1. Amendments to the Work Permit Rules: Problematic Issues Alex Nisengolts 28 April 2011

2. 1 © 2011 KPMG Tax and Advisory LLC, a company incorporated under the Laws of the Republic of Kazakhstan, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. New Amendments to the Work Permit Rules On 2 February 2011, Kazakhstan Government adopted Resolution № 71, amending Government Resolution № 836 dated 19 June 2001 Principal changes include: Revocation of work permits for secondments of expatriates between Kazakh entities Establishment of specified limits on the percentage of foreign personnel employed by large and medium companies Imposition of a 12-month bar on obtaining new work permits if foreign staff are improperly seconded or established limits on the percentage of foreign personnel are violated Reduction to 60 calendar days of the number of days an expatriate may work in Kazakhstan outside the region for which he/she has a work permit. This period may be extended by special permission

3. 2 © 2011 KPMG Tax and Advisory LLC, a company incorporated under the Laws of the Republic of Kazakhstan, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Secondments of Foreign Personnel What the rules say: A work permit may be terminated if an employer seconds a foreign employee to another individual or legal entity (Item 46(6) of the Rules) Employers who second foreign personnel to other employers in Kazakhstan are subject to a 12-month bar on obtaining new work permits, starting from the date when the violation is confirmed (Item 35(7) of the Rules) What is still permissible (not addressed by work permit legislation): Secondment of foreign personnel from abroad to a Kazakh entity, which then obtains work permits and employs those individuals Secondment of local nationals between Kazakh entities

4. 3 © 2011 KPMG Tax and Advisory LLC, a company incorporated under the Laws of the Republic of Kazakhstan, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. New Percentage Quotas on Foreign Staff New limits imposed on large and medium companies regarding the percentage of foreign personnel (Item 19-1 of the Rules) Small companies are exempt The new limits are valid until Kazakhstan joins WTO Sanctions for the violation of the limits include: Revocation of Work Permits (Item 46(5) of the Rules) Employers are banned from obtaining new work permits for a period of 12 months starting from the date when the violation is confirmed (Item 35(7) of the Rules)

5. 4 © 2011 KPMG Tax and Advisory LLC, a company incorporated under the Laws of the Republic of Kazakhstan, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Category 1 Definition Expanded Category 1 definition expanded to include: Chief executives; Deputy chief executives; Financial and technical directors; Chief engineers, structural engineers, technologists, power engineers, metallurgists, architects, geologists and geophysicists These individuals must have higher education and at least five years of experience working in a relevant position in a similar industry prior to obtaining a work permit in Kazakhstan.

6. 5 © 2011 KPMG Tax and Advisory LLC, a company incorporated under the Laws of the Republic of Kazakhstan, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The New Limits will be Phased in Two Stages From 1 July 2011 to 1 January 2012 The total number of foreign personnel already employed or scheduled to be employed in the employer’s first personnel category may not exceed 50 percent of the employer’s total number of category 1 personnel; The total number of foreign personnel already employed or scheduled to be employed in the employer’s second and third personnel categories may not exceed 30 percent of the employer’s total number of category 2 and category 3 personnel; Starting 1 January 2012 The total number of foreign personnel already employed or scheduled to be employed in the employer’s first personnel category may not exceed 30 percent of the employer’s total number of category 1 personnel; The total number of foreign personnel already employed or scheduled to be employed in the employer’s second and third personnel categories may not exceed 10 percent of the employer’s total number of category 2 and category 3 personnel.

