Kazakhstan: EOR or a Kazakh entity

What are the routes into employing someone in Kazakhstan?

Two and the second has two forms. Either an employer already established in Kazakhstan employs the specialists, or the company registers in Kazakhstan itself, as a Kazakh limited liability partnership or as a branch of the foreign legal entity.

The employee's position is the same either way. Kazakh employment law decides the leave, the notice, the severance and the site duties and it decides them by reference to the employment rather than to who the employer is. What changes between the routes is who holds the work permit, whose permits count against the region's quota and whose local-content ratios they are assessed on.

That last row carries a qualification and it is dealt with at the end of this page. An employer of record removes the Kazakh company and the Kazakh employer obligations from the client. It does not answer a question about the client's own activity in the country.

What does each route carry after it is set up?

The permit and quota position, the payroll, the statutory employment positions and for the entity route a set of corporate filings that recur whether the Kazakh operation is one person or thirty.

Registration speed is not the variable. A Kazakh limited liability partnership is registered quickly and what decides the route is what it carries in the years afterwards rather than what it takes to open.

The permit and quota position is the first of those and the one that behaves least like a setup cost. Local content is assessed on the applying employer's payroll numbers: Kazakhstan citizens at least 70% of its first and second category employees and at least 90% of its third and fourth. A permit is issued or extended on those conditions, so a newly registered entity meets them from its own headcount at every application and every renewal, not once at the point of incorporation. The permit fee falls again on each extension and a specialist permit is extended annually.

The rules do list cases where those local-content conditions do not apply and two of them reach a company weighing an entity: a small business entity with no more than twenty employees and a representative office or branch of a foreign legal entity with no more than ten employees. Those disapply the local-content conditions only. Whether a given worker needs a permit at all is a separate question, answered by the Government's own list of exempt categories and the permits and quota page sets out both.

The payroll position is the second. Whoever is the employer runs Kazakh payroll, accounts for social tax and for the contribution lines that follow each worker's residence status, registers the employment contract in the unified system for recording employment contracts and obtains the worker's individual identification number. The cost breakdown prices each of those lines.

The third does not move with the route at all. Twenty-four calendar days of annual leave, probation of up to three months, one month's notice on redundancy or liquidation, severance where it falls due, and for rotational site work the accommodation, organised catering and transport the Labour Code requires, apply identically whichever entity is on the contract. They are not a reason to choose one route over another. They are a reason to be clear which entity is carrying them.

An employer already established in Kazakhstan carries all of that as ordinary operations: the permits it holds and renews, the ratio position it maintains, the payroll it already runs and the statutory employment positions that attach to every contract it signs. None of it is stood up for a single project and none of it reaches the client company. What the client keeps is the direction of the work.

When does the client's own tax position come into it?

When the client's own people are in Kazakhstan long enough on the same or a connected project, because the permanent establishment test looks at the activity rather than at the employment route.

A non-resident that renders services in Kazakhstan through employees or other personnel it engages creates a services permanent establishment where the activity continues for more than 183 days in any consecutive twelve-month period for the same or a connected project. The wording is the important part. The test reaches services rendered through hired employees or other personnel, so it is not switched off by the employment route the workers are on. It is a question about the client's own contract and its own people and it arises whichever way the answer to this page's question comes out.

A permanent establishment must register with the tax authorities within thirty calendar days of commencing business. What follows from that is a corporate tax position rather than an employment one.

Two consequences follow for the decision. The permanent establishment question is separate from the employment question and has to be answered on its own facts, so it is not a reason to choose the entity route and not a thing an employment structure resolves. And the branch profits tax is specific to a non-resident's permanent establishment: it applies to the net income of that permanent establishment after corporate income tax has already been calculated on it.