Statute); - In addition, until January 1, 2066 AIFC participants are exempt from CIT and VAT on income received from the providing financial services in the territory of the AIFC (sub-para. 5) of para. 3 of article 6 of the Law), determined by the Joint Order of the AIFC, the Ministry of Finance of the Republic of Kazakhstan and the Ministry of National Economy of the Republic of Kazakhstan “On approving the List of financial services provided by participants of the Astana International Financial Centre, the income from which is exempt from payment of corporate income tax, value-added tax” (the List). This List applies to legal entities registered in the AIFC or recognised by the AIFC as its participants in accordance with the Acting Law of the AIFC and licensed by the Astana Financial Services Authority to provide financial services, and is mandatory for them if the latter apply paragraphs 3 and/ or 8-2 of article 6 of the Constitutional Statute. Note that the List includes the following financial services: "Managing Collective Investment Scheme (managing an investment fund)" (see sub-para. 4 of para. 5 of the List); "Providing Fund Administration" (see sub-para. 8 of para. 5 of the List); "Acting as the Trustee of a Fund" (sub-para. 9 of para. 5 of the List). In addition, the above services are exempt from VAT under paragraph 8-2 of article 6 of the Constitutional Statute.
What tax benefits are provided for when performing transactions with securities?
Until 1 January 2066, natural and legal persons are exempt from individual and corporate income tax on income received from the following: - profits from the sale of securities listed, on the day of their sale, on the official list of the stock exchange (sub-para. 1) of para. 7 of article 6 of the Constitutional Statute); - dividends and interest from securities listed, on the day of their accrual, on the official list of the stock exchange (sub-para. 3) of para. 7 of article 6 of the Constitutional Statute). In other cases, taxation is carried out in accordance with the current legislation of the Republic of Kazakhstan. It should be noted that the stock exchange (AIX) is a legal entity, incorporated as a company limited by shares, that provides organisational and technical support for the trading of financial instruments in the AIFC (sub-para. 2) of article 1 of the Constitutional Statute).
Can an AIFC participant engage in financial or ancillary activities apply a special tax regime based on a simplified declaration?
A special tax regime based on a simplified declaration may be applied by small business entities - individual entrepreneurs and legal entities-residents of the Republic of Kazakhstan. Thus, obtaining the status of AIFC participant itself is not an obstacle to the application of special tax regimes for SMEs, including based on a simplified declaration. At the same time, most types of income exempt from CIT in accordance with paragraphs 3 and 4 of article 6 of the Constitutional Statute are income from activities incompatible with the application of special tax regimes for SMEs. In particular, a special tax regime is not applied for SMEs providing a number of types of work and services. This list, in particular, includes consulting services; activities on accounting or auditing; financial, insurance and intermediary activities of an insurance broker and insurance agent; activities in the field of law and justice; activities in the framework of financial leasing. In addition, legal entities are also not entitled to apply a special tax regime (hereinafter referred to as the STR) based on a simplified declaration: - having business units, as well as other separate business units and/or tax entities in different localities; - providing services based on agency contracts (agreements). Thus, after receiving the status of AIFC participant, a legal entity can apply a special tax regime based on a simplified declaration in accordance with generally established criteria and conditions. The competence to check for such compliance, as well as in general for compliance with tax legislation, is available only to the tax authorities of the Republic of Kazakhstan. We note that the deletions from the Tax Code specified in the Constitutional Statute do not provide for any provisions on the STR. In this regard, it is necessary to be guided by the Tax Code.
What additional capital raising opportunities does AIX offer to SMEs in Kazakhstan and Central Asia?
In July 2020, AIX launched the Regional Equity Market Segment (REMS) to provide small and medium-sized businesses in Kazakhstan and Central Asia with simplified access to equity finance. REMS allows these companies to raise equity capital by listing on AIX on more flexible terms than the main market. In particular, for companies whose free float has a market capitalisation of less than US$200 million, simpler listing criteria (no need to demonstrate historic net profit and audited accounts are only required for one year) and the ability to submit a short version of a prospectus are provided. REMS Rules are available here (https://www.aix.kz/rules-regulations-2/rules-regulations/).
How much financing can be raised in the REMS segment?
The minimum offer of shares is US$1 million and the offer should not exceed US$200 million in the REMS segment. The price of the offering and the total amount of potential funding from investors will depend on the demand for shares of a particular issuer.
What are the risks associated with a placement in the REMS segment?
The risks associated with an issuer's business and offering are set out in the prospectus. The responsibility for the contents of the prospectus, the quality of the information disclosed, its reliability and relevance lies entirely with the issuer.
What taxes must investors who purchase shares in the REMS segment pay?
