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Payroll & Tax in Kazakhstan

Kazakhstan payroll & taxation

In 2015 Kazakhstan made paying taxes more complicated for companies by introducing a mandatory contribution to the National Chamber of Entrepreneurs and by increasing the vehicle and environmental taxes.

Your Payroll Options in Kazakhstan

Remote Payroll

A remote payroll system is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Kazakhstan. Under Kazakhstan Law, companies registered in other countries are allowed to obtain a license to do business and have employees in the country.

Local Payroll Administration

In some cases, a company will register their business in Kazakhstan under one of the forms available: Limited liability partnerships (LLP), joint stock companies (JSC), and branches of foreign legal entities; but prefer to have another company administering its payroll.  This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal Payroll

Larger companies with a commitment to Kazakhstan may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff.  There will be a need for in country human resources personnel who have the background needed to manage a Kazakhstan payroll, and can fulfil all tax, withholding, and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Kazakh employment laws.

Fully Outsourced Payroll & Employment

Companies can outsource the employment and payroll of their staff in Kazakhstan to a GEO, like Shield GEO. This is possible for both foreign workers and Kazakh nationals. This is the easiest, fastest and safest way to payroll staff in Kazakhstan.

Shield GEO manages all aspects of payroll for workers in Kazakhstan, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.

Read more about outsourced payroll and employment through Shield GEO.

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Setting up payroll in Kazakhstan

Information Explanation
Currency ?

KZT (Approx. 0.0028 USD)

Tax Registration Requirements ?

Fulfilment of the tax liability shall be performed by the taxpayer independently, unless it is established otherwise by the Tax Code.

In fulfilment of the tax liability the taxpayer shall perform the following acts:

1) register with the tax authority;

2) keep records of taxable items and (or) items related to taxation;

3) calculate, proceeding from taxable items and items related to taxation, the tax base and tax rates, amounts of taxes and other obligatory payments, which are payable to the budget, as well as advance and current payments thereof;

4) make and present, except for tax registers, tax forms to the tax authorities in accordance with the established procedure;

5) pay calculated and assessed amounts of taxes and other obligatory payments to the budget, advance and current payments in respect of taxes and other obligatory payments to the budget in accordance with special part of this Code.

In payment of taxes, other obligatory payments to the budget, social assessments, transfer of obligatory pension contributions, obligatory professional pension contributions by a taxpayer’s authorised representative in cases established by this Code, the remitter of money shall specify in the payment documents the surname, name, patronymic (if any) or the official name of the taxpayer and its identification number.

Documentation Required for New Employees ?

For conclusion of an employment contract, the following documents are required:

1) identity document or passport (birth certificate for persons under the age of sixteen years);

2) residence permit or stateless person’s certificate (for foreigners and stateless persons permanently resident on the territory of the Republic of Kazakhstan);

3) document certifying education, qualifications, possession of special knowledge or occupational training on conclusion of an employment contract for work requiring corresponding knowledge, abilities and skills;

4) document confirming labour activities (for persons with a service record);

5) military registration document (for people liable for military services and subject to conscription for military service);

6) document on preliminary medical fitness certification (for persons required to undergo medical fitness certification in accordance with the Labor Code and the legislation of the Republic of Kazakhstan);

7) copies of allocation of a taxpayer registration number and individual social code.

Tax Figures

Information Explanation
Corporate Income Tax ?

20% on taxable profits

Income Tax Rate ?
Grossed income Tax Rate (%)

 

IIT deduction from payment source is made for: employee’s income; income of an individual from a tax agent; pension payment from saving pension funds; dividend, fees, winnings; scholarships; income under saving insurance contracts.

Assessment and payment of tax from self-declared income (property and other income, individual entrepreneur’s income) is performed by a taxpayer on its own.

Tax deductions (reduced tax base): standard tax deductions: minimum salary; property-related tax deductions: repayment of loan benefits received in the housing construction savings banks to carry out activities to improve living conditions; social tax deductions: sums of obligatory pension taxes, medical service costs, insurance premium costs.

Sales Tax ?

VAT: 12%

Withholding Tax ?

Dividends, capital gains, interest, royalties 15%;

Any income of an entity registered in a tax haven jurisdiction 20%;

Insurance premiums under risk insurance agreements 15%;

Income from international transportation services; insurance premiums under risk reinsurance agreements 5%.

