Kyrgyzstan

Kyrgyzstan has adopted a new Tax Code, effective from 1 January 2022, which includes the following changes:

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 of 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.

Value-added tax (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 (PE) should be subject to 12% VAT on digital services.

The Kyrgyzstan government is proposing amendments to the Tax Code that would include electronic sale of goods to individuals residents of Kyrgyzstan as subject to VAT on digital services.

Gambling tax (a new tax introduced)

Companies and individual entrepreneurs engaged in gambling activities should pay gambling tax at the rate of 8% or estimated amount instead of the following taxes:

• Profit tax.
• VAT on taxable supplies.
• Sales tax.

Two main taxation regimes are introduced

A general tax regime and a simplified tax regime based on a single tax are introduced.

Small and medium-sized entities (with a turnover up to 30 million Kyrgyzstani som [KGS]) can be subject to the simplified tax regime and pay a single tax instead of three taxes: income tax, sales tax, and VAT on taxable supplies.

Sales tax for production rate reduction

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

Taxation of Islamic principles of financing is introduced

Conditions are being created to increase the financing of economic sectors by Islamic institutions.

Tax incentives are introduced for a number of industries

New tax incentives include the following:

• 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 for electric buses.

Land tax

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

Other developments

• Written explanations of the Ministry of Economy and Finance of the Kyrgyz Republic will have binding effect for the tax authorities.
• A simplified VAT refund mechanism for entities involved in export activities is introduced.
• Tax regimes on the basis of a mandatory patent and tax contract are abolished.
• Amendments to the Tax Code will be made no more than once a year, except force majeure cases.
• 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% of fines and tax penalties.
• A new norm is introduced to launch a remote tax control system, which assumes that a scheduled audit can be carried out remotely.

See the corresponding tax summary pages for more detailed information on these changes.