KyrgyzstanTax Obligations Detailed

In Kyrgyzstan, employers face several tax obligations, including income tax withholding, social security contributions, and other levies.

Employer Taxes

• Income Tax Withholding: Employers act as tax agents, withholding 10% of employees' gross salaries as income tax. This tax is remitted to the government monthly, by the 20th of the following month.
• Social Security Contributions: Employers contribute 17.25% of the employee's salary towards social security, broken down as follows:
  • Pension Fund: 15% (3% for foreign employees temporarily residing in Kyrgyzstan)
  • Medical Insurance Fund: 2%
• Workers' Health Improvement Fund: 0.25%

Employee Taxes

Employees in Kyrgyzstan also contribute to the social security system. The contributions are as follows: * State Cumulative Pension Fund: 2% * Pension Fund: 8%

Other Taxes

• Sales Tax: Businesses selling goods and services are subject to a sales tax (different from VAT). The rate varies depending on the goods or services sold. Additional taxes apply to specific goods like alcohol, tobacco, and oil products.
• Property Tax: Levied on both movable and immovable property, typically at a rate not exceeding 0.8%. For businesses, tax payments are made quarterly, due by the 20th of the second month following the reporting quarter. Annual filing is due by March 1st of the following year. Individuals must pay by September 1st and file by April 1st.
• Excise Tax: Applied to specific goods such as alcohol, tobacco, and oil products, either produced domestically or imported.

Payroll Cycle and Compliance

• The payroll frequency in Kyrgyzstan is typically monthly.
• The tax year aligns with the calendar year (January 1st to December 31st).
• Salaries must be paid via bank transfer, except in limited cases approved by the Cabinet of Ministers.

Important Considerations for 2025

As of October 1, 2024, employers in Kyrgyzstan are required to pay salaries through non-cash methods (bank transfers), except for specific situations and sectors as defined by the Cabinet of Ministers. Additionally, mandatory employer's civil liability insurance is required to cover potential harm to employees during their work duties. Failure to comply with these regulations may result in fines.

It's important to note that tax laws and regulations can change. Consulting with a tax advisor or legal professional is recommended for the most up-to-date and specific guidance.

In Kyrgyzstan, employers are responsible for withholding and remitting various taxes from employee salaries, primarily personal income tax and social security contributions.

Personal Income Tax (PIT)

The personal income tax rate in Kyrgyzstan is a flat 10% of an employee's gross salary after allowable deductions.

• Deductions: Employees can claim deductions for expenses related to education (for themselves or dependents, capped at 10% of total taxable income), and mortgage interest payments (capped at 230,000 KGS annually). These deductions require submitting a tax return (Form 100) along with supporting documentation by April 1st of the following year. Standard deductions also exist, such as 6.5 Calculated Index (CI, where 1 CI = 100 KGS) and 1 CI per dependent monthly.

• Tax Return & Payment: For salary income (tax withheld at source), employers file monthly tax returns (Form 091) by the 20th of the following month. For other income (not withheld at source), individuals file an annual tax return (Form 100) by April 1st of the following year.

Social Security Contributions

Employers contribute 17.25% of an employee's gross salary towards social security. Employees also contribute, with their 10% share deducted from their salary by the employer and remitted to the relevant funds. The employer contributions break down as follows:

• Pension Fund: 15% of gross salary
• Medical Insurance Fund: 1% of gross salary
• Health Improvement Fund: 0.25% of gross salary

Sales Tax

Sales tax is applicable to goods and services sold within Kyrgyzstan. Rates vary depending on the nature of goods and services. It differs from VAT, applying to sales turnover for Kyrgyz entities and foreign companies using an Employer of Record (EOR) service.

Other Taxes

While not directly related to employee deductions, employers should be aware of other taxes like property tax (with quarterly payments for businesses and an annual payment by September 1st for individuals) and excise taxes on specific goods.

Additional Employer Obligations

Employers act as tax agents, responsible for withholding and remitting employee taxes on time. Penalties apply for late payments. They also maintain records of employee salaries and tax deductions.

Freelancers

Freelancers in Kyrgyzstan have two tax status options: "Individual" (paying the flat 10% income tax and contributions based on the average monthly salary) or "Sole Proprietor" (using the patent system, with different rates, deadlines, and reporting requirements).

It is important to note that tax laws and regulations are subject to change, and this overview represents the situation as of February 5, 2025. Always verify with official sources or consult a tax professional for the most current information.

In Kyrgyzstan, the Value Added Tax (VAT) is levied on most goods and services at a standard rate of 12%, with specific exemptions and zero-rated supplies.

VAT Registration

• Threshold: Mandatory registration is required if your annual turnover exceeds 30 million KGS. Voluntary registration is possible for businesses with turnovers below this threshold. Businesses involved in import/export activities must register regardless of turnover.
• Process: Submit a paper application along with necessary supporting documents to the local tax office, in person or through a representative. The tax office will process the application within five business days.

VAT Rates

• Standard Rate: 12% on most goods and services.
• Zero Rate: Applies to specific supplies like exports (excluding certain goods), international transportation, and services related to international transit air flights.
• Exempt Supplies: Includes pharmaceuticals, land plots, certain financial and insurance services, and specific other goods and services as defined by law.