For investors (both individuals and companies), all gains from the sale of shares which are traded on the REMS segment (and generally on the AIX) and dividend payments are exempt from individual and corporate income tax in Kazakhstan. If an investor is tax resident in other jurisdictions, such investor should consult a tax adviser on applicable taxes in its tax residence jurisdiction.
How much does it cost to list on the REMS segment for issuers?
AIX fees depend on the capitalisation level of the company. Information on AIX fees is available on the stock exchange's website at www.aix.kz, under equity instruments.
Does the AIX exchange give its assessment and recommendations for listing on AIX?
AIX is available to provide all necessary advice to issuers in preparation for a listing. The first step is to contact the Markets team by email at markets@aix.kz or by phone at +7 7172 23 53 679
What is the role of the IAC at the AIFC?
To provide world class services for settling national and international commercial disputes through arbitration, mediation and other methods of alternative dispute resolution, in accordance with the IAC Arbitration and Mediation Rules 2018 or the rules agreed upon between the parties to a dispute submitted to the IAC.
How can a partnership of lawyers come into the AIFC to practise law there, if the partnership is not an entity in its home state?
The provision of legal services is a category of “ancillary services” which is provided for under the AIFC legal and regulatory framework. A partnership or other body corporate must be authorised by the AFSA in order to carry on this activity in the AIFC. A full description of this activity is set out in Schedule 2 to the AIFC General Rules. From a legal entity perspective, the AIFC framework provides for the recognition of non-AIFC general partnerships, limited partnerships and limited liability partnerships. However, an applicant is required to provide a copy of the entity’s “current certificate of registration in its place of origin, or a document of similar effect, certified by the relevant authority in that jurisdiction”. As such, a threshold requirement is that the partnership must be legally recognised in its home state as such. It is also worth noting here that, in relation to the AIFC Court, there are extremely wide rights of audience. All lawyers with a professional lawyer or advocate practising certificate from anywhere around the world are generally eligible to apply to the AIFC Court Registry to represent parties in cases at the AIFC Court. Furthermore, appearing before the AIFC Court does not, by itself, also require a lawyer or firm to be authorised by the AFSA.
Does an AIFC Participant have to comply with the requirements of the Labour Code of the Republic of Kazakhstan on matters not governed by the AIFC Employment Regulations 2017?
An AIFC Participant does not have to comply with the requirements of the Labour Code of the Republic of Kazakhstan since labour relations are governed by the AIFC Employment Regulations 2017. An AIFC Participant may comply with the Labour Code of the Republic of Kazakhstan as long as it does not contravene with these Regulations. It must be noted that the AIFC Employment Regulations 2017 provide minimum employment standards and do not prevent the Employer from providing more favourable terms and conditions of employment in the internal rules of the Employer.
Will the Republic of Kazakhstan [Arbitration Law] (including requirements to obtain prior consent of a superior authority under Article 8 thereof) apply to the proceedings in the IAC?
No. The requirements of the Kazakhstan national law on arbitration do not apply to arbitrations conducted under the AIFC Arbitration Regulations 2017. See section 7 (Exemption from Legislation) of the AIFC Arbitration Regulations 2017. However, parties should note when one of the parties to an arbitration is a Kazakh state party, the provision in the Kazakh Arbitration Law [Kazakh national law on Arbitration] requiring consent to be given by the Kazakhstan authorities will still be applicable to them. The parties to a dispute at the IAC may agree in writing which procedural rules apply to an arbitration or mediation at the IAC. Arbitration or mediation procedural rules of Kazakhstan will only apply at the IAC if the parties to the dispute agree in writing that such shall apply in their proceedings at the IAC.
Does an AIFC Participant need to be audited by the end of each financial year and are there any exceptions, for instance, if the AIFC Participant’s annual turnover has not exceeded U.S. $5,000?
According to AIFC Companies Regulations 2017, Directors of a Company must ensure that, within 6 months after the end of each financial year of the Company, the accounts for that year are shall be prepared and approved by the Directors and examined and reported upon by an Auditor. Unless otherwise provided in its Articles of Association, a Private Company and its Directors are not required to provide examined and reported upon by an Auditor accounts, if the Company, during the current year for which the accounts are being prepared and, if the Company has existed for more than 1 financial year, the year immediately before that financial year, has an annual turnover of not more than U.S. $5,000,000 and an average of not more than 20 Shareholders.
If a Kazakhstan company is seeking a non-Kazakhstan listing for its shares, can the requirement for a dual listing in Kazakhstan be satisfied by an AIX listing?