Income Tax (Personal Allowance) ?

IIT deduction from payment source is made for: employee’s income; income of an individual from a tax agent; pension payment from saving pension funds; dividend, fees, winnings; scholarships; income under saving insurance contracts.

Tax deductions (reduced tax base):
standard tax deductions: minimum salary;
property-related tax deductions: repayment of loan benefits received in the housing construction savings banks to carry out activities to improve living conditions;
social tax deductions: sums of obligatory pension taxes, medical service costs, insurance premium costs.

Payments

Information Explanation
Payment Mode ?

On payment of wages, the employer shall notify each employee, every month, in writing of the component parts of the wage due him for the corresponding period, the amount of and grounds for withholdings made, including information about mandatory pension contributions withheld and remitted, as well as about the aggregate monetary sum due for payment.

Wage payments to employees shall be made at the place where they work, unless the terms and conditions of the employment contract or the collective bargaining agreement envisage otherwise.

Frequency of Salary Payment ?

Wages shall be paid in monetary form in the national currency of the Republic of Kazakhstan at least once a month, no later than the 10th day of the following month. The date for payment of wages shall be envisaged by employment contracts and collective bargaining agreements.

Minimum Wage ?

The minimum monthly wage established annually by the law of the Republic of Kazakhstan on the republican budget for the corresponding financial year shall not be less than the subsistence level and shall not include additions and mark-ups, compensatory and social allowances, bonuses or other incentive payments and shall be paid in proportion to the time worked.

The minimum standard labour compensation shall be determined on the basis of the minimum monthly wage established by the law of the Republic of Kazakhstan on the republican budget for the corresponding year, and branch multipliers determined by branch agreements and approved by the Government of the Republic of Kazakhstan.

The minimum hourly wage of an employee fulfilling his job duties (work time standards), may not be less than the minimum monthly wage divided by the average number of working hours in the month according to the working time balance for the corresponding calendar year.

The minimum monthly wage or monthly base rate of a first rank employee envisaged by the terms and conditions of the employment contract, collective bargaining agreement and (or) acts of the employer, may not be less than the minimum monthly wage established by the law of the Republic of Kazakhstan on the republican budget for the corresponding financial year, while for employees engaged in heavy work or work under harmful (particularly harmful) or hazardous working conditions, it shall not be less than the minimum standard labour compensation.

Employee Entitlements

Information Explanation
Working on Sundays ?

With a five-day working week, employees shall be granted two days off per week, while with a six day working week, they shall have one day off.

Sunday shall be a day off common to both a five-day and a six-day working week. The second day off with a five-day working week shall be established by an act of the employer or the shift timetable. Both days off shall be consecutive, unless otherwise established in the collective bargaining agreement and employment contract.

Disclosure and Confidentiality of Personal Information ?

Personal data of the employee consists of information about the employee required on the initiation, continuation and termination of labour relations. Processing of personal data of the employee shall mean receipt, storage and transmission of the personal data of the employee.

During processing of personal data of the employee, the employer shall observe the following requirements: 1) processing of personal data of the employee shall be carried out for the purpose of ensuring observance of the laws and other regulatory and legal acts, assisting employees in job placement, training and career advancement, and ensuring personal protection of employees; 2) the volume and the content of the employee’s personal data processed shall be determined in accordance with the Constitution of the Republic of Kazakhstan, this Code and other laws of the Republic of Kazakhstan; 3) personal data shall be supplied personally by the employee; 4) the employer shall not have the right to demand from the employee information on his political, religious or other convictions or his private life; 5) the employer shall not have the right to demand from the employee information on his membership or activities in public associations, including trades unions; 6) in adopting decision affecting the interests of the employee, the employer shall not have the right to proceed from personal data of the employee received as a result of their automated or electronic processing; 7) protection of personal data of the employee shall be ensured by the employer in the manner established by the legislation of the Republic of Kazakhstan.

In transmitting personal data of the employee, the employer shall observe the following requirements: 1) not to communicate personal data of the employee to a third party without the written consent of the employee; 2) to allow access to personal data of employees only to specially authorised persons. The given persons shall, moreover, have the right to receive only the personal data of the employee required for fulfilment of specific functions, and shall observe the regime of confidentiality; 3) to transmit personal data of the employee within the organisation in accordance with an act of the employer, with which the employee shall be acquainted. 2. Persons to whom personal data of the employee are transmitted shall use them exclusively for the purpose for which they are communicated and shall not have the right to transmit them to third parties, with the exception of cases established by the laws of the Republic of Kazakhstan.

