Kazakhstan's economy is increasingly embracing flexible work arrangements, with a growing number of professionals opting for independent contractor or freelance status. This shift is driven by various factors, including the global trend towards remote work, the desire for greater autonomy, and the specific needs of businesses seeking specialized skills without the overhead of traditional employment. Understanding the legal and practical landscape for engaging independent contractors in Kazakhstan is crucial for both local and international companies operating in the region.
Navigating the nuances of contractor relationships requires careful attention to local regulations, particularly concerning worker classification, contractual agreements, and compliance obligations. Companies engaging independent professionals must ensure their arrangements align with Kazakh law to avoid potential misclassification risks and associated penalties. This guide provides an overview of key considerations for businesses working with independent contractors in Kazakhstan in 2025.
Legal Distinctions Between Employees and Contractors
Distinguishing between an employee and an independent contractor is fundamental in Kazakhstan, as the legal and tax implications differ significantly. The primary legislation governing labor relations is the Labor Code of the Republic of Kazakhstan. While the Labor Code primarily defines employee relationships, the Civil Code governs contractual relationships for services or work performed by independent contractors.
Key factors typically considered by Kazakh authorities when determining worker classification include:
- Control: The degree of control the client exercises over the worker's activities, including work hours, location, and methods. Employees are generally subject to the client's direct control and internal rules.
- Integration: Whether the worker is integrated into the client's business operations and structure. Employees are typically part of the company's regular workforce.
- Financial Dependence: Whether the worker is financially dependent on the client. Independent contractors usually work for multiple clients and bear their own business expenses and risks.
- Nature of the Relationship: The duration and permanency of the relationship. Employee relationships are often long-term and continuous, while contractor engagements are typically project-based or for a defined period.
- Contractual Terms: The language and structure of the agreement between the parties. A civil law contract for services (e.g., a service agreement or contract work agreement) is used for contractors, distinct from an employment contract.
Misclassifying an employee as an independent contractor can lead to significant liabilities for the client company, including back payment of taxes, social contributions, penalties, and potential legal claims from the worker.
Independent Contracting Practices and Contract Structures
Independent contractor relationships in Kazakhstan are typically formalized through civil law contracts, such as a service agreement (договор возмездного оказания услуг) or a contract work agreement (договор подряда). These contracts fall under the purview of the Civil Code.
Essential terms to include in an independent contractor agreement:
- Scope of Work: A clear and detailed description of the specific services or deliverables the contractor will provide.
- Deliverables and Milestones: Clearly defined outcomes and timelines for completion.
- Payment Terms: The agreed-upon fee structure (e.g., fixed price, hourly rate), payment schedule, and currency.
- Term: The duration of the agreement or the project completion date.
- Termination Clauses: Conditions under which either party can terminate the agreement.
- Confidentiality: Obligations regarding the protection of sensitive information.
- Intellectual Property: Provisions clarifying ownership of work product (see below).
- Indemnification and Liability: Clauses outlining responsibility for damages or losses.
- Governing Law and Dispute Resolution: Specifying that Kazakh law applies and how disputes will be resolved.
It is crucial that the contract reflects a genuine independent relationship, avoiding language or clauses that imply an employer-employee relationship (e.g., mandatory adherence to internal company policies unrelated to the project, provision of company equipment unless specifically agreed upon for the project, control over working hours).
Intellectual Property Rights Considerations for Freelancers
In Kazakhstan, the general rule under civil law is that intellectual property rights for works created by an individual in the course of performing a contract for services or contract work belong to the creator (the independent contractor) unless the contract explicitly states otherwise.
Therefore, if a client company wishes to own the intellectual property created by an independent contractor during the engagement, the contract must contain clear and specific provisions assigning these rights to the client. This assignment should cover all relevant types of IP, such as copyrights, patents, trademarks, and trade secrets, depending on the nature of the work. Without such a clause, the contractor retains ownership, granting the client only a license to use the work for the purposes specified in the contract.
Tax Obligations and Insurance Requirements
Independent contractors in Kazakhstan are responsible for managing their own tax obligations and social contributions. They typically register as individual entrepreneurs (ИП - Индивидуальный предприниматель) or operate as individuals providing services under civil law contracts.
Tax Obligations
Independent contractors registered as Individual Entrepreneurs (IEs) can often choose simplified tax regimes, such as the simplified declaration regime (упрощенная декларация) or the patent regime.
- Simplified Declaration Regime: Applicable if annual income does not exceed a certain threshold and the number of employees is limited. Tax is typically calculated at a rate of 3% of income, split between income tax and social tax.
- Patent Regime: Available for specific types of activities and income thresholds. Tax is calculated based on potential income.
IEs are also required to pay mandatory social contributions, including:
- Mandatory Pension Contributions (ОПВ): Calculated as a percentage of income (e.g., 10%).
- Mandatory Social Contributions (СО): Calculated as a percentage of income (e.g., 3.5%).
- Mandatory Social Health Insurance Contributions (ВОСМС): Calculated as a percentage of income (e.g., 5%).
Individuals providing services under civil law contracts who are not registered as IEs may have taxes withheld by the client company, depending on the client's tax status and the nature of the payment. Generally, payments to individuals under civil law contracts are subject to Individual Income Tax (ИПН) at a rate of 10% and mandatory pension contributions (ОПВ) at 10%. Social contributions (СО) and health insurance contributions (ВОСМС) are typically not applicable for the client when paying an individual under a civil law contract, but the individual may have personal obligations depending on their status.
It is crucial for both the contractor and the client to understand who is responsible for withholding and remitting taxes and contributions based on the contractor's legal status (IE or individual) and the contract type.
Insurance Requirements
Independent contractors are generally responsible for their own insurance, including health insurance (covered partly by the mandatory social health insurance system if registered correctly) and potentially professional liability insurance, depending on their profession and client requirements. Client companies are not typically required to provide insurance coverage for independent contractors.
Common Industries and Sectors Using Independent Contractors
Independent contractors are utilized across various sectors in Kazakhstan, particularly in areas requiring specialized skills, project-based work, or flexibility.
Common sectors include:
- Information Technology (IT): Software development, web design, cybersecurity, IT consulting.
- Creative Services: Graphic design, content writing, marketing, photography, video production.
- Consulting: Business strategy, management consulting, financial consulting, legal consulting.
- Education and Training: Tutoring, corporate training, language instruction.
- Healthcare: Specialized medical services, consulting roles.
- Construction and Engineering: Project-based expertise, specialized technical roles.
- Oil and Gas: Specialized technical or consulting roles on projects.
The use of independent contractors allows businesses in these sectors to access specific expertise on demand without the long-term commitment of employment, while offering professionals the flexibility and autonomy of self-employment.
