Income Tax in Kyrgyzstan
Personal Income Tax:
Kyrgyzstan citizens who are tax residents should be taxed on their worldwide income. Kyrgyzstan citizens who are not residents for tax purposes and foreign citizens are taxed on their Kyrgyzstan-source income only.
Personal income tax rates:
A single flat rate of 10% is applicable to most types of individual income.
For tax purposes, individuals who reside in Kyrgyzstan for 183 days or more in any 12-month period ended in tax year are treated as residents.
Foreign individuals meeting the above criteria may claim double tax treaty (DTT) protection in respect of their residency status, provided they are tax residents in a country with which Kyrgyzstan has concluded a tax treaty.
With few exceptions, all types of direct and indirect income are included in taxable compensation.
The salaries of employees of the diplomatic service of the Kyrgyz Republic, civil servants, and other workers (i.e. citizens of the Kyrgyz Republic) working in overseas missions of the Kyrgyz Republic, as well as offices of public bodies of the Kyrgyz Republic in foreign countries or international organisations located abroad, are not subject to individual income tax.
Additionally, please note that there is a certain threshold of taxable income (monthly) established by the Tax Code. The taxable base should not be less than the minimum income used in calculation of individual income tax. The minimum monthly salary officially established for 2018 is KGS 1,220.
Capital gains and investment income:
Capital gains are subject to ordinary income tax rate at 10%.
There is an exemption available for interest income and capital gains from selling shares that are, on the date of a given sale, in the official lists of the stock exchange in the highest and the next to highest category of listing.
Dividends received by an individual resident of the Kyrgyz Republic from participation in domestic companies, as well as dividends received by a non-resident individual as part of the profit subject to 0% profit tax, are not subject to individual income tax.
The Kyrgyz Tax Code stipulates a list of non-taxable income, which includes, among others, social security contributions, obligatory pension contributions, income in the form of property received as inheritance or a gift from relatives, income from realisation of movable and immovable property owned and used by a taxpayer for personal needs, and other income.
Income of servicemen and officers of the Ministry of Internal Affairs and the penal system in kind of money allowances are exempt from PIT. Payments from funds of deputies of the Jogorku Kenesh of Kyrgyzstan (Parliament) are also exempt from PIT.
Deductions from Income:
The following personal deductions are allowed by the Kyrgyz Tax Code:
· Education for a taxpayer and dependants, but not more than 10% of the aggregate taxable income.
· Interest payments under mortgage loans, but not more than KGS 230,000 annually.
These deductions are available only upon submission of the tax return to the tax authorities along with the special application form and all supporting documentation.
Standard deductions available for employees are as follows:
· 6.5 CI (Calculated Index = KGS 100).
·1 CI for each dependant.
In addition, Kyrgyzstan legislation stipulates additional deductions for certain social categories (e.g. war veterans, individuals with state honorary titles).
Tax Return & Period:
For income tax withheld at source (i.e. payroll income), the taxable period is a month. For income tax not withheld at source (i.e. other than payroll income), the taxable period is a calendar year.
A tax agent is obligated to submit the tax returns on individual income tax withheld at source (i.e. payroll income) no later than the 20th day of the month following the month of income payment.
Moreover, an individual should submit a tax return on income tax not withheld at source (i.e. other than payroll income) before 1 April of the year following the reporting year.
Payment of tax:
Tax agents withhold income tax no later the date of income payment. Tax is due prior to the 20th day of the month following the month of income payment.
For income not taxed at source, income tax payment should generally be made before 1 March of the year following the reporting year.
Corporate Income Tax:
Residence – A legal person is a resident in Kyrgyzstan if it is established according to the laws of Kyrgyzstan or its management bodies are located in Kyrgyzstan.
Basis – Resident companies are taxed on worldwide income. Nonresident entities are subject to tax only on Kyrgyz-source income and on income received by a permanent establishment in Kyrgyzstan.
Taxable income – Taxable profit is defined as accounting profit, subject to certain adjustments in accordance with the provisions of the Kyrgyz Tax Code. Income includes sales income (i.e. total proceeds from the sale of goods, work, services and property rights) and nonsales income. A list of nonsales income is provided in the Tax Code and includes dividends, interest, royalties, leasing income, etc.
Substantiated expenses connected with the earning of income are deductible in computing taxable income.
Taxation of dividends – Dividends received by a resident legal person from another domestic company are exempt from the corporate income tax. Dividends received from a nonresident company are included in regular income and taxed at the general tax rate.
Capital gains – Capital gains derived by a resident are taxed as normal income at the general tax rate.
Losses – Losses incurred by a taxpayer as a result of its economic activities may be carried forward for up to five calendar years. The carryback of losses is not permitted.
Rate – The standard corporate income tax rate is 10%. For leasing companies, the rate is 5% for the period from 1 January 2017 through 31 December 2021. A 0% rate applies to corporate entities engaged in mining of gold ore, concentrate, alloy and gold refining, as well as to certain domestic companies that use new equipment solely for production and sell goods of their own production (provided the domestic companies comply with certain criteria determined by the Tax Code).
Surtax – No
Alternative minimum tax – No
Foreign tax credit – A foreign tax credit is granted for tax paid abroad on foreign income, provided there is a tax treaty with the country in which the tax was paid. The amount of the credit will not exceed the amount of Kyrgyz tax due on the same income.
Participation exemption – No
Holding company regime – No
Incentives – Incentives are available for investments in priority economic sectors relating to business activities in special economic zones.
The profit tax for agricultural and processing businesses that comply with certain criteria, preschool organizations and private medicine cardio surgery businesses is 0%.
Companies operating in a high-tech park may enjoy a profit tax exemption, VAT and sales tax exemptions, a reduced 12% rate of social security contributions and a reduced 5% rate of personal income tax for their employees.
Other – Special taxes are levied on subsoil users that hold licenses to engage in exploration and development of the subsoil in Kyrgyzstan.
Dividends – Dividends that are paid to a nonresident entity or individual are subject to a 10% withholding tax, unless the rate is reduced by a tax treaty.
Interest – Interest that is paid to a nonresident entity or individual is subject to a 10% withholding tax, unless the rate is reduced by a tax treaty.
Royalties – Royalties that are paid to a nonresident entity or individual are subject to a 10% withholding tax, unless the rate is reduced by a tax treaty.
Technical service fees – Technical service fees that are paid to a nonresident entity or individual are subject to a 10% withholding tax, unless the rate is reduced by a tax treaty.
Branch remittance tax – No
Note: Information placed here in above is only for general perception. This may not reflect the latest status on law and may have changed in recent time. Please seek our professional opinion before applying the provision. Thanks.