When a foreign employee, working remotely (online) abroad in the company, registered and located in Kazakhstan, how to conclude an employment contract with such employee? Does he need to obtain a work permit and work visa? What currency should the salary

Due to the geopolitical situation in the region, interest in the labor market of Kazakhstan from foreign employees, including working remote, has sharply increased.

This material discusses the main points of concluding an employment contract between a foreign employee, working remotely being abroad and employer registered in Kazakhstan.

Labor relations between an employer located on the territory of Kazakhstan, including branches and representative offices of foreign legal entities, are regulated by the Labor Code of Kazakhstan, regardless of the location of the workplace, including remote work outside of Kazakhstan.¹

What is remote work according to the Labor Code of Kazakhstan?

Remote work - the execution of labor processes outside the employer's location, using information and communication technologies in the work process.² It should be noted that when an employee are working remotely, the employment contract does not indicate the place of work.³ By agreement of the parties to the employment contract, a flexible working time regime may be established for employees engaged in remote work, and remote or combined remote work may be established.⁴ A business trip for an employee when working remotely is carried out from his location.⁵

In cease an employee uses his own equipment, information facilities and other means to perform his job duties, and also incurs expenses for payment for communication services, the employer pays compensation, the amount, procedure and payment period of which are established by agreement with the employee. By agreement of the parties, an employee engaged in remote work may be reimbursed for other reasonable expenses, including the cost of electricity, associated with performing work for the employer.⁶

Does a foreign employee need a work permit when he works remotely from abroad?

A foreign employee, who is working in the territory of Kazakhstan must apply for a work permit in case the place of work is the territory of Kazakhstan.⁷ A work permit is not required for citizens of the EAEU countries (Armenia, Belarus, Kyrgyzstan and Russia) within the Customs Union.⁸ After employment, EAEU citizens must obtain a temporary residence permit.

A work permit is also not required for the head of a branch or representative office of a foreign company in Kazakhstan.⁹ The director of the company and his two deputies in a company with 100% foreign participation also do not require a work permit.

An employee who has entered into an employment contract with a Kazakh employer for remote work, in the event that the employee will carry out labor activities without living to Kazakhstan, then in this case there is no need to obtain a work permit. Since permission to attract foreign labor is applicable to foreign citizens who will work on the territory of Kazakhstan.¹⁰

What documents are required to conclude an employment contract for a foreigner, working remotely without entering the territory of Kazakhstan?

1. Passport;

2. Individual identification number (IIN);

3. Electronic digital signature (EDS). It is not a mandatory requirement for concluding an employment contract. However, in practice, the Labor Code allows the conclusion of an employment contract by signing it with an electronic signature. In the future, any amendments to the employment contract, notifications of applications and review of documentation can be signed with an electronic signature;

4. Diploma;

5. Work record book (if you have work experience). In practice, not all employers require this document, since the employee needs it more to confirm his length of service with the Company;

6. Account in a Kazakh bank.

In what currency is the salary of a foreign worker calculated?

According to the Labor Code, wages are set and paid in the national currency, tenge.¹¹ That is way, the salary should be indicated in tenge. To receive wages, you must open an account in a Kazakh bank. To open bank account you will need an IIN, personal presence at the bank and a Kazakh telephone number to receive SMS notifications. Many banks additionally require an employment contract registered on the website https://www.enbek.kz/kk to open an account. You can open a multi-currency bank account at once, for example, tenge, dollars and euros and, if necessary, convert tenge into other currencies. You can manage your account - transfer to other accounts, cards, convert through the online banking application. Thus, it is enough to visit the bank once to open an account and you can manage it fully online.

Is electronic document exchange possible between employer and employee?

The pandemic has accelerated the transition to electronic document exchange between employee and employer; in connection with the new realities, amendments to the Labor Code related to remote work were adopted. So, on July 1, 2021, the Law of the Republic of Kazakhstan on “On introducing amendments and additions to the Labor Code of the Republic of Kazakhstan on improving the legal regulation of remote work” was signed and published. An employment contract, additional agreements to it, notifications, statements and familiarization with the employer’s acts can be made by signing an electronic signature.¹²

What are the tax and deduction rates for remote work for non-resident foreigners?

To determine taxation for a foreign worker, it is necessary to determine whether the foreigner is a tax resident of Kazakhstan in accordance with the Tax Code of the Republic of Kazakhstan. For tax purposes, a resident of the Republic of Kazakhstan is an individual:

1. permanently residing in the Republic of Kazakhstan;

2. not permanently residing in the Republic of Kazakhstan, but whose center of vital interests is in the Republic of Kazakhstan.¹³

A person is considered to be permanently residing in Kazakhstan if he is in the country for at least 183 calendar days (including days of arrival and departure) in any consecutive 12-month period ending in the current tax period.¹⁴

If a foreign employee is recognized as permanently residing on the territory of Kazakhstan, then for tax purposes he will be a resident of Kazakhstan. It can be concluded, if an employee works remotely without entering the territory of Kazakhstan, then for tax purposes he will be recognized as a non-resident.

The income of a non-resident individual ¹⁵is subject to individual income tax (IIT) at the source of payment at the rates specified in Article 646 of the Tax Code. In this case, tax deductions for personal income tax are not applied.

According to the Tax Code, income of a non-resident from sources in the Republic of Kazakhstan is recognized as income of a non-resident individual from activities in the Republic of Kazakhstan under an employment agreement (contract) concluded with a resident or non-resident who is an employer ¹⁶. The IIT rate on such income is 10%.¹⁷

In addition, the employer calculates social tax on the income of a non-resident employee in the amount of 9.5% of income.¹⁸

According to the Social Code, compulsory social insurance must be paid for the that are permanently residing in the territory of Kazakhstan and carrying out income-generating activities in the territory of Kazakhstan.¹⁹ Accordingly, if a non-resident employee permanently resides in the territory of his country, and not in Kazakhstan, and an employment contract for remote work is concluded with him, he will not be considered a permanent resident in the territory of Kazakhstan. Therefore, social contributions will not be calculated from his income.

Obligatory social health insurance contributions and Contributions to compulsory social health insurance for non-resident foreigners who are employees during remote work, but do not permanently reside in the territory of Kazakhstan: they are not paid.

Mandatory pension contributions from the income of non-resident workers from third countries (not from the EAEU countries) are also not calculated, since there is no international agreement regarding the calculation of pension contributions.

Therefore, if a non-resident employee works remotely, not being on the territory of Kazakhstan, and he is a citizen of a country that is not part of the EAEU, then, social contributions, Contributions to compulsory social health insurance, Mandatory pension contributions and are not paid for him. He will pay a personal income tax at a rate of 10% and social tax at a rate of 9.5%. It should be noted that all taxes and obligatory payments must be paid by employer and it is recommended for an employee to read carefully does his amount of salary include or exclude taxes and payments in the budget.

Author: legal consultant Aigerim Massatbayeva