The Tax Code establishes a deduction for depreciation based on the declining-balance method. Depreciable fixed assets are divided into several groups, for which maximum depreciation rates range from 10% to 50%.
||Maximum rate of depreciation (%)
||Cars, automobile and tractor equipment for use on roads, special instruments, sundries, and accessories; computers, telephone sets, peripherals, and equipment for data processing
||Automotive transport rolling stock: trucks, buses, special automobiles, and trailers; construction equipment; machines and equipment for all sectors of industry, including the foundry; smith-pressing equipment; electronic and simple equipment, agricultural machines. Office furniture, intangible assets
||Depreciable fixed assets not listed in other groups and expenses equated to them
||Railroad, sea, and river transport vehicles, power machines, and equipment: thermal-engineering equipment, turbine equipment, electric motors and diesel-generators, electricity transmission and communication facilities, pipelines
||Buildings and constructions
||Taxpayer’s costs of geological preparation of deposit reserves, design and engineering-research works, and obtaining the licence for the use of deposits, as well as mining-capital and mining pre-works aimed at further extraction of minerals, as well as the fixed assets of the mining and/or mining-processing enterprises put into operation and actually used in deposit exploration
Certain expenses are deductible within specified limits, including expenses on repairs, expenses on procuring and producing capital production assets, and certain other expenses.
Kyrgyzstan domestic tax legislation does not stipulate the allowance of a deduction for goodwill for profit tax purposes.
Kyrgyzstan domestic tax legislation does not stipulate the allowance of a deduction for start-up expenses for profit tax purposes.
Starting from 5 July 2019 expenses incurred on innovation activities, which in particular include works on scientific research, experimental development, design and survey, as well as works on implementation of technological solutions, application program packages and information and communication technologies are deductible for CIT purposes provided that all supporting documents are in place.
Deductions for interest actually paid on debts, where the loan proceeds were used to fund expenses incurred for the taxpayer's business activity, are allowed within limitations provided in the Tax Code, depending on methodology and nature of the debt. For example, interest on loans connected with the purchase of depreciable assets is not deducted, but increases their value.
Bad debt amounts are deductible in Kyrgyzstan. The Tax Code defines a ‘bad debt’ as the amount the taxpayer is unable to fully receive as a result of the termination of an obligation by the court, bankruptcy, liquidation, or death of the debtor, or expiry of the limitation period provided by the civil legislation of Kyrgyzstan.
Deductions for donations of assets to charity and budget organisations are limited to 10% of taxable income.
Fines and penalties
Fines and interest penalties paid to the state budget are not deductible.
The following taxes may be deducted:
- Land tax.
- Property tax.
- VAT not allowed for offset.
- Subsurface use taxes.
Other significant items
Generally, other expenses related to the earning of aggregate annual income are considered deductible for profit tax purposes, including:
- Business trip expenses that were actually incurred and supported by appropriate documentation (per diems during business trips are deductible only within the established statutory limits).
- Commissions on payroll expenses for labour.
- Material and social benefits provided to employees.
- Representational expenses connected with earning income (transportation, hotel, and translator services).
- Training and retraining of employees.
- Scientific development and exploration works (deductions are relevant for fixed assets).
- Any other costs related to earning income, which can be supported by appropriate documentation in terms of their nature and amount (e.g. invoices, payment orders, receipts).
The other categories of expenses that are not deductible include, inter alia:
- Capital expenses and expenses connected with the purchase, production, and installation of equipment.
- Any expenses incurred on behalf of any other third persons, except in cases where documentation proves business needs for such expenses.
- Pricing losses caused by rates, understated below-market prices, and price incentives.
- Expenses connected with purchases of services in entertainment, vacations, and leisure.
Net operating losses
Net operating losses can be carried forward for up to five years. There are no provisions in Kyrgyz legislation allowing carryback of losses.
Payments to foreign affiliates
Payments to foreign affiliates are deductible for profit tax purposes if they are aimed at earning income and supported by documentation.