The Tax Code of the Kyrgyz Republic (version of the Laws of the Kyrgyz Republic of 13.07.99 # 69 and # 71, 16.07.99 # 77, 27.11.99 # 130 01.12.99 # 135) is aimed at the reduction of the tax burden of economic entities of the Republic, attraction of not only foreign, but local investors, making the mechanism of tax payment easier, improvement of tax administering.
In Part II ” Management” a new wording of Article 40 of the Tax Code is given, i.e. the current payments will be made proceeding on the financial results not of the previous month but the previous financial year and on coordination with tax bodies they will increase and reduce. The size of penalties (Article 64) will be reduced. The responsibility of both tax-payers and tax bodies will increase.
In Part III “Income Tax from Individuals” (Articles 72-89) in favor of the tax payers the insurance payments are not included into the consolidated annual income (Article 74). The tax payer has the right to apply increased norms of amortization (Article 80), the restriction of repair costs increased from 5% to 10% (Article 81), the costs connected with purchasing the fixed assets should be deducted from the consolidated annual income at the amount of 15% of their cost (Article 83-1), the prolongation of losses connected with the economic activity is made not within 5 years as it has been before, but within a shorter period (Article 86), the raise in pay for the work in high mountains is not taxable (Article 88).
To make the calculation of an income tax easier, the number of tax rates is reduced from 6 to 3 and to avoid the tax evasion the maximum rate of an income tax will be not more than 45 minimum annual salaries. If 100 minimum salaries are deducted, the maximum tax rate comes down from 40% to 33% (Article 89).
In Part IV “Profit Tax for Legal Entities” (Articles 91-115) as well as individuals, the deductions on insurance are not included in the consolidated annual income if they are directed to the restoration of fixed assets or the purchase of a similar kind of fixed assets (Article 93). The tax payer on coordination with the Government of the Kyrgyz Republic has the right to apply increased norms of amortization (Article 97); restriction for deduction of repair costs increases from 5 to 10%, and the sums of costs for the repair of the railway and rolling stock shall be deducted from the consolidated annual income (Article 98), the prolongation of losses connected with the economic activity is made not within 5 years but within the period up to 5 years (Article 103). The deduction from a consolidated annual income of the sums to the insurance reserve funds is permitted for legal entities, engaged in insurance activity (Article 104-1). The deduction is also permitted from a consolidated annual income of the sums of land, road and emergency tax (Article 105).
The dividends received by the residents are exempted from taxation, and those received by non-residents are reduced from 15 to 10% (Articles 107, 109).
In Part V “Value Added Tax” insurance services are exempted from taxation as it is customary elsewhere in the world (Article 141). In order to avoid different interpretation, the editing amendment of Article 145 was made.
In conformity with Article 150 of the Tax Code of the Kyrgyz Republic the export of goods is considered to be a delivery with a zero rate of VAT. This means that the VAT paid for material resources, is reimbursed by the budget for manufacturing goods.
Article 150-1 “International Transportation” reads that the delivery of the work or services connected with international transportation of passengers, luggage and cargo is considered a delivery with a zero rate of VAT.