Yes. A Kazakhstan company which intends to be listed on a foreign exchange can satisfy dual listing requirements under Article 22-1 of the Kazakhstan Law on Securities Market by being listed and offered on AIX. In that case this company would be considered as compliant with this statutory requirement. In addition, if an issuer decides to choose AIX as a single venue for listing equity securities, it is possible to list on AIX both shares and GDRs. Disclaimer: This document is designed to assist actual and potential AIFC Participants (‘Participants’) to be familiar with benefits provided to actual Participants. Neither this document nor any of the answers to the questions in this document constitutes legal advice and should not be acted upon as if advice had been given. If there is any inconsistency between any statement in this document and the relevant AIFC Regulations and Rules or associated Guidance, the AIFC Regulations, AIFC Rules and Guidance prevail. Participants should, where they consider it necessary, obtain their own legal advice in relation to their specific situations. This document does not cover each and every aspect of the AIFC Regulations and Rules. It selectively addresses frequently asked questions in relation to the AIFC. This document is a living document – as we become aware of new or changing issues, we will amend the document as appropriate.
What is the role of the AIFC Court?
To adjudicate (a) claims arising out of disputes between AIFC Participants, AIFC Participants and AIFC Bodies and an AIFC Participant or AIFC Body and its expatriate Employees; (b) claims arising out of disputes relating to activities conducted in the AIFC and governed by the Acting Law of the AIFC; and (c) claims arising out of the disputes in which all parties to the dispute agree in writing to the jurisdiction of the AIFC Court.
If I want to trade securities in the AIFC, do I have to be a member of the AIFC Exchange as well as an AIFC Participant? If so, are the processes designed to prevent duplication?
Generally, to deal in securities in the AIFC, whether as principal or agent, a firm must be a registered AIFC Participant (whether as a legal entity incorporated in the AIFC or as a recognised legal entity) and duly authorised by the AFSA. An AIX membership is required to trade on the AIX as a dealer or broker. However, there is a pathway for non-AIFC brokers authorized to carry on trading in their respective home jurisdictions to obtain AIX membership through recognition by the AFSA and becoming a “Recognised Non-AIFC Member” or “RNAM”. An RNAM is not required to be incorporated in the AIFC to become an AIX member and trade on the exchange. (For further information on these issues see Question "How to become an AIX trading member?")
If I have to use AIFC employment law for hiring staff, how far can I adapt it for my own purposes?
AIFC Employment Regulations 2017 provide minimum employment standards, and do not prevent the Employer from providing more favourable terms and conditions of employment when hiring an Employee than those required under these Regulations.
Are judgments of the AIFC Court enforceable in greater Kazakhstan? And elsewhere? What about AIFC arbitral awards?
A: Yes. AIFC Court judgments are enforceable in Kazakhstan on the same terms and conditions as judgments of the Kazakhstan courts. Parties who wish to enforce an IAC arbitral award in Kazakhstan can apply to the AIFC Court for an execution order and subject to obtaining that execution order the arbitral award will be enforced in Kazakhstan on the same terms and conditions as judgments of the Kazakhstan courts. B: Enforcement of AIFC Court judgments in the Commonwealth of Independent States (‘CIS’) can currently happen in accordance with the provisions of the Minsk Convention on Legal Assistance and Legal Relations in Civil, Family and Criminal Matters (22 January 1993 as amended 28 March 1997), the Kishinev Convention on Legal Assistance and Legal Relations in Civil, Family and Criminal Matters (7 October 2002), and the Kiev Agreement between the CIS Countries on the Procedure for Settlement of Disputes Associated with Commercial Activities (20 March 1992). AIFC Court judgments are also recognized and enforced in various other countries pursuant to bi-lateral treaties ratified by the Republic of Kazakhstan (including Azerbaijan, China, Georgia, India, the Kyrgyz Republic, Lithuania, Mongolia, North Korea, Pakistan, Turkey, Turkmenistan, United Arab Emirates, Uzbekistan). Judgments of the AIFC Court may be enforced in foreign countries on the basis of reciprocity, without requiring Government or Court agreements, including in the UK, China and the US. IAC arbitration awards are recognized and enforced internationally in accordance with the provisions of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958 (‘the New York Convention’)) in 159 countries.
Can I assure my clients that their interests are adequately protected, in relation to, for instance, market abuse by others and my own insolvency?
AIFC Conduct of Business Rules (COB), AIFC Prudential Rules for Insurance Intermediaries and AIFC Prudential Rules for Investment Firms as well as AIFC Insolvency Regulations and Rules and AIFC Anti-Money Laundering, Counter – Terrorist Financing and Sanctions Rules ensure that the behaviour of firms operating in the AIFC contributes to fostering and maintaining the integrity of financial markets in the AIFC.
How can an investor buy or sell AIX-traded securities?
Please visit the AIX website or contact any of the AIX trading members.
What will be the initial principal activities to be carried out at the AIFC?