VAT Filing and Payment

• Filing Frequency: Monthly VAT returns are required.
• Deadline: VAT returns and payments are due by the 25th of the month following the reporting period.
• Required Documentation: Maintain records of issued and received VAT invoices, annual accounts, bank statements, cash books, and credit/debit notes. E-invoicing is recommended, though not currently mandatory.

VAT on Digital Services

• Non-resident providers of digital services are liable for VAT if the service is consumed within Kyrgyzstan.
• The VAT rate for digital services is also 12%.
• Registration is required from the first sale, regardless of thresholds.
• Returns are filed quarterly by the 20th of the following month.
• Input VAT recovery is not available for non-resident providers.

Sales Tax

A sales tax is levied on certain transactions, particularly those conducted in cash. The rate is 1% for sales of goods, works, or services that are also subject to VAT. The rate is 2% for sales exempt from VAT. For non-cash transactions the rate is 0%. There are also simplified regimes for small businesses and specific industries with lower rates and simplified reporting.  

Other Taxes

Aside from VAT and sales tax, other taxes may be levied in Kyrgyzstan depending on the nature of the business activity, such as income tax, excise duties, property tax and land tax. Consult local regulations for more details on these taxes.

---

Information is current as of February 5, 2025, and may be subject to change.

Kyrgyzstan offers various tax incentives to stimulate economic growth and attract investment.

Special Economic Zones (SEZs)

Kyrgyzstan has four SEZs: Naryn, Karakol, Bishkek, and Maimak. Businesses operating within these zones benefit from a tax-neutral regime, exemption from customs duties, and a liberalized currency control regime. A special fee, ranging from 0.1% to 2% of sales, applies based on the specific SEZ location.

Investment Incentives

• Large Investments: Local companies producing or re-processing goods in Kyrgyzstan using new equipment (acquired after May 1, 2015) may qualify for a 0% profit tax rate. Eligibility requires meeting one of the following criteria: annual turnover exceeding 170 million KGS, monthly profit tax exceeding 150,000 KGS, or charter capital exceeding 10 million KGS. This incentive is not available for companies in the tobacco, mining, alcohol, retailing, or information technology sectors. Dividends from foreign companies engaged in large investment projects (unrelated to Permanent Establishment activities) also benefit from a 0% withholding tax if derived from profits subject to the 0% profit tax rate.
• Renewable Energy: New producers of electricity, heat, gas, and renewable fuels (gaseous and liquid biofuel) using renewable energy sources can be exempt from corporate income tax for five years, subject to specific criteria. Imported goods and equipment for constructing renewable energy plants listed by the government are VAT-exempt.

Sector-Specific Incentives

• Agriculture: Agricultural producers and traders, as well as operators of machine-tractor stations and trade-logistic centers for agricultural purposes, may qualify for specific tax benefits. Retail chains selling domestic agricultural products will be exempted from VAT to promote local produce.
• Park of Innovative Technologies: Resident companies are exempt from profit tax, sales tax, and VAT if they fulfill the requirements of the Tax Code. Employees of resident companies and individual entrepreneurs within the park are taxed at a reduced income tax rate of 5%.
• Construction Sector: A simplified single tax system will be implemented for the construction sector from July 1, 2025, with rates of 6% for cash payments and 4% for non-cash payments.
• Transportation and Delivery Services: Taxi drivers and couriers are subject to a simplified 1% income tax rate, automatically withheld from each order through their respective platforms.
• Waste Recycling: Sales of waste paper and scrap metal are exempt from income tax.

Tax Administration Reliefs

• Cancellation of Universal Declaration: The requirement for all individuals to file annual income declarations has been removed. Only individuals seeking tax deductions need to file.
• Zero Reporting Elimination: Taxpayers with no liabilities during a reporting period are no longer required to submit a zero report.
• Vehicle Assembly: Initial registration fees are waived for vehicles assembled in Kyrgyzstan.
• Tax Amnesty for Re-Exported Cars: Individuals who imported and sold a vehicle within a year are exempt from income tax.

Additional Information as of Today, February 5, 2025

• Kyrgyzstan has Double Taxation Agreements (DTAs) with several countries to avoid double taxation.
• The standard corporate income tax rate is 10%, and the standard VAT rate is 12%.
• Sales tax rates vary from 1% to 5% depending on the goods or services.
• A preferential tax regime is available in designated subsidy settlements for businesses registered after January 1, 2019, offering exemptions from sales tax, income tax, land tax, and real estate tax. Eligibility depends on meeting certain criteria, including being located in a designated settlement and engaging in specific activities like food production and processing, light industry, or export-oriented production.
• Simplified taxation based on a unified tax rate of 2-6% is available for specific business activities.
• Leasing companies benefit from a preferential 5% income tax rate and are exempt from VAT and sales tax.
• Foreign companies providing digital services without a local domain name or IP address are subject to VAT.
• Taxpayers applying for tax incentives are obligated to provide information to assess the effectiveness of the incentives.

Please note that tax regulations are subject to change. This information is current as of February 5, 2025, and should be verified with official sources for the most up-to-date details. Always consult with a qualified tax advisor for personalized advice.