Русский
Cyprus loses a major Russian client to Kazakhstan’s fiscal gain as Western exits increase
The Russian chain of low cost retailers, Fix Price has redomiciled its corporate PLC entity from Cyprus to the Astana International Financial Centre in Kazakhstan. Fix Price operate over 6,500 retail stores worldwide, with 2023 revenues of ₽291.9 billion (US$3.3 billion) and net profits of ₽35.7 billion (US$403 million).
The move, which has come because Cyprus, as part of the European Union is now considered toxic to Russian holding companies, sees Cyprus lose direct taxable revenues worth about US$42 million, in addition to the local provision of legal, accounting, audit and related business services to Fix Price, as well as local staff redundancies. That income has now relocated for the benefit of the Kazakhstan economy. Fix Price, unless they have negotiated a sweetener deal with the Kazakhstan tax authorities, will also face a higher corporate tax burden – Kazakhstan’s CIT rate is 20% against 12% in Cyprus.
That taxable difference – equal to an increase of about US$40 million per annum to Fix Price’s overheads – can be judged to be worth the extra cost by Fix Price to avoid doing business in the European Union and redomicile to a more friendly jurisdiction.
Kazakhstan is part of the Eurasian Economic Union (EAEU), a free trade bloc that also includes Russia in addition to other markets in Armenia, Belarus and Kyrgyzstan. The EAEU also has Free Trade Agreements with Iran, Serbia and Vietnam with other countries such as Uzbekistan poised to do the same.
As of June 30, 2024, Fix Price operated 304 stores throughout Kazakhstan, including 287 of its own and 17 franchises, with operations in Astana (43), Karaganda (38), Pavlodar (33) and Almaty (30). The company employs 1,900 people in Kazakhstan.
Dmitry Kirsanov, Managing Director of Fix Price Group, said that “We see solid growth potential for Fix Price in Kazakhstan. In the first half of 2024, we expanded our store network by 24 outlets and plan to open 16 more stores by the end of the year.”
Fix Price has benefited from the global shift towards value in consumer demand. Over the past few years they have seen annual revenue growth at 30%, followed by highly profitable growth rates. Fix Price’s EBITDA margin in 2022 was 18.6%.
Fix Price are one of several Russian listed companies that have redomiciled their operations from Western HQ and stock markets to more friendly nations, with Kazkahstan’s operating environment often considered the best alternative option. These include Yandex, Ozon, Qiwi, and Cian, among others, who have all deregistered from Nasdaq or the New York Stock Exchange, while Russia’s O-key, Novatek, Tinkoff Bank, Sistema and a further 20-plus corporates have left the London Stock Exchange. There are multiple other examples. That corporate knowledge and market know-how is now moving away from the Western financial markets. While not all have relisted in Kazakhstan, a large percentage of them have, making the Astana International Financial Centre very much a growth market for fund-raising and professional services to Russian and related multinationals as they redomicile away from Western corporate prejudices.