Our current regulatory framework provides for the conduct and regulation of several defined regulated financial services activities, including banking, insurance intermediation, dealing in securities, managing and advising on investments and managing collective investment schemes, providing and arranging custody services, providing trust and fund administration services and Islamic banking and financing, among several others. Insurance intermediation is a current permitted activity, and the AFSA is now building out the framework for the conduct and regulation of insurance and reinsurance activities as well as the framework for conventional banking. The current framework also provides for market infrastructure activities such as operating an exchange and operating a clearing house. Additionally, a range of professional services ancillary to financial markets and services can be carried on, including legal, audit, accountancy, consulting and credit rating services. The general legal framework of the AIFC also provides for the incorporation and registration of entities carrying on a wide range of other corporate and commercial activities, which can thereby also become AIFC Participants.
If I want to sell units in funds in the rest of Kazakhstan from my office in the AIFC, as an AIFC Participant, do I have to establish the funds in the AIFC, or can I market the securities of funds established outside AIFC?
Generally, to deal in securities in the AIFC, whether as principal or agent, a firm must be a registered AIFC Participant (whether as a legal entity incorporated in the AIFC or as a recognised legal entity) and duly authorised by the AFSA. An AIX membership is required to trade on the AIX as a dealer or broker. However, there is a pathway for non-AIFC brokers authorized to carry on trading in their respective home jurisdictions to obtain AIX membership through recognition by the AFSA and becoming a “Recognised Non-AIFC Member” or “RNAM”. An RNAM is not required to be incorporated in the AIFC to become an AIX member and trade on the exchange. (For further information on these issues see Question How to become an AIX trading member?)
Can parties to a dispute arising in Kazakhstan outside the AIFC agree to litigate their case in the AIFC Court? Or to submit to arbitration in the AIFC?
Yes. Parties who have no relation to the AIFC can agree or “opt-in” to bring a case to the AIFC Court or to the IAC provided all of the parties to that case agree to do so in writing. The agreement to do so can happen at any time of the contractual relationship, whether before or after the dispute arises.
How are the jurisdictions of the AIFC bodies and national state authorities of the Republic of Kazakhstan delimited? In case of contradictions, how are they resolved?
Article 4 of the Constitutional Law of the Republic of Kazakhstan on the AIFC provides an exhaustive list of the areas of jurisdiction of the AIFC. Issues not included in this list are governed by the acting law of Kazakhstan, and the resulting contradictions and disputes are resolved within the framework of the judicial system of Kazakhstan. Tax disputes of the AIFC Participants are considered by the courts of the Republic of Kazakhstan.
How to become an AIX trading member?
STEP 1: AFSA Option 1 Registration: Two options: Option 1 a) incorporation of a new legal entity/subsidiary in the AIFC (e.g., as Private Company or Limited Liability Partnership); or b) the establishment of a “branch” in the AIFC (e.g., a Recognised Company or a Recognised LLP). Authorisation and Supervision: In order to conduct Regulated Activities of Dealing in Investments as Principal and/or Agent, Arranging Deals and Advising on Investments, the applicant needs to obtain a licence from the AFSA. Option 2 Recognized Non-AIFC Member (RNAM) whereby the AFSA will recognize the broker’s home jurisdiction licence without requiring a legal presence in the AIFC. STEP 2: AIX Contact the AIX Markets team as the first step at markets@aix.kz. The AIX Markets team will provide you with an overview of the application process.
What is the objective of the AIFC?
Objectives of the AIFC are as follows: to attract investment into the economy of the Republic of Kazakhstan by creating an attractive environment for investment in the financial services sphere; to develop a securities market in the Republic of Kazakhstan and integrate it with international capital markets; to develop insurance markets, banking services, Islamic finance, financial technologies, electronic commerce and innovative projects in the Republic of Kazakhstan; to develop financial and professional services based on international best practice; to achieve international recognition as a financial centre.
If I am an AIFC Participant and my clients are in the rest of Kazakhstan, what do I have to do to ensure that my contracts with, and transactions for, my clients are governed by Acting Law of the AIFC?
We recommend that contracts which you enter into, and your terms of business, with your clients make it clear that contracts with, and transactions for, your clients are governed by Acting Law of the AIFC and that this is confirmed in writing by your clients. If the counterparty to the contract is not an AIFC Participant or AIFC Body, the AIFC Contract Regulations will not govern the contract unless this is expressly provided for in the contract. However, provided that applicable law does not otherwise dictate what the governing law of the contract must be the parties can elect to have the contract governed by the Acting Law of the AIFC, including the AIFC Contract Regulations, by specifying this in the contract.
Can I choose to make my AIFC contracts subject to a law other than the Acting Law of the AIFC?
Yes, it is possible. AIFC Contract Regulations 2017 state that the Regulations govern contracts made between AIFC Participants, AIFC Bodies and AIFC Participants, and AIFC Bodies, unless otherwise expressly provided in a contract. If a party to a contract is not an AIFC Participant or AIFC Body, the Regulations do not apply to the contract unless expressly provided in the contract. Any contract governed by the Regulations is subject to the jurisdiction of the AIFC Court unless otherwise expressly provided in a contract.
