Self-Employment in Kazakhstan
How to register self-employment in Kazakhstan? How much tax should be paid? What nuances should be kept in mind?
Who is Self-Employment Suitable For?
To register as self-employed, an individual must meet several criteria simultaneously:
- Not to have an official job (based on a contract with an employer).
- Not to be registered as an individual entrepreneur (IE).
- Not to be registered as unemployed with the labor exchange.
- Not to hire employees.
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As mentioned earlier, a self-employed person can sell their own products or provide services, but not in all areas.
Self-employment is suitable if you produce and sell agricultural products yourself. These can be vegetables or fruits, eggs, dairy products, or honey. However, selling other handmade goods is prohibited. For example, if you make handmade jewelry, you need to open an IE to legally sell them.
Self-employment is also relevant for specialists providing services in tutoring or tailoring. Additionally, as a self-employed person, you can work as a nanny, perform loading or unloading jobs, repair equipment or housing, and assemble furniture.
Renting out residential property is also included in the list of activities available to the self-employed.
An important note: a self-employed person can sell goods, rent out housing, and provide services to individuals only.
You can check your status at any time to ensure you are registered as self-employed. To do this, visit the e-government website Egov.kz – all information is available in your personal account. It’s also worth visiting it if you’re planning to start working as self-employed to check if you are listed in the database as unemployed.
Pitfalls of Self-Employment
There are other nuances:
You can sell self-produced goods and provide services but cannot do this on commercial territory.
For example, you cannot take home-grown apples, tomatoes, or potatoes to a market or a store – self-employed individuals can sell them only from home. You can arrange to meet customers on a neutral territory, i.e. somewhere in the street, but you cannot set up a sales point.
If you repair irons or laptops, or mend clothes, you can provide these services only at home; the self-employed are not allowed to have their own workshop or service point in shopping centers.
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You can rent out housing, but not property.
You can offer an apartment for rent that you do not live in (for example, one inherited or an investment property). However, you cannot provide services for renting out household appliances or power tools.
You can only provide services that do not fall under private practice.
A self-employed person cannot be a lawyer, mediator, or notary. To work in these fields, you will need to become an IE.
Also note that in Kazakhstan, self-employment is not available to non-citizens. But there is an exception: this rule does not apply to oralmans, ethnic Kazakh repatriates who have relocated to Kazakhstan from other countries.
How to Register as Self-Employed?
Self-employed persons do not need to go through a special registration procedure or submit reports to the tax committee. To start working as self-employed, you only need to pay the Unified Aggregate Payment (EAP). This payment is made once a month –you can officially work until the end of the paid month. You can also pay the EAP for several months in advance – the choice of payment format is up to you.
To stop working as self-employed (for example, if you no longer have income), you just need to stop paying the EAP – the system will automatically deregister you.
Everything is as simple and quick as possible.
What Does the EAP Include and How to Make the Payment?
The unified aggregate payment got its name because it combines four payments:
- 10% of the amount goes to individual income tax.
- 30% goes to the pension fund.
- 40% goes to health insurance.
- 20% are social contributions.
You do not have to calculate the percentages yourself: an individual pays one amount, which is automatically distributed among the four categories.
Exception: self-employed pensioners – all their contributions go to one category only – income tax.
The EAP amount is set by the state:
- Self-employed individuals living in regional centers and cities of republican significance pay 1 MCI. In 2024, this is KZT 3,692.
- Residents of other settlements pay half – 0.5 MCI, i.e. KZT1,846.
You can make the EAP payment in any convenient way. Transactions are available through:
- Second-tier banks. Payments can be made in cash or by card through the cashdesk. You do not need to open a bank account.
- Kazpost and other organizations where you can make such a transaction.
- Bank apps. The most convenient option is bank apps. They already have a section of payments for self-employed, so you don’t even need to enter the recipient's details. Another convenient option with payment through the app: you can pay the EAP for another person – you only need to specify his or her IIN.
What Are the Advantages of Self-Employment?
This method of legalizing work has many advantages:
- You can receive free medical care since you participate in the state insurance system along with individual entrepreneurs and hired workers.
- Pension savings increase.
- Years of pensionable service increase. It determines the amount of payments when you retire. For example, if a worker has 10 years of service, such worker will receive a pension of 54% of the minimum living wage. With each additional year after 10 years of service, the payment amount increases by 2%. To receive a pension equal to the minimum living wage, the length of service must be 33 years.
- You can count on social assistance. For example, on unemployment allowance or assistance when adopting a child, and childcare allowance for a child up to one year old.
Disadvantages
Freelancers are attracted by the simplicity and clarity of the system, but it also has disadvantages. The main one is that there is no link to income. On one hand, this is good: you make a small payment and spend the rest of the money at your discretion. At the same time, you can use medical services and “build up” pensionable service. However, since the self-employed do not pay taxes, the pension will be basic, and social benefits will be minimal. This will not suit everyone, of course.
