In Kyrgyzstan, employers have a range of tax obligations on behalf of their employees.

Social Security Contributions

Employers are required to contribute 17.25% of an employee's gross salary for social security. This is broken down into:

• 15% towards the Obligatory Pension Fund (OPF)
• 2% towards the Obligatory Medical Insurance Fund (OMIC)
• 0.25% towards the Employee Healthcare Fund (EHFC)

These social contribution rates are fully equalized for both Kyrgyzstani citizens and foreign nationals working in Kyrgyzstan.

Personal Income Tax (PIT)

Employers are obligated to withhold Personal Income Tax (PIT) from employee salaries. Currently, Kyrgyzstan has a flat PIT rate of 10%.

Additional Considerations

Employers must pay these contributions in a timely manner as stipulated by Kyrgyzstani tax laws. Late payments may lead to penalties or fines. Additionally, severance pay provisions should be factored in when considering employee termination costs.

In Kyrgyzstan, employees are subject to certain tax deductions from their gross salaries.

Personal Income Tax (PIT)

A flat Personal Income Tax (PIT) rate of 10% applies to most types of individual income. This tax is withheld directly from the employee's salary by the employer.

Social Security Contributions

Employees in Kyrgyzstan are required to contribute 10% of their gross salary towards social security. This is broken down as follows:

• State Cumulative Pension Fund (CPF): 2% is contributed to the CPF for long-term retirement savings.
• Obligatory Pension Fund (OPF): 8% goes towards the OPF for contributing to their pension.

Important Considerations

• Foreign Nationals: Foreign employees working in Kyrgyzstan have the same social security contribution obligations as Kyrgyzstani citizens.
• Income Tax Calculation: PIT is calculated on taxable income, which is determined after deducting applicable allowances and exemptions.

In Kyrgyzstan, the standard VAT rate is 12%. Businesses that exceed an annual turnover threshold of KGS 30 million are required to register for VAT. VAT applies to most services provided within the country. However, certain services, including some exports and international transport, are zero-rated for VAT purposes, allowing businesses to claim back input VAT incurred on the costs of providing these services.

VAT Calculation and Reporting

VAT is charged on the gross value of the services. Businesses can generally deduct input VAT (VAT paid on purchases) from their output VAT liability, ensuring that VAT is ultimately borne by the final consumer. VAT-registered businesses are required to file VAT returns on a quarterly basis.

VAT on Imported Services

Kyrgyzstan applies a reverse charge mechanism for VAT on imported services. This means that the recipient of the imported service is liable for VAT, rather than the foreign supplier. The VAT payable is calculated based on the value of the imported service.

VAT on Digital Services

Non-resident suppliers of digital services to Kyrgyzstan consumers may be obliged to register for VAT in Kyrgyzstan, regardless of their turnover. A registration and filing portal is provided by the State Tax Service. Notably, there is no simplified registration threshold for non-resident digital service providers in Kyrgyzstan.

Kyrgyzstan offers a variety of tax incentives to attract businesses and encourage investment in certain sectors. Here's a breakdown of some key programs:

Special Economic Zones (SEZs)

SEZs are designated areas within Kyrgyzstan that offer a more favorable tax environment. Businesses operating within an SEZ can benefit from:

• Tax-neutral regime: This means exemption from profit tax, and sales tax.
• Customs duty exemptions: Businesses can import equipment and materials duty-free.
• Liberal currency control regime: This allows for easier repatriation of profits.

There are four SEZs currently operating in Kyrgyzstan: Naryn, Karakol, Bishkek, and Maimak. It's important to note that SEZs also have a special fee for these incentives, ranging from 0.1% to 2% of sales depending on the specific zone.

Agriculture Sector

The Kyrgyz government actively supports businesses involved in agriculture. Agricultural producers, traders, and entities operating machine-tractor stations or agricultural trade-logistic centers can enjoy significant tax benefits:

• Income tax exemption: Businesses in this sector can be exempt from paying income tax.
• Reduced property tax: Agricultural businesses can benefit from a 50% reduction in property tax liabilities.
• Simplified payroll taxes: The government has implemented a simplified system for calculating payroll taxes for businesses in the agriculture sector.

Kyrgyzstan's tax incentive programs aim to stimulate economic activity in targeted sectors. Carefully evaluating these benefits and aligning them with your business goals can make Kyrgyzstan an attractive investment destination. It's always advisable to consult with a tax professional to ensure you understand the eligibility requirements and application process for any specific tax incentive program.