Investing in AIFC Startups: Investment Structures and Key Tax Considerations

1. Introduction

The establishment of the Astana International Financial Centre (AIFC) created new opportunities for structuring investments in Kazakhstan. Before the AIFC, investments in businesses in Kazakhstan were usually made under general Kazakhstan law through the acquisition of shares or participatory interests, contributions to charter capital, or loan financing. These instruments remain widely used. However, the traditional civil law framework provided limited flexibility for hybrid investment structures commonly used in international venture capital transactions.

In particular, instruments combining elements of debt and equity, such as convertible loans, SAFEs and certain types of options, were difficult or, in some cases, not possible to implement in their usual international form. Restrictions on debt-to-equity conversion and formal requirements relating to charter capital often required the parties to simplify or restructure their commercial arrangements.

The AIFC introduced a separate legal and corporate framework based on common law principles. It allows investors and start-ups to use both traditional investment structures, such as share purchases and share subscriptions, and hybrid instruments which provide an investor with a right or an option to receive shares in the future. The parties may also regulate their rights through detailed transaction documents and shareholders’ agreements.

This flexibility is particularly important for start-ups, where the parties may not be ready to agree the final valuation of the business at an early stage. An investor may also wish to protect its investment while retaining the opportunity to participate in the future growth of the company. The choice of instrument affects the investor’s corporate rights, expected return and tax position.

This article considers the main instruments available for investing in start-ups through the AIFC and explains their key legal and tax implications.

2. Why the Investment Instrument Matters for Tax

Different instruments may provide the same amount of funding but produce different legal and tax results. A lender normally receives interest. A shareholder may receive dividends and a capital gain on a later sale. A holder of a convertible instrument may receive both types of return at different stages of the investment.

The tax analysis should therefore follow the structure of the investment. It should cover the initial funding, income during the investment period, any conversion or exercise, distributions to the investor and the final exit.

2.1. The Scope of the AIFC Tax Regime

The Constitutional Law on the AIFC provides specific tax exemptions. For investors in a non-financial AIFC company, the relevant exemptions generally apply only to dividends and gains from the sale of shares in an AIFC Participant registered under AIFC law.

The Constitutional Law does not provide other general tax exemptions for investments in a non-financial company. Separate exemptions may apply where the company provides qualifying financial or other specified services.

3. Traditional Investment Structures

3.1. Direct Equity Investment

Under a direct equity investment, the investor becomes a shareholder from the beginning. The investor normally receives voting rights and may negotiate board representation, reserved matters, transfer restrictions and exit rights. The investment may be completed through a purchase of existing shares or a subscription for newly issued shares.

3.1.1. Share Purchase Agreement

Under a share purchase agreement, or SPA, the investor purchases existing shares from a current shareholder. The purchase price is paid to the seller, not to the company. The transaction therefore changes the ownership of the business but does not by itself provide new working capital to the start-up.

SPAs are traditional and widely used under general Kazakhstan law. However, AIFC law provides a more familiar and flexible framework for using detailed transaction mechanisms, including conditions precedent, completion mechanics, representations and warranties, indemnities, limitations of liability, deferred consideration and price adjustment provisions. These mechanisms help the parties allocate transaction risks more clearly.

Tax position. The sale is a disposal event for the seller. Where the target is an AIFC participant registered under AIFC law, the seller’s gain may fall within the AIFC exemption for gains from the sale of shares. The exemption may be available to both resident and non-resident sellers. The availability of the exemption should be confirmed against the legal status of the target. The purchaser should also retain the SPA, payment records and related expenses because these documents establish the acquisition cost of the shares for any future tax analysis.

After completion, dividends paid on the acquired shares may qualify for the AIFC dividend exemption. A later gain on the sale of the shares may also qualify. If the AIFC company is only a holding company and receives income from a mainland Kazakhstan subsidiary, the tax treatment of the payment from the subsidiary to the AIFC company requires a separate analysis.

3.1.2. Share Subscription Agreement

Under a share subscription agreement, or SSA, the company issues new shares to the investor. The subscription price is paid to the company and can be used to develop the business. Existing shareholders are normally diluted, unless they also participate or their rights provide otherwise.

The SSA should be aligned with the company’s Articles of Association, the required corporate approvals, any pre-emption rights and the registration of the investor in the register of shareholders. If the investment includes different share classes, the rights attached to each class should be clearly reflected in the Articles of Association and the terms of issue.

Tax position. Subscription proceeds normally form part of the company’s equity rather than income from its ordinary business. For tax purposes, such proceeds are not recognised as income and are therefore not subject to corporate income tax.