Also, keep in mind that self-employed individuals are usually denied large loans by banks, which means that difficulties may arise with mortgages – the most popular type of loan.
Experts believe that self-employment is an optimal solution for those specialists for whom freelancing is a side job, for example, during university studies. Such a system will also be suitable for rural residents engaged in growing agricultural products and who cannot “accumulate” service record in any other way.
Can You Be an IE and Self-Employed Simultaneously?
In Kazakhstan, self-employment cannot be combined with individual entrepreneurship or hired work. IE and hired work contradict the very conditions for registering an individual as self-employed.
Open an account for a IE at Bank CenterCredit
Self-employment is a way to earn income while avoiding the risks of being held accountable for illegal entrepreneurship. The advantages of the system include maximum simplicity and clarity, no need for complex administrative procedures and reporting. Self-employment allows free use of medical services and “accumulation” of service record but is not suitable for everyone. Therefore, it is important to familiarize yourself with the nuances before starting activities. важно ознакомиться с нюансами.
Чтобы вести бизнес легально, потребуется открытие ИП в Казахстане. Однако законность – не единственное преимущество. Во-первых, у вас будет идти официальный рабочий стаж. Во-вторых, бизнесмены делают пенсионные отчисления. В-третьих, для индивидуальных предпринимателей в РК созданы все условия для развития бизнеса, его масштабирования.
How to Open an IE in Kazakhstan in 2024: Online and Offline
You can open an IE in Kazakhstan in two ways: online or offline by personally visiting the Public Service Center (PSC). The first method is attractive due to its simplicity and efficiency: you can become an individual entrepreneur in just a few minutes without having to spend your time for travelling to the PSC. The second method will not save time but will allow you to ask the PSC staff all your questions and get comprehensive information. Let's consider both options in more detail.
How to Open an IE Online
Online IE registration is possible in three ways:
- Through Egov.kz: This is the electronic government portal.
- Via the E-Salyq Business app: This app is developed by the State Revenue Committee.
- Through certain banks: For example, on the website of Bank CenterCredit at bcc.kz.
Let's look at a specific example of how to open an IE through the Egov portal:
- Go to the Egov.kz website.
- Click on the Business section.
- Select the Business Registration and Development section.
- Go to the Business Registration and Liquidation tab. You will see a list of services; to view all items, click the Show All button.
- Select the Notification of Commencement of Activities as an Individual Entrepreneur section.
- Click on the Order Service Online button. You can't miss it: it's big and bright orange. Log in to the system or register.
- You will be redirected to the electronic licensing portal - Elicense.kz.
- Click on the Notification of Commencement of Activities as an Individual Entrepreneur.
- Fill out the proposed form.
- Sign it with an Electronic Digital Signature (EDS).
Please note that the EDS must be obtained in advance. This can also be done remotely on the Egov.kz website.
How Much Does It Cost to Open an IE Online in Kazakhstan?
The registration procedure is free.
How to Register Through a Bank
This process is just as simple as using the Egov.kz platform. Bank CenterCredit has launched its own service: you can register through the app or on a special web resource. The service will require identity verification: identification can be done through the Egov.kz portal or via video. The user then fills out information about their business (nature of business, address, tax regime). Done! The entire procedure takes no more than 5 minutes.
One significant advantage of registering through a bank is that you can immediately open an account, issue a corporate card, connect internet banking for business, and even gain access to online accounting services.
How to Register an IE at PSC
To register a business in the classic “paper” format, you need to visit the local Public Service Center or the tax authority at the location of your primary business activity or your residence registration. For example, if you are opening a store, you need to approach to the tax office at your store's location. As with online registration, the documents will be ready within a day.
Please note that in some cases, a lease certificate for the premises where the IE will operate may be required.
To start an IE in Kazakhstan, you need to receive an electronic registration notification. Today, business owners no longer need to obtain an IE registration certificate – it is enough to fill out a special form and download the registration notification from the Personal Area on the Elicense.kz electronic licensing portal. The document specifies the address and name of the enterprise, the type of activity according to the Common Classifier of Economic Activity (OKED), and the chosen tax regime.
What You Need to Know Before Starting a Business (IE) in Kazakhstan
Let's answer the most common questions that future entrepreneurs have.
Is It Possible To Run a Business Without Registering As an IE?
Yes, it is possible to engage in entrepreneurial activities without IE status. However, there is a reservation: in this case, entrepreneurs shall not use hired labor, and the annual profit of the enterprise from the sale of goods, works, and services to individuals shall not exceed 12 minimum wages.
Can an IE Registration Be Denied?
The IE registration process in Kazakhstan seems to be very simple and straightforward. However, there are some hidden pitfalls. In certain cases, the authorized body may refuse to open a business. You will be denied if:
- You are already an individual entrepreneur. Opening two IEs by one person is prohibited in Kazakhstan.
