A new set of work permit rules will take effect in Kazakhstan on 1 January 2017 (the 2017 Work Permit Rules). They will entirely replace (not amend) the current work permit rules adopted in January 2012 and most recently amended in March 2016 (the Old Rules).1
The 2017 Work Permit Rules consist of the following pieces of legislation:
- Order No. 559 issued on 27 June 2016;2
- Order No. 1069 issued on 15 December 2016, substantially amending Order No. 559;3 and
- Resolution No. 802 adopted on 15 December 2016, supplementing Order No. 559.4
Principal Changes Made by Order No. 559
1. Loss of Exemptions for Heads of Branches and Representative Offices and Heads of Strategic Investors
The Old Rules set forth a number of significant exemptions from the requirement to obtain a work permit,5 including (among others) exemptions for:
- heads of foreign branches and representative offices (Branch/Rep Office Head Exemption), and
- heads of companies that have signed contracts with the Government for investments exceeding the equivalent of US$ 50 million and heads of entities performing investment activity in priority sectors of the economy and having signed contracts with the investments authority (Strategic Investor Head Exemption).
Order No. 559 does not contain any exemptions. But a draft list of exemptions was proposed to be attached to a Resolution of the Government expected to be adopted and take effect on 1 January 2017 (Draft 2017 Exemptions)6. The Draft 2017 Exemptions contain neither the Branch/Rep Office Head Exemption nor the Strategic Investor Head Exemption. Due to the absence of any transition period under Order No. 559 and the Draft 2017 Exemptions, as of 1 January 2017 any foreign citizen7 who is the registered head of a branch or representative office (or who is the CEO of a company having a signed contract with the Government for investments exceeding US$ 50 million or performing investment activity in priority sectors and having signed contracts with the investment authority) would be in violation of Kazakhstani law if he/she does not hold a work permit. Under the legislation, the consequences of not holding a required work permit include (among others):
- a fine for the employer of up to the equivalent of approximately US$ 7,000;
- a fine for the foreign employee of up to the equivalent of approximately US$ 200 fine for the foreign employee or up to 10 days of imprisonment; and
- deportation of the foreign employee and his/her inability to return to Kazakhstan for 5 years.
As noted below, this change was deleted on 15 December 2016.
2. Loss of 120-day Business Trip Exemption
Under the Old Rules, most foreigners8 on a business trip to Kazakhstan for not more than 120 days in a calendar year are specifically exempt from the work permit requirement. This exemption9 was eliminated by Order No. 559 and was not contained in the Draft 2017 Exemptions. The elimination of a clear exemption from the work permit requirement for such persons would make their status unclear, notwithstanding that they might have a valid business visa.
As noted below, this change was deleted on 15 December 2016.
3. General Work Permits
Order No. 559 makes the following five changes (among others) to the general procedures for obtaining a work permit. These five changes do not apply to the intra-Corporate transfer procedures for obtaining a work permit.
3.1 Introduction of State Fees for Work Permits
A state fee (ranging from approximately US$ 154 to US$ 1,500 at current exchange rates) will need to be issued for each work permit issued on or after 1 January 2017. Under the Old Rules, work permits are issued at no charge.
3.2 Elimination of Special Conditions
Under the Old Rules, most work permits, other than for top managers, are required to be issued subject to one or more of four "special conditions" (such as an obligation to train local employees and an obligation to hire additional local citizens).10 Order No. 559 contains no such requirement, thereby eliminating the special conditions for work permits issued on or after 1 January 2017.
3.3 Elimination of Local Market Research
Under Order No. 559, an employer will no longer be required to try to find possible local citizens to fill a position before applying for a work permit for a foreigner to fill such position. Under the Old Rules an employer is first required to notify the local labor authorities and to interview candidates provided by them.
3.4 Decrease of Work Permit Term and Increase of Extensions
The maximum term of a work permit for "category 1" employees (directors and deputies) is decreased by Order No. 559 from three years to 12 months, with an unlimited number of possible extensions. The maximum term of a work permit for "category 2 and category 3" employees (managers and specialists) remains at 12 months but the number of possible extensions is increased from two to three.
