Corporate - Significant developments

Last reviewed - 02 March 2022

Kyrgyzstan has adopted a new Tax Code which is effective from 1 January 2022. The below summaries the main changes:

1. E-commerce tax (a new tax introduced)

Entities involved in the following can be subject to e-commerce tax at 2% on net profit: 

  • provision services in electronic form based on the use of a domain name or IP-address registered in Kyrgyzstan;
  • activities of the seller and / or operator of a trading platform in accordance with the legislation of Kyrgyzstan on electronic commerce.

2. VAT on digital services (a new tax introduced)

Entities providing services in electronic form without using a domain name or IP-address registered in Kyrgyzstan and which does not lead to creation of a permanent establishment should be subject to 12% VAT on digital Services.

3. Two main taxation regimes are introduced: 
- a general tax regime;
- a simplified tax regime based on a single tax. 
Small and medium-sized entities (with a turnover up to KGS 30 million) can be subject to simplified tax regime and pay a single tax instead of three taxes: income tax, sales tax and VAT on taxable supplies. 

4. In order to balance the conditions of doing business and support domestic producers, the rate of sales tax for production is reduced to 1%.

5. Taxation of Islamic principles of financing is introduced. Accordingly, conditions are being created to increase the financing of economic sectors by Islamic institutions.

6. Tax incentives are introduced for a number of industries:

- lower rate for a single tax for clothing industry;

- VAT benefit for jewellery industry;

- VAT benefit for temporary import of aircraft due to their high cost for aviation industry;

- exemption from VAT of electric buses.

7. The land tax has been removed from the list of local taxes.

8. Written explanations of the Ministry of Economy and Finance of the Kyrgyz Republic will have binding effect for the tax authorities;

9. A simplified VAT refund mechanism for entities involved in export activities is introduced.

10. Tax regimes on the basis of a mandatory patent and tax contract are abolished.

11. Amendments to the Tax Code will be made no more than once a year, except force majeure cases.
12. Exemption from payment of 50% of fines and tax penalties accrued on a tax audit or submission of a revised tax reporting is introduced, if the taxpayer fulfils the following at the same time: 
- does not have a current tax debt;
- within 15 days from the date of delivery of the decision on the results of a tax audit or submission of a revised tax reporting pays the full amount of tax liabilities and 50% fines and tax penalties.
13. A new norm is introduced to launch a remote tax control system, which assumes that a scheduled audit can be carried out remotely.

The more detailed information on each changes were introduced into the relevant sections of WWTS Kyrgyzstan page.