- Your company went bankrupt over the last 12 months.
- A court has prohibited you to engage in entrepreneurial activities.
- You submitted registration papers not at the place of residence (i.e., you have selected the wrong tax authority at the registration stage).
- Your document package is incomplete.
- You filled out the application form incorrectly.
- You have chosen a type of activity that is prohibited for IEs. In Kazakhstan, this includes passenger and cargo air transportation, drug manufacturing, activities related to weapons, and a number of others.
At What Age Can an IE Be Opened in Kazakhstan?
Individuals who have reached the age of majority can open an IE. However, in some cases, it is possible not to wait until the age of 18 and become a full-fledged entrepreneur even at the age of 14. To do this, you need to prepare. So, you will need to attach the consent of legal representatives to the list of documents required for business registration. If there is no consent, you need to provide other documents. This may be a copy of the marriage certificate (if the minor is married) or a court decision declaring that the minor is fully capable (this process is called emancipation). However, emancipation is possible only for individuals who have reached the age of 16.
What Tax Regime to Choose?
Individual entrepreneurs may choose one of four regimes:
1. Special Patent-Based Tax Regime
Suitable for IEs who work independently only, i.e. without hiring employees. It provides the most favorable conditions. The tax rate is the same for all entrepreneurs and is 1% of income.
However, there is a condition: the maximum annual income should not exceed 3,528 MCIs (Monthly Calculation Index). In 2024, 1 MCI equals KZT 3,692.
2. Special Tax Regime Based on a Simplified Declaration
This regime allows a maximum of 30 employees (including the business owner). But it also comes with more obligations.
What taxes does an IE pay under the simplified regime in Kazakhstan in 2024? 3% of income, with 1.5% being income tax and another 1.5% being social tax. Additionally, the individual entrepreneur pays for themselves: 10% for pensions, 3.5% for social security, and 5% of 1.4 Minimum Wage for health insurance.
The simplified regime is suitable for IEs whose maximum income for six months does not exceed 24,038 MCIs. There is also an additional condition: when using the TIS (three-component integrated system), the income threshold increases.
If an IE's income exceeds 20,000 MCIs during the calendar year (20,000 * 3,692 = 73,840,000), the entrepreneur must obtain a VAT certificate (VAT is 12%).
3. Special Tax Regime Using a Fixed Deduction
This taxation system is suitable for companies where, besides the entrepreneur, 49 other people are employed. The tax rate in this case is 10% of income.
But the regime is relevant only when the maximum income for six months does not exceed 144,184 MCIs.
What if your business does not meet the conditions of any of the three systems? In this case, the fourth option - the generally established regime - is optimal. It provides a 10% tax rate on income, while there are no any income limits. Please note that in this situation, tax reports are submitted to the tax authority quarterly and according to the results of the year. The generally established regime is suitable for businesses with large turnovers. Moreover, this system is mandatory for alcohol and tobacco producers, professionals providing financial and accounting services, companies selling petroleum products, or working with natural resources.
What Taxes Are Paid for Hired Workers?
In all tax regimes, except for the patent-based regime, it is possible to employ workers. Therefore, their income must be subject to the following taxes and payments to be withheld and paid monthly:
- 10% – individual income tax (IIT).
- 10% – pension contributions.
- 2% – health insurance contributions (Compulsory Social Health Insurance Contributions).
Additionally, the following is paid at the expense of the IE:
- 3.5% – social contributions.
- 3% – compulsory health insurance (Compulsory Social Health Insurance).
Individual entrepreneurs on this regime are exempt from the social tax for employees.
What happens if tax reports are not submitted on time and taxes and other payments are delayed?
In this case, the entrepreneur will receive a fine. If a businessman is late with payments, a penalty will be charged for each day of delay.
How to Change IE Information?
If any data submitted by the entrepreneur during registration changes, the tax authority must be notified thereof. You have 10 days to do this.
Changes are made through the Elicense.kz portal. In the Personal Area, you will see a list of available services – select the Service section (Notification Procedure subsection). Then follow this path: Notification of Commencement of Activities as an IE – Change of IE Registration Data. The next step is to click on the Order Service Online button.
Then, you should select the tax authority at the place of registration – the application for changing registration details will be automatically sent to the tax authority.
A form with all the information about your IE will open – you can edit the necessary details here. The final step is to sign the notification of change with your electronic signature. Here you can also download the new (with changes) notification and the IE certificate.
To sum up, we have learned what is needed to open an IE in Kazakhstan. The procedure is as simple and quick as possible, requiring a minimal package of documents. This is why Kazakhstan is considered one of the countries with a favorable business environment. As we can see, most procedures (obtaining an EDS, changing details) can be done online and save time. However, despite the simplicity of the process, it is essential to remember the individual entrepreneur obligations – including timely tax payments and other payments.
Author - Broslavskaya Natalia Alexandrovna