3.5 Status of EEU Citizens under Ratios
Order No. 559 addresses the status of employees from other countries which are members of the Eurasian Economic Union (Russia, Belarus, Kyrgyzstan and Armenia) for purposes of the ratios of local employees to foreign employees which employer are required to maintain. The Old Rules do not directly address the status of such persons working in Kazakhstan for purpose of calculating the ratios. Order No. 559 states that such persons will not be counted as foreign employees when calculating the employers local content. However, it is unclear whether, for ratio purposes, they will be counted as Kazakhstani citizens or will not be taken into account at all when calculating the ratio.
4. Kazakh Language Requirement for Certain Intra-Corporate Transfer (ICT) Work Permits
As of 31 March 2016, a special regime was adopted for the issuance of work permits for "intra-corporate transfer" employees, i.e., foreigners who will work in Kazakhstan for a subsidiary, or for a branch or representative office, of their foreign employer. Under Order No. 559, "category 3" employees (specialists) working under an ICT arrangement must pass a Kazakh language test in order to obtain a work permit.
As noted below, this change was deleted on 15 December 2016.
Changes to Order No. 559
When it was issued in June 2016, Order No. 559 was expected to take effect, without any changes, on 1 January 2017, along with a supplementing Government resolution containing a list of exemptions from the work permit requirement substantially in the form of the Draft 2017 Exemptions. In other words, Order No. 559 and a resolution adopting the Draft 2017 Exemptions were expected to be the final new work permit rules.
But Order No. 559 (and the Draft 2017 Exemptions) proved to be highly controversial in Kazakhstan's foreign investment community. A number of the changes, in particular the elimination of the exemptions for heads of branches and representative offices and for heads of strategic investors and the imposition of the new Kazakh language requirement, were felt to be harmful to Kazakhstan's investment climate. Following consultations with the country's leading business organizations (including the Kazakhstan Foreign Investors Council Association, the American Chamber of Commerce and the European Business Association of Kazakhstan) and a number of leading foreign investors, the following significant actions were taken on 15 December 2016:
- Order No. 1069 was issued by the Minister of Healthcare and Social Development; and
- Resolution No. 802 was adopted by the Government of Kazakhstan.
Order No. 1069 and Resolution No. 802 delete some of the most controversial changes in Order No. 559 and adopt certain other changes to Order No. 559. The principal changes made by Order No. 1069 and Resolution No. 802 are summarized below:
Order No. 1069
Order No. 1069 amends Order No. 559 by, among other things, deleting the Kazakh language requirement for "category 3" employees for work permits issued under the ICT procedures.
In addition, Order No. 1069 makes the following two positive amendments to Order No. 559:
- the ratio requirements, which set forth the maximum number of foreigners which may be employed in relation to the number of local citizens employed by the employer, will no longer apply to branches and representative offices having not more than 30 employees;11 and
- an employer's obligation to report to the migration authorities on business trips of its foreign employees to different regions of Kazakhstan is eliminated.12
Resolution No. 802
Resolution No. 802 is the expected Government resolution supplementing Order No. 559. But the list of exemptions from the work permit requirement attached as Annex 2 to Resolution No. 802 replaces, and is broader than, the list of exemptions in the Draft 2017 Exemptions. Annex 2's list of 18 classes of persons who are exempt from the work permit requirement is substantially the same as the list of exemptions under the Old Rules. Resolution No. 802 (Annex 2, paragraphs 16, 17 and 18) makes it clear that the following classes of persons (among other classes) shall continue to be exempt from the work permit requirement notwithstanding Order No. 559:
- heads of branches or representative offices of foreign legal entities;
- persons arriving for business trip purposes for a period not exceeding the total of one hundred and twenty calendar days within one calendar year; and
- CEOs of companies, which executed investment contracts with the Government of the Republic of Kazakhstan for a cash equivalent exceeding US$50 million, and also chief executive officers of Kazakhstani legal entities investing in priority-type activities under contracts with the competent investment authorities.
