In this article, Meruet Zhunubayeva, Managing Partner at Astrea Group KZ, delves into the key considerations for foreign companies planning to expand into Kazakhstan, Uzbekistan, and Kyrgyzstan.
Meruet Zhunubayeva, Managing Partner at Astrea group KZ, an expert in international taxation and corporate law, linkedin
Central Asia is an emerging and strategically significant region, attracting international businesses due to its geographical location, abundant natural resources, and growing consumer market. However, registering branches and representative offices of foreign companies in this region involves specific legal and tax considerations that vary across jurisdictions.
Branch vs. Representative office vs. Permanent establishment
Before initiating the registration process, it is crucial to understand the distinctions between a branch, a representative office, and a permanent establishment under tax law.
Branch. A legally dependent but operationally autonomous subdivision of a foreign company that is authorized to conduct business activities, enter into contracts, open bank accounts, and pay taxes in the host country.
Representative office. A structure that primarily engages in auxiliary functions such as marketing, negotiations, and business promotion but is not permitted to conduct commercial activities.
Permanent establishment. A tax concept that applies when a foreign entity conducts business activities in a country, even without a registered branch. For instance, prolonged service provision in a jurisdiction may trigger tax liabilities under local PE rules.
Kazakhstan: favorable conditions for branches and representative offices
Kazakhstan offers foreign companies a straightforward and business-friendly registration framework for branches and representative offices.
Registration process
1. Registration is conducted through the Ministry of Justice of the Republic of Kazakhstan.
2. Required documents include corporate resolutions from the parent company, a charter, and a power of attorney for the appointed head.
3. The registration timeline typically ranges from 5 to 10 business days.
Taxation
1. Branches are subject to corporate income tax at 20% and VAT at 12% if engaged in commercial activities.
2. Representative offices are exempt from taxation unless they conduct business operations.
3. If a branch or representative office executes contracts on behalf of its parent company, tax withholding obligations may arise, particularly for payments to non-residents.
Additional Requirements
1. Mandatory registration with tax authorities.
2. Accounting and financial reporting obligations apply to both branches and representative offices.
Uzbekistan: no branches allowed, but permanent establishments may apply
Unlike Kazakhstan, Uzbekistan does not allow the registration of branches by foreign companies. Instead, businesses may establish representative offices or operate under a permanent establishment status if they conduct commercial activities.
Registration Process
1. Representative offices must be accredited by the Ministry of Investments, Industry, and Trade.
2. The process takes between 15 to 30 days, and the foreign company must demonstrate prior business activity abroad.
3. Bank account opening and tax registration are mandatory.
Taxation
1. Representative offices are tax-exempt unless they engage in business activities.
2. If a foreign company provides services or generates income in Uzbekistan, it may be considered a permanent establishment, triggering the following tax liabilities:
— Corporate income tax — 15%
— VAT — 12%
— Withholding tax — 10% to 20% on certain types of income.
Key Risk: If a representative office enters into contracts and earns revenue, Uzbek tax authorities may reclassify it as a permanent establishment, imposing retrospective tax obligations.
Kyrgyzstan: simple registration but high tax rates
Kyrgyzstan permits the registration of both branches and representative offices, though its tax regime may pose a higher financial burden compared to neighboring countries.
Registration process
1. Registration is handled by the Ministry of Justice of Kyrgyzstan.
2. A branch or representative office must appoint a local head and establish a legal address.
3. The standard registration process takes 10 to 15 business days.
Taxation
Branches are subject to:
— Corporate income tax — 10%
— VAT — 12%
— Representative offices are tax-exempt if they do not engage in business operations.
— If services are provided in Kyrgyzstan, withholding tax obligations — 5–10%, may apply.
Key takeaways and recommendations
Kazakhstan offers the most flexible framework for establishing fully operational branches with commercial activity rights.
Uzbekistan only permits representative offices, while business operations may create permanent establishment risks.
Kyrgyzstan allows branches but imposes higher tax rates compared to its regional counterparts.
When entering the Central Asian market, businesses must consider not only the legal registration requirements but also the tax implications, which may arise even in the absence of a formal branch.
If you require expert guidance on business registration, taxation, or risk minimization strategies in Central Asia, feel free to contact me — I will help you develop a compliant and efficient market entry strategy.