If the AFSA and other AIFC bodies have no criminal prosecution powers, how does Anti-Money Laundering oversight work in the AIFC?
The Astana International Financial Centre AML Rules, which are administered by the AFSA, require AIFC financial institutions and certain other AIFC Participants to maintain policies, procedures and controls to ensure that they are not unwittingly being used by the clients and counterparties to facilitate money laundering or other types of financial crime. These requirements, which the AFSA has authority to enforce through the imposition of fines and other disciplinary measures, are in line with and complement the broader Kazakhstan AML/CTF regime. Kazakhstan's criminal legislation, including the AML Law and the Criminal Code of the Republic of Kazakhstan, applies to all AIFC Participants.
What kind of investors operate on AIX?
Currently, private and institutional investors are able to participate in initial issues and secondary trading of listed securities via AIX trading members. As of July 2019, there are 20 brokers participating in AIX’s trades, including almost all local brokers and four international brokers (Chinese and European).
Can an intangible asset form part of the payment for share capital of an AIFC Participant registered in the AIFC as a Private Company?
Yes. Property, in addition to money, may be contributed to the payment of the placed paid (partially or completely) shares of a private company, according to the conditions stipulated by the AIFC Companies Regulations (Article 45 of the AIFC Companies Regulations).
What is the AIFC?
Geographically, it is a large defined zone within the City of Nur-Sultan wherein AIFC Participants may be located and carry on their business activities. Conceptually, the AIFC is a financial hub for Central Asia, the Caucasus, the Eurasian Economic Union (EAEU), the Middle East, West China, Mongolia and Europe.
(a) Can an AIFC Participant provide investment services for which it has AIFC authorisation to clients elsewhere in Kazakhstan without the need for any other authorisation and without being subject to regulation by the Central Bank or any other body? (b) If so, could this be done through a branch or office in (for example) Almaty? (c) If so, are there any other jurisdictions which recognise such authorisation?
(a): Appropriately licensed AIFC Participants can generally offer financial and other services to clients throughout Kazakhstan, however, to the extent that such activities are subject to regulation by an authority such as the National Bank of the Republic of Kazakhstan, we urge AIFC Participants to take independent legal advice as to whether they would additionally require a license or authorisation from that authority. (b): Currently, we consider that an AIFC Participant would be subject to applicable (non-AIFC) Republic of Kazakhstan laws and regulations in establishing a branch or office in Kazakhstan outside of the territory of the AIFC. (c): Currently no, however, in the future the AFSA hopes to establish so called “passporting” arrangements with other jurisdictions in relation to the provision of financial services.
How does the AIFC regulation of financial technology actually work?
AFSA has established the Fintech Lab in the AIFC as a space in which firms can Test and/or Develop the FinTech Activities without being immediately subject to the full set of regulatory requirements under the AIFC Financial Services Framework Regulations and Rules made thereunder. FinTech Lab is designed to allow firms to deliver effective competition in the interests of consumers by reducing the time, and potentially the cost, of getting FinTech to market, enabling greater access to the market for innovative firms, including start-ups, AFSA collaborating with the firms to ensure that appropriate consumer protection safeguards are built into their FinTech Activities and also enabling FinTech Activities to be Tested and/or Developed. Firms considering the FinTech Lab option should refer to the AIFC Financial Technology Rules, which is available on the AFSA website.
Which audit companies are acceptable for listed companies?
AIX does not maintain a list of required or recommended audit firms. Issuers are free to engage an external auditor based on their needs. However, the audit must be performed in accordance with IFRS, US GAAP, Swiss GAAP or other standards acceptable to AIX.
An AIFC Participant (a taxpayer of the AIFC) plans to receive an intangible asset - software by way of payment or part payment for an investment in its share capital - from its parent company (a Canadian company that is not a tax resident). Will it bear any tax burden on the investment?
The tax regime in the territory of AIFC is established by the Tax Code, except for the exemptions provided by article 6 of the Constitutional Statute. Since this issue is not regulated by the exemptions provided in the Constitutional Statute, it is necessary to refer to the Tax Code. It follows from this that the cost of software received by a tax resident of Kazakhstan (including AIFC participant) as a contribution to the authorised capital is not considered for tax purposes as income (based on sub-para. 1) of para. 2 of article 225 of the Tax Code). Also, in this case, for VAT purposes, there is no turnover on the sale of goods (based on sub-para.1) of para. 1 of article 372 of the Tax Code).
