Skip to content

Kyrgyzstan

Country Name: Kyrgyz Republic (Kyrgyzstan)
Currency: Kyrgyzstani Som (KGS)
Primary Tax Authority: State Tax Service of the Kyrgyz Republic
Key Legislation:

  • Tax Code of the Kyrgyz Republic (as amended)
  • Customs Code
  • Law on Investment
  • Value Added Tax (VAT) Law

Fiscal Authority Allocation

Centralized Fiscal System:
Kyrgyzstan operates a centralized tax system. The State Tax Service of the Kyrgyz Republic, under the Ministry of Economy and Finance, administers the collection of taxes, including corporate income tax (CIT), personal income tax (PIT), value-added tax (VAT), and other indirect taxes.

Corporate Income Tax (CIT)

Standard Rate: 10%
Kyrgyzstan imposes a flat corporate income tax rate of 10% on resident and non-resident companies. This rate is competitive compared to other Central Asian countries, making Kyrgyzstan attractive for investment.

Corporate Forms and Taxation:

  1. Resident Companies: Taxed on worldwide income.
  2. Non-Resident Companies: Taxed only on Kyrgyzstan-sourced income.

Exemptions and Incentives:

  • Investment Law: Tax incentives are available to companies investing in key sectors such as agriculture, renewable energy, and manufacturing. These incentives include CIT exemptions, VAT deferrals, and customs duty exemptions for up to five years.
  • Free Economic Zones (FEZs): Companies operating in designated free economic zones benefit from tax holidays on profits, VAT exemptions, and customs duty exemptions for certain raw materials and equipment.

Goods and Services Tax (GST) / Value-Added Tax (VAT)

Standard Rate: 12%
Kyrgyzstan imposes VAT at a standard rate of 12% on most goods and services. VAT is levied on domestic production and imports. Businesses with an annual turnover exceeding KGS 8 million must register for VAT.

Exemptions:
Essential goods and services, such as healthcare, education, and some agricultural products, are VAT-exempt. Exports are zero-rated, meaning businesses can reclaim VAT paid on inputs used to produce exported goods.

Personal Income Tax (PIT)

Flat Rate: 10%
Kyrgyzstan imposes a flat personal income tax rate of 10% on both residents and non-residents. Residents are taxed on their worldwide income, while non-residents are taxed only on Kyrgyzstan-sourced income.

Deductions and Allowances:
Personal deductions are limited, but certain expenses such as social security contributions and charitable donations may be deductible.

Additional Mandatory Contributions

Social Security Contributions:
Employers and employees are required to contribute to the social security system, which covers pensions, healthcare, and unemployment benefits.

  • Employer Contribution: 17.25% of gross salary.
  • Employee Contribution: 10% of gross salary.

Withholding Taxes

  • Dividends: 10%
  • Interest: 10%
  • Royalties: 5%
    Kyrgyzstan imposes withholding taxes on payments made to non-residents. These rates may be reduced under Kyrgyzstan’s double taxation agreements (DTAs).

Transfer Pricing Rules

Kyrgyzstan follows the arm’s-length principle for related-party transactions. Companies engaged in cross-border transactions with related entities must apply market-based pricing and maintain transfer pricing documentation.

Special Tax Regimes

  • Free Economic Zones (FEZs): Businesses operating in FEZs benefit from tax holidays of up to five years on profits, as well as exemptions from VAT and customs duties. These zones are designed to promote export-oriented industries and foreign investment.
  • Investment Incentives: Under the Investment Law, companies investing in sectors like infrastructure, agriculture, and energy may qualify for reduced tax rates, exemptions from customs duties, and VAT deferrals for capital expenditures.

Other Taxes

  • Customs Duties: Kyrgyzstan imposes customs duties on imports, with rates varying depending on the type of goods. Essential goods and raw materials for industrial use may benefit from reduced or zero rates.
  • Excise Taxes: Excise taxes are levied on specific goods such as alcohol, tobacco, and petroleum products.
  • Real Estate Transfer Tax: A 10% tax is imposed on the transfer of real estate, calculated based on the property’s transaction value.

Double Taxation Agreements (DTAs)

Kyrgyzstan has signed several double taxation agreements (DTAs) with countries such as Russia, Kazakhstan, and Germany. These agreements help reduce withholding taxes on cross-border payments and prevent the double taxation of income earned in Kyrgyzstan and other jurisdictions.

Local Taxes

Local governments in Kyrgyzstan may impose minor taxes and fees, such as property taxes and business license fees. However, the major taxes, including CIT, PIT, and VAT, are administered centrally by the State Tax Service.

Compliance and Reporting

Annual Filing:
Corporate tax returns must be filed by March 31st of the following year. Personal income tax returns are generally due by March 31st. VAT returns are filed monthly or quarterly, depending on the business’s turnover.

Penalties for Late Filing:
Penalties for non-compliance or late filing include fines and interest on unpaid taxes. Interest is charged at a rate of 0.1% per day on overdue tax payments, along with additional fines for underreporting or misreporting income.

Recent Developments

Tax Incentives for Renewable Energy:
Kyrgyzstan has introduced tax incentives for companies investing in renewable energy projects, such as hydropower and solar energy. These incentives include tax holidays, customs duty exemptions, and VAT deferrals for the import of equipment and machinery.

Expansion of Free Economic Zones (FEZs):
To attract more foreign investment, Kyrgyzstan continues to expand its network of Free Economic Zones (FEZs). These zones offer tax holidays, VAT exemptions, and customs duty reductions to encourage businesses to establish operations and promote exports.

Digital Economy Taxation:
In response to the growing digital economy, Kyrgyzstan has started to implement measures to regulate e-commerce and online services. The government is exploring new tax policies for digital transactions and international digital service providers.

Subscribe to my free newsletter for regular updates on law, taxation and business worldwide.

Tags: