Updated October 2, 2024

Company Formation and Branch/Representative Office Registration in Kazakhstan: A Comprehensive Guide

Company formation in Kazakhstan or registering a branch/representative office is a crucial first step toward establishing a successful business. The legal solutions chosen at this stage play a significant role in determining your long-term success. With years of experience and a proven track record, our team specializes in business registration, corporate dispute resolution, and related legal services. This guide outlines the process and offers expert advice to help you make informed decisions.

Organizational and Legal Forms in Kazakhstan

Kazakhstan’s legislation provides a wide range of organizational and legal forms for entrepreneurial activities. These include sole proprietorships, partnerships, joint-stock companies, and the option to establish a branch or representative office of both local and foreign companies. The right choice depends on your business goals, objectives, and projected turnover.

For detailed information on the registration process of legal entities and structural units in Kazakhstan, see the following section. But first, let’s explore why establishing a branch or representative office may be a smart initial step for foreign companies looking to enter the Kazakh market.

Why Start with a Branch or Representative Office?

A branch or representative office is an ideal way to explore market potential in Kazakhstan before committing to full-scale business registration. This phased entry allows you to minimize operating costs and reduce your tax burden while assessing the market. Kazakhstan’s unified tax legislation, aligned with international standards, supports this strategy, with tax conventions in place with 55 countries to avoid double taxation.

Under Kazakh law, representative offices are considered “auxiliary” to their parent companies, typically handling marketing, logistics, and distribution network setup. After three years, a representative office may be classified as a “permanent establishment,” leading to different tax implications.

Example: Pharmaceutical Companies Entering Kazakhstan

A typical example of this approach is seen in the pharmaceutical industry. Many large pharmaceutical companies initially entered Kazakhstan by partnering with local distributors and pharmacy chains. With only a small market share at first, these companies recognized Kazakhstan’s growing population and economic potential. Based on our legal advice, they established representative offices to manage logistics, maintain stock levels, and create new distribution channels.

Because a representative office is non-commercial, it cannot apply for a pharmaceutical license under Kazakh law. However, this initial setup allows businesses to gauge market viability before deciding whether to expand with a branch or subsidiary.

Limited Liability Partnership (LLP): The Optimal Legal Form

For businesses seeking to expand, one of the most attractive organizational structures in Kazakhstan is the Limited Liability Partnership (LLP). This structure offers limited liability to its participants while maintaining flexibility in business operations. Under the Kazakhstan Law on Limited and Additional Liability Partnerships, participants are not liable for the partnership’s obligations, and vice versa.

Foreign individuals and legal entities can establish LLPs independently or as joint ventures. There are no restrictions on foreign ownership, and 100% foreign-owned LLPs can appoint foreign directors and deputies without needing special permits for foreign labor. This flexibility allows foreign directors to manage the company from day one, saving time and resources. For more information follow the article Kazakhstan Work Visa C3 for CEOs and Deputy CEOs of companies with 100% Foreign Ownership

Kazakhstan’s Improved Business Environment

Kazakhstan’s regulatory framework is constantly improving to enhance the country’s investment appeal. Recent changes have streamlined the registration process for businesses, particularly through EGOV.KZ, the country’s e-government portal. This platform allows for online registration of LLPs, significantly reducing wait times and improving service quality.

In 2020, Kazakhstan ranked 25th in the World Bank’s Doing Business report, advancing from 77th place in just five years. The country outperformed many developed nations, such as Austria, France, and Switzerland, in ease of doing business. Notably, Kazakhstan ranked 3rd globally for protecting the rights of minority investors, thanks to reforms that made the country more attractive to foreign businesses.

Small, Medium, or Large Business? Know Your Entity

When registering an LLP in Kazakhstan, it is important to classify your business as small, medium, or large. Small businesses are defined as entities with fewer than 100 employees and annual turnover below 300,000 monthly calculation indicators (MCI)—equivalent to 1,107,600,000 KZT or approximately $2.3 million USD. Business classification impacts several factors, including tax monitoring and reporting requirements.

How We Can Help

Our team of experts offers more than just legal services. We act as business consultants, helping you determine the most optimal organizational and legal structure for your business. We consider factors such as taxation, income repatriation, legal capacity, and operational functionality to tailor the perfect solution for your market entry and expansion.

Contact us today to explore your options for business registration, branch setup, or representative office registration in Kazakhstan. Let us guide you through every step of the process to ensure your success in this dynamic and growing market.