Author(s): Yuliya Chumachenko
Member Firm: Aequitas
Law No. 405-V on Mandatory Social Medical Insurance, of 16 November 2015 set up a state medical insurance fund to finance the public health system. Employers, including all foreign legal entities operating in Kazakhstan through permanent establishments, must withhold and pay contributions to the medical insurance fund. Meanwhile, the state makes contributions on behalf of the economically inactive portion of the population (i.e. 15 different categories of socially vulnerable people: mothers with several children, disabled people, students, pregnant women and those caring for a child under three, retired people, military personnel and certain other categories).
Employee contributions are currently set at 1% of their income, but this will rise to 2% from 2020 onwards.
From 1 July 2017, employers will have to pay 2% of their employees’ income out of their own funds and from 1 January 2018, the rate of contributions will rise annually, reaching 5% in 2020. Thus, in 2018 the rate will be 3% and in 2019, 4%. The contributions will be deducted when calculating corporation tax.
The employer must calculate and pay contributions on a monthly basis, on or before the 25th day of the month following the month concerned.
Employees and self-employed individuals registered with the tax authorities will pay for themselves.
From 2019 onwards, employers will be obliged to make withholdings from employees’ pay, in addition to making their own employer contributions.
The employer must inform employees about the withholdings it makes every month (on or before the 15th day of the month following the month concerned), and every quarter it must submit an individual income tax and social tax statement reflecting how much has been withheld to pay the tax authorities.
The tax authorities enforce payment of withholdings by taking the amount owed from the debtor’s bank account (in either national or foreign currency) and charging interest at 2.5 times the official refinancing rate of the National Bank of Kazakhstan.
The arrears are collected based on a collection order and the debtor should be notified, although no notification is required for amounts of less than 1 MCI (i.e. the ‘monthly calculation index’, set each year and currently KZT 2,269, or approximately EUR 6).
In addition, the employer must provide the tax authorities with a list of the employees for which the contributions have been paid. If the company fails to submit the list, after five business days, the tax authorities may suspend debit operations at the company's bank and cash-on-hand accounts.
Social Medical Insurance for Foreign Nationals
Generally, foreign employees, other than those with ‘oralman status’ (i.e. ethnic Kazakhs from the neighboring Asian countries who come to Kazakhstan for permanent residence) or those holding a Kazakhstani residence permit, do not fall with the law, because they either have medical cover in Kazakhstan on a paid basis or are covered by voluntary medical insurance funds. However, there are some international treaties ratified by Kazakhstan that change the position.
An example of this is the Eurasian Economic Union Treaty signed by Russia, Kazakhstan, Belarus, Armenia and Kyrgyzstan and made in Astana on 29 May 2014. By this Treaty, social security for employees who are nationals of the Treaty member states and their families is treated in the same way as for Kazakhstani nationals. Accordingly, employers will need to withhold funds for them to pay into the medical insurance fund from 1 July 2017.