Summary of Changes To Take Effect on 1 January 2017 under the 2017 Work Permit Rules
To summarize the status of the legislation concerning work permits, as of 1 January 2017 the Old Rules will be entirely replaced by Order No. 559 of the Acting Minister of Healthcare and Social Development on 27 June 2016. However, Order No. 559 has been amended by Order No. 1069 of the Minister of Healthcare and Social Development dated 15 December 2016. In addition, the Government of Kazakhstan has adopted Resolution No. 802 on 15 December 2016 which supplements Order No. 559 by (among other things) setting forth a list of work permit exemptions. Taken together, these three legislative acts constitute the 2017 Work Permit Rules.
The most significant differences from the Old Rules made by the 2017 Work Permit Rules are the following:
(i) state fees will be payable for the issuance of work permits issued under the general procedure (see para. 3.1 above); (ii) special conditions will no longer apply to work permits issued under the general procedure (see para. 3.2 above); (iii) local market research will no longer apply to work permits issued under the general procedure (see para. 3.3 above ); (iv) the maximum term of work permits, and the maximum number of extensions, will be changed for certain types of work permits issued under the general procedure (see para. 3.4 above); (v) the ratio requirements will no longer apply to branches and representative offices having not more than 30 employees (see item (1) under "Order No. 1069" above ); and (vi) the requirement to report on foreign employees' business trips to different regions of Kazakhstan will be eliminated (see item (2) under "Order No. 1069" above).
1 Resolution No. 45 of the Government of the Republic of Kazakhstan "On Approval of the Rules and Conditions of Issuing Permits to a Foreign Employee for the Purpose of Employment and to Employers for the Purpose of Attracting Foreign Labor Force and Foreign Workers Transferred within the Framework of Corporate Transfer" dated 13 January 2012, as amended.
2 Order of the Acting Minister of Healthcare and Social Development of the Republic of Kazakhstan No. 559 " On Approval of the Rules and Terms of Issuance and/or Extension of the Permits for Employers to Attract Foreign Labor Force as well as of Conducting Intra-Corporate Transfers" dated 27 June 2016 ("Order No. 559"). As used in this Legal Alert, the term "Order No. 559" does not include the amendments or supplements made by Order No. 1069 and Resolution No. 802.
3 Order of the Minister of Healthcare and Social Development of the Republic of Kazakhstan No. 1069 "On Making Amendments and Additions to the Order of the Acting Minister of Healthcare and Social Development of the Republic of Kazakhstan dated 27 June 2016 No. 559 'On Approval of the Rules and Terms of Issuance and/or Extension of the Permits for Employers to Attract Foreign Labor Force as well as of Conducting Intra-Corporate Transfers'" dated 15 December 2016 ("Order No. 1069").
4 Resolution of the Government of the Republic of Kazakhstan No. 802 "On Approval of the Rules for Setting a Quota for the Employment of Foreign Nationals in the Republic of Kazakhstan and for Allocating Such Quota Among the Regions of the Republic of Kazakhstan; on Forming Lists of the Sectors of the Economy in Which Intra-Corporate Transfers are Permitted and Lists of Persons Whose Employment Is not Subject to Permits to Employ Foreign Nationals Obtainable from Local Executive Authorities; and on Repealing Certain Resolutions of the Government of the Republic of Kazakhstan" dated 15 December 2016 ("Resolution No. 802").
5 Articles 4 and 5 of the Old Rules.
6 Draft Resolution On Approval of Regulation for Quota Setting for Attraction of Foreign Labor Force to the Republic of Kazakhstan and its Distribution Across Regions of Kazakhstan.
7 Citizens of countries which are members of the Eurasian Economic Union are separately exempt from the work permit requirement.
8 See, footnote 7.
9 Article 4.11 of the Old Rules.
10 See Baker McKenzie Legal Alert "Major changes to Kazakhstan's work permit rules" dated 8 January 2016.
11 The ratio requirement automatically ceased to have effect when Kazakhstan joined the WTO on 15 November 2015. See, Baker & McKenzie Legal Alert "Major changes to Kazakhstan's work permit rules" dated 8 January 2016. However, the ratio requirement was reinstated on 31 March 2016.
12 See, Baker & McKenzie Legal Alert "Major changes to Kazakhstan's work permit rules" dated 8 January 2016.