CIS Legal Update - September 2013: Kazakhstan National ID Scheme and Issues for Foreign Executives

by Dechert LLP

Six years after the passage of the Law of the Republic of Kazakhstan on National Registers of Identification Authorities (“National Registry Law”) of 12.01.2007 (as amended on 21.06.2013), on January 1, 2013, obtaining an Individual Identification Number (the “IIN”) has become obligatory for all residents and non-residents, as well as legal entities.  The IIN is a step towards tidying up the current registration regime, but a number of issues remain murky.  This update in particular investigates the complications that the Law (by requiring the IIN for registration purposes) creates for companies seeking to appoint or change a non-resident executive.

Obtaining an IIN

A non-resident must be physically present in Kazakhstan in order to obtain an IIN, as he/she must submit a notarized copy of the his/her passport along with a copy of the registration certificate issued by the immigration authorities to the tax authorities.  The tax authorities then send this information to the appropriate department in the Tax Committee of the Ministry of Finance, which, in turn, approves the issuance of an IIN to the non-resident.

Issues with changing a non-resident executive

Article 563.5 of the Tax Code requires taxpayers, including companies, to notify the tax authorities of any changes to their registration data no later than ten business days following the “moment of change” – a term for which the law provides no explicit definition. In practice, the tax authorities define the “moment of change” as the date when the decision to amend the registration is made. Since a change in a company’s executive staff constitutes a change in the facts recorded in a company’s registration data, the company is required to notify the tax authorities within the required period of ten business days. As part of this notification, the newly-appointed company executive must provide his/her IIN to the tax authorities.

However, companies and newly appointed executives generally consider that the new executive commences work in Kazakhstan as of the date when he or she is issued a work permit, which will naturally be later than the date on which the company decides to approve the appointment of the new executive. This practice entails the risk of violating the ten-day notice term set forth in Article 563.5 of the Tax Code.

A potential solution would be to rely on item 7 of Article 9.10 of the Law, which allows a non-resident to obtain an IIN by simply opening a current account in a Kazakhstan bank. In this scenario, the non-resident would have an authorized person – acting under a power of attorney – apply to a bank to open a current account for him or her. In accordance with the Law, the tax authorities would be bound to issue the non-resident an IIN (upon receipt of a letter from the bank confirming that an authorized person requested the bank to open a current account on behalf of the non-resident), thereby foregoing the need for the non-resident to apply for it in person in Kazakhstan.

In practice, however, banks have sometimes refused to provide this letter on the basis of their own view of the law and their internal rules and policies. For example, some bank officers assert that a non-resident employed in Kazakhstan may only open a current account upon presenting an IIN. We are of the view that these situations can only be effectively resolved by amending the laws to eliminate these contradictory interpretations.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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