Construction Licensing in Kazakhstan: Key Considerations for Foreign Companies
Many foreign companies actively engage in construction projects across Kazakhstan. However, under the Law on Architectural, Urban Planning, and Construction Activities of the Republic of Kazakhstan, conducting construction work requires a valid construction license.
According to the Law on Permits and Notifications, foreign nationals, stateless persons, and foreign legal entities can apply for permits and submit notifications on an equal basis with local citizens and entities, unless stated otherwise by Kazakhstan’s legislation or international treaties.
Kazakhstan has several mutual recognition agreements with foreign governments, such as:
Agreement on the Mutual Recognition of Construction Licenses issued by the CIS Member States (Moscow, 27 March 1997);
Agreement between Kazakhstan and Russia on the Mutual Recognition of State Construction Licenses (Moscow, 1 August 1995);
Agreement between Kazakhstan and Kyrgyzstan on the Mutual Recognition of State Construction Licenses (Almaty, 19 May 1995);
Agreement on Cooperation in Construction Activities (Moscow, 9 September 1994).
These agreements allow foreign companies to obtain a construction license in Kazakhstan based on their home country licenses, subject to qualification verification.
Construction License Categories in Kazakhstan
Kazakhstan’s construction licenses are divided into three categories:
Category I: Permits construction of facilities of all responsibility levels, including any building type, regardless of complexity or safety.
Category II: Allows construction of second and third responsibility level facilities, as well as first-level projects under a subcontract.
Category III: Permits work on second-level technically simple facilities and third-level projects, as well as first and second-level projects under a subcontract.
Foreign companies generally seek a Category I license, which requires meeting specific legal qualifications, including:
Certified engineering and technical personnel;
Adequate production facilities;
Sufficient material and technical resources;
Prior construction experience;
Completion of at least 10 construction projects at the first or second responsibility level.
Key Pitfalls for Foreign Construction Companies
Foreign companies must carefully navigate Kazakhstan’s construction licensing regulations, especially when acting as general contractors. If a company with a Category II or III license wins a project requiring a Category I license, it cannot transfer that responsibility to a subcontractor. Even if the subcontractor holds the necessary license, the general contractor cannot tender for the project.
Furthermore, Kazakhstan law limits the amount of construction work that can be subcontracted. No more than two-thirds of the total project value can be transferred to subcontractors. This means the general contractor must retain a significant portion of the work.
Branch vs. Subsidiary: What’s Best for Foreign Companies?
Foreign construction companies face a key decision when entering the Kazakh market: whether to establish a local branch or subsidiary.
No legal presence: While foreign companies can operate in Kazakhstan without a local entity, in practice, this often leads to challenges related to taxation, customs, machinery certification, and employment.
Purchasing an existing company: Some foreign companies opt to buy a Kazakh company that already holds a construction license, effectively acquiring the license itself.
Establishing a branch: A branch is not a separate legal entity but a unit of the parent company. The parent company’s experience can be used for license applications, but the license must be obtained by the parent company, not the branch.
Conclusion
Navigating the construction licensing process in Kazakhstan can be complex, particularly for foreign companies unfamiliar with local regulations. While Kazakhstan’s legislation provides flexibility, foreign firms often face practical difficulties, especially without a local presence. Partnering with a law firm experienced in Kazakhstan’s construction sector can help overcome these challenges.
BOND STONE Law Firm offers expert advice and legal assistance for foreign companies entering the Kazakh construction market. Our team is well-versed in local laws and regulations, ensuring smooth project implementation for international clients.
Feel free to contact us for professional legal support on construction licensing and compliance in Kazakhstan.
