The basis of tax legislation in The Kyrgyz Republic is set out in the Presidential edict adopted in April 1994 and became effective on 21 July 1994.
The following information on taxes operating in the territory of The Kyrgyz Republic is based on legislation as at 1 September 1995. As mentioned above the legislation is in the process of being amended.
I. INCOME TAXES ON CORPORATIONS
1. Rates
Tax payers are entities which receive taxable profits in a tax year. The basic rate of income tax applied to profits of entities is 30% although different rates of income tax are applied to profits from entities engaged in specified activities. Examples of such activities and their respective rates of income tax include gambling (70%), banking (45%), non-manufacturing activities (50%), and non-state owned agricultural production (15%).
2. Local Income Tax
None.
3. Capital Gains Taxes
None. Capital gains are included as part of aggregate income subject to income tax.
4. Branch Profits Taxes
Branches are currently taxed in the same manner and at the same rates as permanent establishments in The Kyrgyz Republic.
5. Foreign Tax Reliefs
To prevent double taxation, credit is given for foreign income taxes against income tax payable in The Kyrgyz Republic. Credit is however limited to the amount of tax that would have been assessed on that income in The Kyrgyz Republic.
6. Classification of Corporations
Corporations are classified for Kyrgyz tax purposes as domestic or foreign legal entities. All legal entities are required to be registered in The Kyrgyz Republic.
7. Payment of Taxes
Tax liabilities are payable in monthly installments which are due not later than the 15th day of each month calculated on the basis of the tax rates applicable and the financial results for the previous month. Income tax paid outside The Kyrgyz Republic should be taken into account when paying income tax in The Kyrgyz Republic.
Annual declarations of aggregate income and deductions are required and are due by 15th April following the end of the tax year.
II. INCOME TAXES ON INDIVIDUALS
1. Rates
Income tax is paid by citizens of The Kyrgyz Republic, citizens of foreign countries and stateless persons who have taxable income tax in a tax year.
The amount and nature of income subject to income tax depends on whether an individual is resident or non-resident for tax purposes. A non-resident is only taxable on Kyrgyz source income whereas a person resident in The Kyrgyz Republic is taxable on worldwide income.
A resident is a physical person who stays in The Kyrgyz Republic for 183 or more days within any continuous 12 month period.
Taxable income of an individual comprises the aggregate of income received in the calendar year less allowable deductions.
Tax rates are set out below:
Aggregate Income Tax Up to 10 time the minimum annual wage 10% of the amount of income 10-20 times Tax on lower amount plus 15% on excess 20-30 times Tax on lower amount plus 20% on excess 30-40 times Tax on lower amount plus 30% on excess Over 40 times Tax on lower amount plus 40% on excess
2. Capital Gains Taxes
None. Capital gains are included as part of aggregate income for the purposes of income tax.
3. Foreign Tax Reliefs
For both residents and non-residents relief is provided for foreign taxes paid in the same way as for a resident legal entity. See section I, item 5.
4. Tax Period
A tax or fiscal year for both entities and individuals is always the calendar year.
III. INCOME TAXES ON NON-RESIDENTS
1. Liability To Tax
Resident individuals are subject to Kyrgyz income tax on their worldwide income.
Non-resident individuals are generally taxed only on Kyrgyz source income. If a non-resident individual carries out activities through a permanent establishment that individual is subject to income tax on income attributable to the permanent establishment in the same manner as residents of The Kyrgyz Republic.
Resident entities are taxed on their worldwide income. A Kyrgyz branch or other permanent establishment of a non-resident entity however is generally subject to tax only on the income attributable to its business activities in The Kyrgyz Republic.
A non-resident individual or non-resident entity which receives other income is subject to withholding tax at source. The rate of withholding tax varies depending on the type of income. See section III, item 2.
2. Withholding Tax Rates
The normal withholding rates on Kyrgyz source income of non-residents are as follows:
Kyrgyz source income Withholding Tax Dividend and interest income 15% International transportation services 6% Other income 20%
3. Other Matters
There are currently a number of exemptions available for non-resident foreign investors investing in various industry sectors. These include tax breaks (i.e. exemption from taxation) for between two and five years depending on the types of industrial sectors in which the investment is made.
IV. OTHER SIGNIFICANT TAXES
1. Sales (Value-Added)
VAT is generally chargeable at 20% on imported goods and on supplies of goods and services made in The Kyrgyz Republic by both resident and non-resident taxable persons. There are however exemptions available from VAT in respect of imports of goods for certain specified production related activities. There are also a number of supplies which are not subject to VAT which include financial services, and those provided in connection with education, religion, and health care institutions.
Exports and export related services are exempt from VAT.
The tax period is either monthly or quarterly depending on the value of taxable turnover and any excess VAT is recoverable on submission of a claim.
2. Inheritance and Gift Taxes
Inheritances and gifts are subject to certain exemptions included in the computation of aggregate annual income and are subject to income tax.
3. Taxes on Payrolls (Social Security)
Social security taxes are payable in The Kyrgyz Republic. The rates at which such taxes are paid depend on the nature of business activity carried on in The Kyrgyz Republic. The tax rates for entities vary between 5% and 33%. For individuals carrying on business activities the rates vary between 2% and 5%.
4. Taxes on Natural Resources
Taxes on Natural Resources include output production payments and rental payments which vary depending on the type of mineral being mined.
5. Other Taxes
a. Excise Duties
Excise duties are levied on the sale and import of goods which included vodka, vodka products, tobacco products, oil and fuel products, and jewelry. Excise duties are levied on imported goods on their customs value and on domestic goods on the selling price of those goods.
The rates of excise duties currently vary between 18% and 120% for domestic products and imported goods.
b. Land Tax
Land tax is payable by entities and other persons who own or use land and is based on land usage. The amount of tax which is often subject to change depends on various factors which include the quality and location of the land.
c. Property Tax
Property tax is payable by persons who have an interest in relevant property and is based on the average annual value of fixed production assets and long-term rented assets.
The rate of property tax is currently 1.2% of property value and is payable quarterly in advance.
d. Road Users Tax
All enterprises and organisations, other than those involved in highway maintenance are liable to this tax.
Current rates range from 0.08% to 0.8% depending on the nature of business activities and the tax is payable in equal monthly payments which are due by the 15th of each month.
e. Advertising Tax
Advertising tax is payable by all entities and individuals advertising their products. The tax is levied as a percentage of the cost of advertising. The percentage rate varies but is generally no more than 5% of the cost of advertising.
f. Levy for the Right to Use Local Symbols and Signs
This levy is paid by all legal entities and individuals involved in manufacturing production that use local symbols and signs. The rate is fixed by local authorities and is generally no more than 0.5%.
V. COMPUTATION OF TAXABLE INCOME
1. Capital Gains
Capital gains are treated as part of taxable income.
2. Depreciation
Depreciation is allowed as a deductible expense for tax purposes and is calculated at rates determined by statute.
3. Loss Carryovers
For certain types of entities a one year loss carryforward is available. No other loss carryforward is available.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
For further information contact Jonathan Wale on +7 3272 622 101 or enter a text search 'Coopers and Lybrand' and Business Monitor'.