Can a civil law contract, where one of the parties is a private company registered in the AIFC, specify the acting law of the Republic of Kazakhstan as the substantive law and the procedural rules of the International Arbitration Centre or the AIFC Court as the procedural law
Yes, the AIFC Court and the IAC hear and adjudicate disputes on the basis of a relevant agreement between the parties. In adjudicating disputes, the AIFC Court is bound by the Acting Law of the AIFC, which is based on the principles, legislation and precedents of the law of England and Wales and the standards of leading global financial centres and may also take into account final judgements of the AIFC Court and the courts of other common law jurisdictions in related matters. If the substantial law of the dispute, as agreed by the parties of the dispute, is not the Acting Law of the AIFC, the law to be applied in the case will be determined by the AIFC Court. Such law may be any law, including the Acting of the Republic of Kazakhstan, as the substantial law of the dispute. The acceptance or rejection of application for adjudication of a dispute by the AIFC Court or the IAC is decided exclusively by the AIFC Court or the IAC.
What is being established at the AIFC site?
The AIFC Bodies are headquartered here, including the Astana International Financial Centre Authority (AIFCA), the Astana Financial Services Authority (AFSA), the AIFC Court, the Astana International Arbitration Centre (AIAC) and AIFC Bodies’ Organisations (subsidiaries), such as the AIFC Expat Centre, the Bureau for Continuing Professional Development (BCPD), the Fintech Hub, the Astana International Exchange (AIX). Additionally, the site is home to brand-new, state-of-the-art business, commercial and conference facilities in which AIFC Participants can maintain premises and carry on their business activities.
If I am an AIFC Participant and have a branch in Almaty, can I do business through the branch under the Acting Law of the AIFC?
Appropriately licensed AIFC Participants can generally offer financial and other services to clients throughout Kazakhstan, including but not limited to by means of branch, however, to the extent that such activities are subject to regulation by an authority such as the National Bank of the Republic of Kazakhstan, we urge AIFC Participants to take independent legal advice as to whether they would additionally require a license or authorisation from that authority. Please note that AIFC Participant would be subject to applicable (non-AIFC) Republic of Kazakhstan laws and regulations in establishing a branch or office in Kazakhstan outside of the territory of the AIFC
If I get the exemption, does that mean that anything I do in the AIFC is then tax exempt?
CIT and VAT exemptions are provided for AIFC participants providing financial services, a specific list of which is specified in paragraph 3 of article 6 of the Constitutional Statute (see the previous answer). In addition, CIT exemptions are provided for AIFC participants providing ancillary services, a specific list of which is specified in paragraph 4 of article 6 of the Constitutional Statute (see the previous answer). In other cases, taxation is carried out in a generally established manner.
Are AIFC Participants and banks operating in the AIFC subject to requirements of legislation of Kazakhstan in terms of currency control?
The legislation of the Republic of Kazakhstan on currency control is fully applicable subject to exemptions established by the Constitutional Statute of the Republic of Kazakhstan on AIFC (the “Constitutional Statute”). Following the Constitutional Statute, the terms of, and procedures for, currency transactions related to the provision of financial and professional services in the territory of the AIFC as well as the requirements on AIFC Participants in relation to the provision of information about currency transactions are established by the AIFC Rules, adopted in with the agreement of the National Bank of the Republic of Kazakhstan and the Agency of the Republic of Kazakhstan on Regulation and Development of Financial Market. The Rules on Currency Regulation and Provision of Information on Currency Transactions in the AIFC are available via the following link (https://aifc.kz/legal-framework/rules-on-currency-regulation-and-provision-of-information-on-currency-transactions-in-the-aifc/).
If an issuer has been more recently established how can it comply with the 3-year requirement?
Each applicant for listing on AIX and each listing will be considered on a case-by-case basis. In the case of a newly established entity AIX may consider other material factors (e.g. history and performance of an underlying business, nature of an applicant’s business). As such, as an example, newly established subsidiaries or newly established holding companies of existing business (e.g. a newly established company established in the AIFC as the parent company of a Kazakhstan based group of operating companies) may be able to be eligible for listing taking into account various other circumstances.
Under AIFC Rules can an AIFC Participant service clients in “mainland” Kazakhstan or outside Kazakhstan from their office in the AIFC?
Appropriately licensed AIFC Participants can generally offer financial and other services to clients throughout Kazakhstan, however, to the extent that such activities are subject to regulation by an authority such as the National Bank of the Republic of Kazakhstan, we urge AIFC Participants to take independent legal advice as to whether they would additionally require a license or authorisation from that authority. To the extent that business activities are permitted but not regulated under AIFC law, such activities carried on by an AIFC Participant in broader Kazakhstan may be subject to the general laws of Kazakhstan. For example, a company headquartered in the AIFC and conducting mining operations in Kazakhstan would be subject to regulation by the AIFC Registrar of Companies from a corporate law perspective, but its mining operations would be subject to the general laws of Kazakhstan. AIFC Participants may offer services from their AIFC premises into jurisdictions outside Kazakhstan, provided they do so in accordance with the applicable law of such jurisdictions.
