Kyrgyzstan

Corporate taxes and other direct taxes

Taxable income is calculated as annual income minus expenses. Only properly documented expenses may be deducted, provided that expenses are related to the taxable income. Dividends and capital gains are excluded from taxable income. The percentage of depreciation norms for fixed assets is set out in the Tax Code and is substantively similar to IFRS principles. Losses can be carries forward within the following 5 calendar years inclusively; the rule on carrying forward losses does not apply to losses generated during periods when a company enjoyed tax benefits. There are no thin capitalization rules.

WHT is applied to incomes paid to non-residents that are not registered for tax purposes in Kyrgyzstan. Taxable incomes are listed in the Tax Code. Kyrgyzstan has signed 32 treaties on the avoidance of double taxation. Though the treaty rates prevail over the Tax Code, it is important to have a duly issued tax residency certificate for the non-resident to apply the treaty. The multilateral instrument (MLI) is not in force.

Transfer pricing in Kyrgyzstan
Arm's length principle		Since 2009
Documentation liability		Documentation is not required, but benchmarking shall be provided upon tax authorities request.
APA
Country-by-Country liability
Master file-local file (OECD BEPS 13) applicable
Penalty
- lack of documentation
- tax shortage		From 10% to 100% of the tax shortage.
Related parties		Interdependent entities are entities whose relations may affect the conditions or economic results of their activities or those of the entities they represent, namely: 1) An entity has a direct or indirect participation in another entity and the aggregate share of such participation is more than 20%; 2) Two entities in which a third entity holds participation and its direct and/or indirect interest in each entity is more than 20%, or is controlled by such an entity 3) When one natural person is subordinate to another natural person in an official capacity 4) Entities between which there are relations regulated by the labor legislation of the Kyrgyz Republic 5) Close relatives; 6) The founder of the management and the trustee.
Safe harbors		20%

Level of attention paid by Tax Authority:

8/10

VAT and other indirect taxes

The VAT concept is quite similar to the concept applied in developed countries worldwide. Turnover subject to VAT is in general the total value of sales (Output VAT). VAT paid to suppliers (input VAT) is deducted from Output VAT. Input VAT cannot be offset if the goods, works, or services purchased are not related to the taxable turnover, the VAT-invoice is not issued by a supplier or is issued in violation of legal requirements, the supplier is declared by court as inactive entity, etc. The VAT rate for the export of goods is 0% and there is a procedure for refund of the related input VAT. A special VAT procedure applies to the export/import of goods to/from the countries belonging to the Eurasian Economic Union such as Russia, Belarus, Kazakhstan, and Armenia.

Sales tax applies to revenue besides VAT. The rate varies from 0% to 5% depending on the type of activity and whether the revenue was received in cash or not.
Excise tax is paid by importers and sellers of:
1) Alcoholic products
2) Tobacco products
3) Oil products.

VAT options in Kyrgyzstan	Applicable / limits
Distance selling
Call-off stock
VAT group registration
Cash accounting - yearly amount in EUR (approx.)*	Available without limits
Import VAT deferment
Local reverse charge
Option for taxation
- letting of real estate
- supply of used real estate
VAT registration threshold*

Personal income tax / Social security system

The following are recognized as tax residents: citizens of the Kyrgyz Republic and any individual remaining in the Kyrgyz Republic for at least 183 calendar days in any consecutive 12-month period ending in the current tax period (calendar year).
All types of income are taxed at a rate of 10% regardless of the tax residency status of the individual and the type of incomes received.

The following social contributions are withheld from employee income: 8% to the Pension Fund, 2% to the State Pension Fund. The following social contributions are paid by an employer on employee income: 15% to the Pension Fund, 2% to the Compulsory Health Insurance Fund, and 0.25% to the Employee Health Improvement Fund.

Wage related taxes in Kyrgyzstan	Minimum wage		Average wage in private sector
Exchange rate KGS/ EUR	in EUR	in KGS	in EUR	in KGS
97	191	18,500	464	45,000
Total wage cost	224	117.25%	544	117.25%
Employer's social security and other contributions	33	17.25%	80	17.25%
Gross salary	191	100.00%	464	100.00%
Personal income tax	19	10.00%	46	10.00%
Employees' contributions	17	9.00%	42	9.00%
Net salary	154	81.00%	376	81.00%