This content is from: Local Insights


Kazakhstan's new law on financial leasing (the Lease Law) became effective on July 13. It regulates tripartite transactions involving a sale of assets from a supplier to a lessor, followed by the lessor's lease of those assets to a lessee. Although this type of transaction was first recognized by the special part of the Civil Code in July 1999, it has remained relatively rare due to the lack of clarifying legislation.

The Lease Law determines the rights and responsibilities of the parties, the procedures for acquiring and transferring the leased assets, and the terms of financial lease contracts. The most distinctive requirements of a financial lease transaction, as stipulated by the Lease Law, are the following:

  • the term of the lease must not be less than 80% of the wear and tear period for the leased assets;
  • consumer goods, securities, and natural resources cannot be leased under a financial lease;
  • the leased assets must be used by the lessee in commercial operations;
  • the lessor must notify the supplier in writing that the assets will be leased;
  • legal entities other than banks do not need any licence to engage in financial lease activities;
  • financial lease contracts are subject to registration with the Ministry of Justice.

The Lease Law does not deal with the taxation of financial leases. Under the tax code, a financial lease is treated for tax purposes as a sale and purchase agreement. However, lessors must be careful in applying the two laws, since differences between them exist. For example, the code's definition of "financial lease" is not identical to the definition in the Lease Law.

The Lease Law regards a financial lease as an investment activity on par with direct investments in Kazakhstan. Therefore, the preferences and incentives available for investments will also apply to financial leasing operations. Similarly, where the lessor is a foreign company, the guarantees under the Law On Foreign Investments will be available, including the guarantee against adverse changes in legislation.

Given their limited capital resources and their need to modernize production assets, the ability to utilize financial leasing as a serious financial tool is likely to be welcomed by many companies in Kazakhstan. While there are a number of contradictions between the Lease Law and other legislation, as well as some uncertainties regarding taxation and customs regulation of financial leases, the sound legal basis provided by the Lease Law will undoubtedly increase the use of financial leasing in Kazakhstan.

Curtis Masters and Gennadiy Orekhov

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