What tax benefits are there in the AIFC?
The tax regime in the territory of AIFC is established by the Tax Code, except for the exemptions provided by article 6 of the Constitutional Statute. The exemptions are the following tax benefits for AIFC participants: 1. Corporate income tax, Value added tax (CIT, VAT): on income received from the provision of financial services within the AIFC (if there is a license obtained from the Astana Financial Services Authority): 1) Islamic banking services; 2) reinsurance and insurance brokerage services; 3) investment management services for assets of investment funds, accounting and safekeeping services for investment funds, as well as services related to issuing, offering, trading, purchase and redemption of securities of investment funds; 4) brokerage, dealer or underwriting services; 5) any other financial services determined by a joint act of the AIFC and the Ministry of National Economy and the Ministry of Finance. 2. Corporate income tax (CIT): on income received from legal, auditing, accounting, consulting services provided to AIFC bodies, as well as to AIFC participants that provide financial services, the list of which is specified in paragraph 3 of article 6 of the Constitutional Statute (see above). For exemption from CIT, AIFC participants must keep separate records in accordance with the Regulations on keeping separate accounting of income subject to exemption of corporate income tax and subject to taxation, and expenses subject to allocation to deductions by the participants of AIFC. These Regulations are posted on the AIFC website in the "Tax Administration" section. 3. Property tax and land tax on facilities located in the territory of the AIFC for AIFC participants that provide financial and ancillary services, the list of which is specified in paragraphs 3 and 4 of article 6 of the Constitutional Statute (see above). 4. Foreign nationals who are employees of an AIFC participant that provide financial and ancillary services the list of which is specified in paragraphs 3 and 4 of article 6 of the Constitutional Statute, are exempt from personal income tax on income received from activities in the AIFC under their employment contracts with the AIFC Participant. 5. Natural and legal persons are exempt from individual and corporate income tax on income received from the following: - profits from the sale of securities listed, on the day of their sale, on the official list of the stock exchange; - profits from the sale of shares or stakes in the capital of AIFC participants that are legal persons registered under the Acting Law of the AIFC; - dividends and interest from securities listed, on the day of their accrual, on the official list of the stock exchange; - dividends from shares or stakes in the capital of AIFC participants that are legal persons registered under the Acting Law of the AIFC.
How can I predict a demand for a security and fix its pricing/yield?
Prior to listing on the AIX, applicants are recommended to consult with their financial adviser on issues pertaining to the potential demand for the proposed securities and their terms.
Do I need to have full time employees based in the AIFC, if so, what are the requirements for this?
Subject to limited exceptions, a Company/Partnership must at all times, have a registered office registered in the AIFC to which all communications and notices may be addressed. There is no requirement for a minimum number of persons to be employed in the AIFC. Additionally, residency requirements may apply to persons carrying out certain key functions. For example, if your firm is required under Acting Law of the AIFC to appoint a Money Laundering Reporting Officer, that individual generally must be resident in Kazakhstan. As another example, if you are operating as a Representative Office, you must appoint a Principal Representative who is resident in the country. However, AIFC law requires that an AIFC Participant must carry on its primary business activities in the Centre – to this extent, it would generally be necessary to have adequate resources, including personnel, located in the AIFC.
Where can I find the requirements of AIX for the content of the prospectus?
The prospectus requirements are set out in the AIFC legislation (the AIFC Market Rules) and AIX Business Rules.
Do I need to have an office in the AIFC to be a participant?
Subject to limited exceptions, an AIFC Participant must maintain a registered office in the AIFC, which is a location to conduct its principal business activity.
What are the main advantages of listing shares and or debt on AIX?
An AIX listing (on a sole or dual basis) allows eligible Kazakhstan and international companies as well as state bodies to raise funds via IPOs, SPOs and private placements by providing them access to local and international retail and institutional investors. The main benefits arising out from AIX listing include, but not limited to: the special legal/regulatory regime based on the principles of common law; tax benefits for investors – no Kazakh tax on capital gains and/or interest/dividend payments on AIX listed securities; issue and settlement in any currency; euroclear accessibility; issuers must comply with disclosure requirements, which make company more transparent for investors, and with international-standard continuing obligations for investor protection and effective operation of the market.
Do I have to form an AIFC company to be an AIFC Participant, or can I establish a branch which is an AIFC Participant?
A firm can become an AIFC Participant and carry on business activities in the AIFC either via a legal entity established under Acting Law of the AIFC or via a “recognised” branch of a non-AIFC entity.
If we intend to list our securities on AIX, is it mandatory to establish an entity in AIFC or to become an AIFC Participant?