Employee Protection and Anti-discrimination Rights ?

The state guarantees its citizens, in the sphere of population employment, protection against any forms of discrimination and provision of equal opportunities to gain a profession and a job.

The principles of the labour legislation of the Republic of Kazakhstan includes the prohibition of discrimination, forced labour and the worst forms of child labour.

According to the Labor Code, everyone have equal opportunities to exercise their rights and freedoms in the sphere of labour.

No-one may be subjected to any discrimination in exercising their labour rights depending on sex, age, physical disabilities, race, nationality, language, material, social or official position, place of residence, attitude to religion, political convictions, tribe or social stratum or membership of public associations.

Discrimination shall not include differences, exceptions, preferences and restrictions determined by requirements inherent in the nature of the work or dictated by the state’s concern for people in need of increased social and legal protection.

Persons who believe they have been subject to discrimination in the sphere of labour shall have the right to enter a lawsuit in a court or other instance in the manner established by the laws of the Republic of Kazakhstan.

Time Off Work ?

Employees shall be granted annual paid leave of twenty four calendar days, unless a greater number of days in envisaged by other regulatory and legal acts, the employment contract, collective bargaining agreement or acts of the employer.

Additional annual paid leave shall be granted:

1) to employees engaged in heavy work, work under harmful (particularly harmful) and (or) hazardous working conditions, the duration of which shall be at least six calendar days;

2) group one and two disabled, with a duration of at least fifteen calendar days.

For other categories of employees, provision of additional annual paid leave and its minimum duration may be established by the laws of the Republic of Kazakhstan.

Employment contracts and collective bargaining agreements may establish for employees additional annual paid leave of an incentive nature for long, continuous work service, performance of important, complex and urgent work, as well as work of another nature.

The duration of annual paid leave shall be calculated in calendar days, not counting official holidays falling during the leave period, irrespective of the work regime and timetable.

In calculating the total duration of annual paid leave, additional annual paid leave shall be added to the basic annual paid leave. The total duration of annual paid leave shall not, moreover, be restricted by any maximum limit.

Medical Leave ?

Sick leave is calculated on the basis of the average monthly remuneration rate. The amount of sick leave allowance is computed at the average wage rate, but the maximum required payment is 10 monthly payment indicators, or 8,230 KZT or approximately USD 54.

Employment Termination

Information Explanation
Resignation / End of Service Payment ?

1The employee shall have the right to cancel the employment contract on his own initiative by giving the employer at least one month’s written notice to this effect, with the exception of the cases envisaged by clause 4 of this article.

On agreement between the employee and the employer, the employment contract may be cancelled before expiry of the notice period envisaged by clause 1 of this article.

The employee shall serve written notice on the employer of cancellation of the employment contract at the time indicated in the application in cases when the employment contract is cancelled owing to impossibility of continuing work.

The employee shall have the right to notify the employer in writing of non-performance by the employer of the terms and conditions of the employment contract. In the event that, on expiry of a period of seven days, non-performance by the employer of the terms and conditions of the employment contract continues, the employee shall have the right to cancel the employment contract by serving at least three working days’ written notice on the employer.

During the notice period envisaged by this article, the employee shall have the right to revoke, in writing, its application for cancellation of the employment contract.

On expiry of the notice period indicated in this article, the employee shall have the right to cease work, while the employer shall issue to the employee the documents associated with his labour activities and any payments due thereto.

For individual categories of employees, this Code envisages a special procedure for cancelling the employment contract on the initiative of the employee.

Severance / Redundancy Pay ?

An employer has a right to annul a contract in case of company liquidation or a staff reduction. He has to notify an employee in writing at least one month in advance prior to the contract annulment. A one-time compensation equivalent to the monthly wage is to be paid to the employee.

Termination of Employment ?

The employer shall, on the grounds envisaged by subclauses 1) and 2), clause 1, article 54 of the Labor Code, serve at least one month’s written notice on the employee of cancellation of the employment contract, unless the employment contract or collective bargaining agreement envisaged a longer notice period. With the written consent of the employee, the employment contract may be cancelled before expiry of the notice period.

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