Tax alert – Mazars Central Asia

Below is an overview of the key changes in relation to income tax, special tax regime based on patent and collection of taxpayers' tax debts, which will come inti force in 2024 and introduced by the following legal acts of the Kyrgyz Republic:

1)    The Law of the Kyrgyz Republic on "On Amendments to Certain Legislative Acts of the Kyrgyz Republic in the Field of Taxation" dated 03.04.2023 #78,

2)    Data of the Social Fund of the Kyrgyz Republic on the average monthly salary in the Kyrgyz Republic for the calculation of insurance contributions in 2024,

3)    Order of the State Tax Service under the Ministry of Finance of the Kyrgyz Republic No. 237 dated 1 September 2023,

4)    Decree of the President of the Kyrgyz Republic "On introduction of a temporary ban (moratorium) on inspections of business entities" dated 09.01.2024.

I.    SPECIAL TAX REGIMES

1. Patent based tax.

From 1 January 2024, patents for the following types of trading activities will expire:

• retail sale in markets and mini markets, in shops, outside shops, shopping malls and markets, in shopping centers using outlets;
• sale of spare parts and materials for cars outside markets using kiosks, pavilions, containers, carriages, trays, counters, tents, yurts, manual mobile carts, sheds and other temporary iron structures;
• sale of fast food chain products (fast food);
• breeding and sale of pets;
• production (sale) of bread;
• production (sale) of sandblock, cinder block and paving stones at home;
• sale of handicraft products (folk arts and crafts) of own production;
• manufacture and sale of tombstones, pedestals and related elements;
• activities of artists, including sales of paintings and portraits.

Traders with a patent are now required to operate under a general tax regime or a single tax, except for entities in the "Dordoi" and "Kara-Suu" zones.

At the same time, in December 2023, the president of the KR at the Dordoi market at a meeting with traders stated that patents would remain in force until July 2024. However, no changes have been made to the Tax Code regarding the extension of patents to date.

2. Special regimes for "Dordain” и "Kara-Suu"

Varga markets "Dordoi" in Bishkek and "Kara-Suu" in Osh oblast are included in trade zones with special regime.

Subjects of the trade zone with a special regime pay the amount of tax on trading activities (large wholesale and retail markets of the republic included in the objects of strategic importance) depending on the declared amount of annual revenue.

The tax rate is set per trading point depending on the declared volume of revenue planned to be received for the current calendar year in the following amounts:

II. INCOME TAX AND INSURANCE PAYMENTS

3. Income tax

According to Article 187 of the Tax Code of the Kyrgyz Republic, if the amount of wages paid by the employer for a worked calendar month does not exceed the amount of the minimum estimated income, the amount of the minimum estimated income (MEI) is taken as the tax base for income tax.

Order of the State Tax Service under the Ministry of Finance of the Kyrgyz Republic № 237 from 01.09.2023 approved the minimum estimated income per month for 2024.

4. Insurance payments

According to Article 13 of the Law "On Tariffs of State Social Insurance Contributions", the amount of insurance contributions paid by employers on behalf of employees of legal entities may not be less than the amount calculated on 60 per cent of the average monthly salary (AMS).

For 2024, the following AMS amounts have been established for insurance premiums and tax by city: 

Below is a comparative calculation of taxes and contributions from the payroll with the minimum wage equal to 60% of the SMZ for Bishkek:

[1] PF-Pension Fund

[2] SAPF - State Accumulative Pension Fund

[3] IT – Income Tax

[4] CHIF - Compulsory Health Insurance Fund

[5] LRF - Labor Recuperation Fund

III.    TAX LIABILITY AND TAX DEBT

5. Ensuring the fulfilment of a tax obligation and the repayment of tax debts

The State Tax Service of the Kyrgyz Republic reported on the beginning of mailing of notices to taxpayers of debts through the Personal Tax Cabinet on the website Cabinet.salyk.kg.

If a taxpayer has debts, a notice of tax debts, non-tax income and insurance contributions will be sent through the taxpayer's office without the taxpayer's consent.

Once a notice is sent electronically, it is deemed to have been served after 5 calendar days from the date of sending, irrespective of whether the taxpayer has opened his Personal Tax Account or not.

15 calendar days from the date of delivery of the notice are given for voluntary repayment of the debt. Failure to pay or incomplete repayment within the stipulated period will result in collection of the amount owed in accordance with the laws of the Kyrgyz Republic. This includes:

• undisputed recovery of funds from a taxpayer's bank account,
• establishing a tax post,
• travel restrictions,
• judicial penalties and other preventive measures.

Taxpayers should independently check the existence of arrears in their personal cabinet on the website Cabinet.salyk.kg to avoid accrual of penalties for late fulfilment of tax obligations.

IV. TAX AUDITS

6. Moratorium on tax audits

President of the Kyrgyz Republic Sadyr Japarov signed a decree "On the introduction of a temporary ban (moratorium) on audits of business entities", according to which:

Moratorium is imposed on inspections of business until 31 December 2024 conducted by law enforcement and other authorised bodies entitled to conduct audits of business entities, with the exception of inspections carried out at the request of officials of state bodies in the event of identification of specific facts of violation by a business entity of the legislation of the Kyrgyz Republic with the attachment of documents, materials and other supporting information.

General Prosecutor's Office of the Kyrgyz Republic to strengthen oversight of the legality and validity of audits conducted by law enforcement, tax and other authorised bodies that have the right to conduct audits of business entities.

The Cabinet of Ministers of the Kyrgyz Republic within a month should take measures arising from the Decree, as well as bring its decisions in line with the Decree.

Mazars Alert contains a selection of the latest important regulatory changes; it is intended to provide information only and therefore should not be construed as professional advice or consultation. Should you require any information related to the above, please contact us.   

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