The investor’s subsequent return normally consists of dividends and an increase in the value of the shares. The AIFC exemptions for dividends and gains from shares may apply in the same manner as for shares acquired under an SPA.

3.2. Loan Financing

Under a standard loan, the investor remains a creditor and does not become a shareholder. The company must repay the principal and, if agreed, pay interest. This structure may be suitable where the investor wants a fixed return and repayment priority but does not require an immediate equity interest.

Tax position. Repayment of the principal normally represents repayment of the amount advanced rather than investment income. Interest is the investor’s return and is analysed separately. Interest paid by an AIFC company to a non-resident investor may constitute Kazakhstan-source income and may be subject to withholding tax at a rate of 10% to 15%. The special AIFC exemption for dividends and gains from shares does not cover interest under an unlisted private loan.

An applicable double tax treaty may reduce the Kazakhstan withholding tax.

4. Hybrid Investment Structures

4.1. Convertible Loan

A convertible loan begins as debt but may later be converted into shares. The conversion normally takes place upon a future financing round, a long-stop date, a sale of the company or another agreed event. If conversion does not occur, the investor may retain the right to repayment together with interest.

The AIFC Companies Regulations recognise convertible securities and the grant of rights to subscribe for or convert securities into shares. A convertible loan should nevertheless be distinguished from a convertible security expressly issued under the corporate framework. The legal mechanism depends on the terms of the instrument and the corporate approvals adopted by the company.

Tax position during the debt stage. Before conversion, the investor is a lender. Interest accrued or paid during this period is generally subject to the same analysis as interest under an ordinary loan, including possible Kazakhstan withholding tax and treaty relief.

Tax position on conversion. Upon conversion, the company should derecognise the loan liability to the extent converted and recognise the relevant amount as share capital and, where applicable, share premium. The accounting records should separately identify the principal and accrued interest converted, the number and class of shares issued, and the issue price. They should be supported by the relevant corporate resolutions and the updated register of shareholders.

Where the conversion is properly implemented and documented as an issue of shares for non-cash consideration, there is a reasonable basis under the Tax Code to treat the principal amount converted as consideration received by the company from the placement of newly issued shares rather than as taxable income.

Tax position after conversion. Once the investor receives shares and is entered in the register of shareholders, future dividends and gains from a sale of those shares may fall within the AIFC exemptions. The conversion documents should clearly establish the investor’s acquisition cost. If the loan is repaid instead of converted, the ordinary loan analysis continues to apply.

4.2. SAFE

A simple agreement for future equity, or SAFE, normally gives the investor a contractual right to receive shares upon a future financing round or another agreed event. A standard SAFE does not usually bear interest and does not require repayment in the same manner as a loan.

A SAFE is not a separately regulated instrument under the AIFC Companies Regulations. It may be used as a contractual arrangement, but its terms must be consistent with the AIFC corporate rules, the Articles of Association and the approvals required for a future share issue. The document should also explain what happens on a sale, insolvency or termination before the shares are issued.

Tax position. Kazakhstan tax law does not provide a specific tax regime for a SAFE. The tax result will therefore depend on the legal and economic terms of the agreement. The parties should consider how the initial payment is recorded, whether the investor has any repayment right, when the company becomes obliged to issue shares and how the acquisition cost of those shares will be determined.

The AIFC exemptions for dividends and capital gains normally become relevant after shares have been issued. They should not automatically be applied to a payment, transfer or cash settlement made while the investor only holds a contractual right under the SAFE. This classification risk should be assessed before the SAFE is signed.

4.3. Options and Other Rights to Acquire Shares

An option gives an investor the right, but not necessarily the obligation, to acquire shares at an agreed price or upon an agreed event. The option may relate to newly issued shares or existing shares held by a founder or another shareholder. AIFC corporate law permits a company, subject to its Articles of Association and the relevant approvals, to grant rights to subscribe for shares and recognises the issue of shares on the exercise of an option.

Tax position. The tax analysis may be required at several points: when the option is granted, when it is transferred, when it is exercised and when the acquired shares are later sold. Relevant factors include any option premium, the exercise price, the market value of the shares and the investor’s acquisition cost.

The AIFC exemptions for dividends and gains from shares may apply after the option has been exercised and the investor has acquired shares.

5. Comparison of Investment Structures

The following table summarises the main distinctions. References to AIFC exemptions assume that the conditions under Article 6 of the Constitutional Law on the AIFC are satisfied.