For its securities to be eligible for listing on the AIX, the issuer does not need to be established in the AIFC nor otherwise to be an AIFC Participant. However (1) if the issuer is carrying on regulated activities in the AIFC it needs to be an AIFC Participant and (2) if the issuer is not an AIFC Participant (e.g., not incorporated or recognised in the AIFC) it will not be eligible for certain benefits available only to AIFC Participants.
How do I become a participant?
AIFC Business Development Office is the first point of contact for all establishments interested in having a presence in the AIFC. We have a dedicated team of Business Development Officers who are at hand to support and guide organisations through the registration process. Office of the Registrar organised under the AFSA framework but acting independently of the AFSA’s regulatory and supervisory functions, the Office of the Registrar is responsible for the registration of a legal entity in the AIFC, either one established under Acting Law of the AIFC or a branch of a Foreign Company. If the applicant intends to carry on regulated financial services or ancillary activities in the AIFC, it must first obtain appropriate authorisation from the AFSA. However, the entire process is designed as a “single window” concept, to increase efficiency and reduce the burden on applicants to the extent possible. There is an opportunity to proceed the registration process via self-service portal: https://digitalresident.kz/.
What legal form is acceptable for an issuer which wishes to list on AIX?
An issuer of debt securities (e.g, bonds) to be listed may be a legal entity in any form (e.g. a limited liability partnership) subject to its home jurisdiction. An issuer of equity securities must be incorporated in a legal form allowing free transferability of its equity securities (e.g. a company limited by shares). In order to have equity securities listed on AIX, a Kazakhstan-incorporated limited liability partnership would need to convert into a Kazakhstan joint stock company or establish a corporate holding company (potentially incorporated in AIFC) whose securities would be listed.
Why become a participant in the AIFC?
A distinctive feature of English common law is the use of a flexible and transparent approach to resolving disputes, as well as the primacy of protecting the rights and interests of investors. The AIFC has an independent regulatory regime that ensures fairness and efficiency of the financial market. One of the motivating factors for AIFC Participants is tax breaks for AIFC Participants from corporate income tax on income received from providing the following financial services in the AIFC: Islamic banking services; reinsurance and insurance brokerage services; investment management services for assets of investment funds, accounting and safekeeping services for investment funds, as well as services related to issuing, offering, trading, purchase and redemption of securities of investment funds; brokerage, dealer or underwriting services; any other financial services prescribed by AIFC Acts. In addition, simplified visa and labour regimes operates in the AIFC. Particularly, AIFC provides visa waiver up to 30 days for citizens of OECD countries, UAE, Malaysia, Singapore, and Monaco. Employees of the AIFC Participants and their family members may obtain visas for periods of up to 5 years with the possibility of a further extension. AIFC Participants may employ foreign nationals and stateless persons for the conduct of activities in the AIFC without obtaining work permits for them. AIFC Participants enjoy simplified visa procedures to obtain, extend, change a category or cancel visa without need to leave a country, and to obtain visa upon arrival. To facilitate the foreign employees’ and their family members’ access to an ample variety of government and non-government services, within the AIFC Authority a specialised centre - the AIFC Expat Centre (AEC) - operating on the principle of a “single window” has been created. Available at the AEC in English are Kazakhstan visa and migration related services, tax-revenue services (e.g. issue of Individual Identification Numbers), Registration of vehicles and issuance of driver's licenses to foreign nationals, a wide range of Government for Citizens Corporation’s government services (such as the issue of digital signatures), notarial and translation services, document copying services, payment terminal services, a call centre, together with guidance on real estate agencies, schools search, information on must-see attractions in Nur-Sultan and other services required or useful for entry and stay by foreign nationals coming and working in the AIFC.
What are the main requirements to legal entities to be listed on AIX?
The main requirements for listing can be found in the AIX Business Rules published on AIX’s website. Key requirements include: consolidated and audited financial statements for three years (please see Question 43 if the applicant does not have a three year trading record) prepared in accordance with IFRS, US GAAP, Swiss GAAP or other standards acceptable to AIX; minimum public float of at least 25% for issuers of equity securities (AIX may accept a lesser percentage subject to its sole and absolute discretion); a minimum market cap of at least $1M for issuers of equity securities and $500K for issuers of debt securities at the time of listing. AIX Business Rules provide customized requirements for certain different categories of issuers such as funds, mining companies and companies eligible for pre-IPO listing, listing at the Belt and Road Market of AIX. Further information on these listing sectors is set out in the AIX website.
What is an AIFC participant?
An AIFC Participant is a legal entity (a company, partnership, etc.) that is registered under the Acting Law of the AIFC. This includes both legal entities formed under AIFC law and foreign legal entities that are “recognized” by the AIFC Registrar of Companies.