7. 6 © 2011 KPMG Tax and Advisory LLC, a company incorporated under the Laws of the Republic of Kazakhstan, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. New Form Specifying Local Content in Personnel As part of their applications for new work permits, large and medium companies must submit a form specifying the local content in their personnel, which is based on Appendix 6-1 of the Rules If the percentage of foreign personnel exceeds the permissible limits, the authorized body may refuse to issue new work permits

8. 7 © 2011 KPMG Tax and Advisory LLC, a company incorporated under the Laws of the Republic of Kazakhstan, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Small Company Exception What is a small company? Defined in the Law on Private Entrepreneurship to include individual entrepreneurs and legal entities which Employ not more than 50 employees, and Whose average annual assets do not exceed 60,000 MIF (approximately USD 600,000) Additional point: it must be registered as a small company What are assets? Defined under IAS 38.8 and Article 13.1 of the Law on Accounting –Assets are defined as a resource which is controlled by an entity as a result of past events and from which future economic benefits are expected to flow to the entity

9. 8 © 2011 KPMG Tax and Advisory LLC, a company incorporated under the Laws of the Republic of Kazakhstan, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Unclear Aspects How are branches classified for the purposes of labor quotas? Item 2(1) of the Rules defines foreign personnel as foreigners and persons without citizenship which are attracted by an employer to perform employment activities on the territory of the Republic of Kazakhstan Still unclear: How to classify expatriates who do not need a work permit (such as branch directors and expatriates with a permit residence permit for the purposes of completing Appendix 6-1 in order to calculate Kazakh content in personnel Item 46(5) of the Rules allows the authorized body to revoke work permits in cases where the percentage of expatriates employees exceeds the limits established in Item 19-1 of the Rules Still unclear: Whether existing work permits be revoked once the new percentage quotas become effective even though the employer legitimately obtained those work permits prior to the effective date of the new quotas

10. 9 © 2011 KPMG Tax and Advisory LLC, a company incorporated under the Laws of the Republic of Kazakhstan, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Business Trips by Expatriates within Kazakhstan The number of days an expatriate may work outside the region for which he/she has a work permit has been reduced to 60-calendar days from the prior 120-days. (Item 32-1 of the Rules) The new amendments specify a procedure for obtaining special permission to work in two or more regions of Kazakhstan: The employer must first apply to the local authorized body, which must then send a written request to the central executive body for approval of the employer’s request The central executive body must approve or deny the local authorities’ request within seven business days. Once the local authorized body receives approval from the central authorities, it must issue the special permission within five business days The special permission authorizing the employer’s expatriates to work in multiple regions of Kazakhstan will be valid until the expiration date of the foreign employee’s work permit Still unclear: How to treat the time the foreign employee spent working in a different region of Kazakhstan prior to the adoption of the new amendments. Does the 60-day limit begin after the effective date of the 2 February 2011 amendments or does it extend to prior periods?

11. 10 © 2011 KPMG Tax and Advisory LLC, a company incorporated under the Laws of the Republic of Kazakhstan, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Faster Response from the Labor Authorities The authorized body must now approve or reject an employer’s application for a new work permit within 15 working days from the date when the required documents are received, instead of 20 working days. (Item 24 of the Rules) The authorized body must now approve or reject an employer’s application for an extension of an existing work permit within five working days from the date when the required documents are received, instead of 10 working days. (Item 24 of the Rules) The new amendments reduce the time periods for the authorized body to make decisions on certain issues:

12. 11 © 2011 KPMG Tax and Advisory LLC, a company incorporated under the Laws of the Republic of Kazakhstan, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Companies participating in the “Industrialization Map of Kazakhstan” Program for 2010 - 2014 Employers participating in the implementation of projects under the “Industrialization Map of Kazakhstan” Program for 2010 – 2014 and bringing to Kazakhstan foreign personnel, including contractors repairing, installing and commissioning production equipment for such projects, are not required to seek alternative candidates on the domestic labor market. Those employers are also not required to file the following documents with the authorized body as part of their work permit applications: job advertisements in state and local periodicals; justification of the employer’s refusal to hire a local employee to fill the position.

13. Thank you Presentation by Alex Nisengolts

14. © 2011 KPMG Tax and Advisory LLC, a company incorporated under the Laws of the Republic of Kazakhstan, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International Cooperative (“KPMG International”).