6. Tax Matters Applicable to All Structures

6.1. Legal Form and Economic Substance

The title of a document is not decisive for tax purposes. A document called a SAFE may contain repayment and return provisions similar to debt. A convertible loan may in substance provide a fixed return with only a remote possibility of conversion. The tax analysis should follow the rights and obligations created by the document and the way in which the parties perform it.

6.2. AIFC Company and Mainland Kazakhstan Activities

The AIFC provides its own civil and corporate framework, but it does not replace Kazakhstan public law. Licensing, competition, currency regulation and reporting, subsoil use, employment, customs and other mandatory rules may still apply. AIFC Participants are also subject to the special currency framework under Article 5 of the Constitutional Law on the AIFC and the applicable AIFC currency rules. Any registration or reporting requirement should be checked separately. The same distinction is relevant for tax. Where an AIFC holding company owns a mainland operating company, payments between the two companies should be analysed separately from distributions by the AIFC company to its investor.

6.3. Timing and Supporting Documents

The parties should identify each possible tax event before signing the final documents. These events may include payment or capitalisation of interest, conversion, issue of shares, payment of dividends, exercise of an option and sale of shares. The company and the investor should retain residence certificates, payment records, board and shareholder resolutions, registers, valuation materials and documents confirming acquisition cost.

7. Choosing the Appropriate Structure

There is no single instrument that is suitable for every AIFC start-up. The choice should follow the commercial objective and the intended form of return.

• • An SPA is suitable where the investor wishes to acquire existing shares and the seller wishes to exit fully or partly.
  • An SSA is suitable where the company needs new capital and the parties can agree the valuation and shareholder rights at the time of investment.
  • A loan is suitable where repayment and a fixed return are more important than participation in future growth.
  • A convertible loan is useful where valuation is uncertain but the investor requires debt protection before conversion.
  • A SAFE may be suitable where the parties want a simpler future equity arrangement without ordinary loan repayment and interest mechanics.
  • An option may be used where the acquisition of shares should depend on a future event or be implemented in stages.

The parties should compare the tax cost during the investment period with the tax result on exit. An instrument with a simple corporate structure may create recurring withholding tax. A structure with a favourable exit may create uncertainty on conversion. Tax modelling should therefore be completed before the term sheet and the final documents fix the commercial terms.

8. Conclusion

The AIFC has expanded the instruments available for investment in Kazakhstan start-ups. Investors can use direct share acquisitions and subscriptions, ordinary loans and hybrid structures such as convertible loans, SAFEs and options. This flexibility is valuable, but the instruments do not produce the same tax result.

Direct ownership of shares may benefit from the AIFC exemptions for dividends and capital gains. Interest under a private loan normally remains within the general Kazakhstan tax and treaty framework. Hybrid instruments require a stage-by-stage analysis, with particular attention to accrued interest, conversion, valuation and acquisition cost.

For this reason, the legal documents, corporate actions and tax analysis should be prepared together. The structure should be reviewed before financing is provided, while the parties can still adjust the terms without changing an existing investment.

Selected Legal Sources

1. 1. Constitutional Law of the Republic of Kazakhstan No. 438-V ZRK dated 7 December 2015 on the Astana International Financial Centre (the official English text published by the AIFC is headed ‘Constitutional Statute’), as amended through 30 December 2022, in particular Articles 5 and 6(7).
   2. Tax Code of the Republic of Kazakhstan dated 18 July 2025 No. 214-VIII, as in force on 21 September 2026, in particular Articles 238(1)(3), 255(1)(1), 370(8), 679(1)(13), 682(1)(7), 682(2) and 683.
   3. AIFC Companies Regulations, AIFC Regulations No. 2 of 2017, with amendments adopted on 17 October 2024 and effective from 1 January 2025, in particular sections 44–46.
   4. Rules on the Substantial Presence of AIFC Participants Applying Tax Exemptions for Corporate Income Tax and Value Added Tax, effective from 1 January 2022.
   5. Joint Order approving the List of Financial Services Provided by AIFC Participants, Income from Which Is Exempt from Corporate Income Tax and Value Added Tax (AIFC No. 126 dated 26 May 2020; Ministry of Finance No. 547 dated 29 May 2020; Ministry of National Economy No. 118 dated 12 June 2020).

Disclaimer. This article is provided for general information only and does not constitute legal or tax advice. The treatment of an investment depends on the investor, the terms of the transaction, the applicable law and any relevant double tax treaty. Specific advice should be obtained before entering into a transaction.