Kazakhstan Witnesses Significant Changes in Broadcasting Legislation
At the end of 2015 Kazakhstan legislation on broadcasting was amended twice. The amendments related to the distribution of advertising on foreign TV and radio channels that are rebroadcast in Kazakhstan, as well as the activities of foreign TV and radio broadcasting companies on the territory of the Republic of Kazakhstan.
Ban on Advertising
The ban on advertising on foreign TV and radio channels rebroadcast on the territory of Kazakhstan gave rise to a heated discussion among the parties concerned. This ban was due to come into force on Jan. 1, 2016. The obligation to implement the ban and liability for violating this ban was imposed on TV and radio broadcasting operators of Kazakhstan.
TV and radio broadcasting operators of Kazakhstan and foreign channels stood together against the prompt implementation of the ban on advertising (the government provided only one month to comply with the amendment to the legislation in the part of advertising on foreign channels), as well as against the ban itself. In December 2015, the media industry and state bodies of Kazakhstan held consultations with regard to the ban on advertising. During the consultations two major obstacles were discussed regarding the implementation date of Jan. 1, 2016.
The infrastructure available for rebroadcasting foreign channels in Kazakhstan does not allow for the automatic exclusion of advertisements during the transmission of the signal to the consumer. Elimination of advertising has to be done manually. This means that the rebroadcasting must be monitored 24 hours a day by a person who, at the time of advertising, must insert a banner when an advertisement appears. To ensure monitoring of one channel 24 hours a day, at least three people must be engaged. Many TV and radio broadcasting operators are not able to bear such a financial burden.
In addition to the technical problems, there are also legal uncertainties on how to implement the new requirements related to advertising. Apart from the advertising of goods, works and services, the possibility of distributing the following information in the rebroadcasting of foreign TV and radio channels is questionable:
· information of one channel and its programs transmitted by another channel (i.e. promotional videos ); and
· information messages on upcoming programs on a specific TV and radio channel (i.e. announcements).
Due to a broad definition of the concept of «advertising» in Kazakhstan legislation, first of all, promotional videos may be considered advertising.
As a result of the approach of Kazakhstan TV and radio broadcasting operators and foreign media companies to the state authorities, it was decided to set up a moratorium on the ban on advertising for six months. The moratorium should give the government time to make a balanced decision on the issue of the ban on advertising on foreign rebroadcasting channels. Mr Issekeshev, the Minister of Investment and Development of the Republic of Kazakhstan, pointed out in his blog that international experience, including those contained in the European Convention on Transfrontier Television of 5 May 1989 will be taken into account in the development of law enforcement practice in Kazakhstan with respect to placement by channels of announcements of own programs (http://blogs.gov.kz/ru/blogs/isekeshev_a/questions/302522#comments).
At the moment oral comments of the officials of the Committee for Communication, Informatization and Information of the Ministry of Investment and Development of the Republic of Kazakhstan («the Communications Committee») on the fate of the amendments introduced in 2015 into the legislation on broadcasting regarding advertising are available.
· A moratorium on the ban on advertising on foreign TV and radio channels has been introduced for six months until July 1, 2016. The moratorium is introduced in order to give TV and radio broadcasting operators’ time to purchase the necessary equipment to exclude advertisements on foreign channels in an automatic mode.
· The moratorium will lead to the refusal of state bodies to conduct inspections on compliance with the legislation on advertisement on foreign channels.
· According to the Communications Committee, it will not initiate lifting the previously introduced ban on advertising on foreign channels.
· In the period of the moratorium, the Communications Committee in conjunction with other government agencies, as necessary, will prepare draft amendments to the Kazakhstan legislation on advertising, as well as bylaws intended to narrow the definition of «advertising,» in order to exclude, for example, announcements from advertising. It is yet to be seen whether promotional videos will be excluded from the concept of «advertising.»
The newly adopted statutory acts do not impose specific liability for violating the ban on rebroadcasting advertising. TV and radio operators in Kazakhstan would bear general liability for any violation of the rules for retransmitting a TV or radio channel. Liability for this violation is provided for in the form of a fine ranging from $650 to $2,600.
No liability of foreign TV and radio companies has been established.
Establishment of a Representative Office or a Company
The Law On Amendments to Some Legislative Acts on Informatization in Kazakhstan («the Informatization Law») was published on Nov. 26, 2015. The Informatization Law, inter alia, amends TV and radio broadcasting legislation.
The Informatization Law obliges the owners of foreign TV and radio channels, which rebroadcast TV and radio channels to the territory of the Republic of Kazakhstan, to establish a representative office of the company in Kazakhstan.
The viewpoint of the Ministry of Investment and Development of the Republic of Kazakhstan in respect of the obligation to register a foreign media company in Kazakhstan suggests that the new regulation was adopted primarily in order to ensure a possibility of bringing a foreign legal entity to administrative liability. Foreign legal entities who committed administrative offenses on the territory of Kazakhstan are subject to administrative liability in Kazakhstan on a common basis. However, it is not possible to bring a foreign legal entity to liability in Kazakhstan in the absence of international agreements on mutual assistance in civil, administrative and criminal cases between partner countries. Foreign TV and radio companies, which have their charter capital state involvement (full or partial), as well as their affiliate media companies are subject to a special regulation. They can continue to broadcast the channels to the territory of the Republic of Kazakhstan only after creation of a legal entity in Kazakhstan. At the same time, participation of foreign entities in the charter capital of such legal entity may not exceed 20% of the shares or participation interests. Foreign citizens or stateless persons may not be the heads or chief editors of such mass media.
Representative Offices of Foreign Entities in Kazakhstan
Under Kazakhstan law, a representative office is a structural unit of a parent company in other location. A representative office often performs the functions of market research, represents and protects the interests of the parent company and does not carry out any commercial activities. A representative office does not have its own property; the property used by a representative office is considered to be the property of the parent company. In civil relations, a representative office acts on behalf of the parent company.
With regard to taxation, a representative office is a non-resident of the Republic of Kazakhstan. Consequently, a representative office pays taxes which are not associated with the income of the foreign legal entity (for instance, individual income tax, social tax, vehicle tax, in case of the existence of items of taxation).
If a foreign media company intends to use the entity it creates for the purpose of doing business in Kazakhstan, then it is possible to consider the possibility of establishing a branch or a subsidiary of the foreign entity. This choice is available only to media companies without state participation in the charter capital.