1. Payers of profits tax are:
1) all legal persons - residents which carry on economic activity and gain profits from a source of income both in the Kyrgyz Republic and outside it;
2) all non-resident legal persons who carry on economic activity in the Kyrgyz Republic as part of a permanent establishment and gain profits from a source of income in the Kyrgyz Republic.
2. A legal person shall be subject to taxation separately from its founders.
3. Profits received from a simple partnership (or a consortium) shall be treated as profits of the participants and taxed to each of them.
The object of taxation shall be profits, calculated as the difference between aggregate annual income of a taxpayer and deductions allowed under this Code
1. Aggregate annual income shall comprise all types of income, both monetary and in kind, as well as works and services, including:
1) gross income from the disposal of goods (works, services);
2) gross income from the disposal of assets that are not subject to depreciation, their value adjusted for inflation;
3) as well as income :
a) interest income, other than interest income previously taxed at the source in the Kyrgyz Republic;
b) dividends;
c) proceeds of insurance policies, with the exception of payable amounts
d) related to insured accident (event), related to capital assets that do not exceed their balance sheet value, if these amounts are spent on restoration of capital assets or procurement of a similar type of capital assets;
e) property and money received without compensation, except for objects of social and cultural character, housing and public utilities roads, electric power grid, substations, boiler houses, heat supply systems, thermo-power stations, water inlets, mining equipment and other similar objects transferred without compensation, provided there is a resolution of the Government of the Kyrgyz Republic to this effect, to government bodies of the Kyrgyz Republic (or on their resolution to specialized organizations, using or exploiting such objects for the appropriate purpose) and to local self-government bodies, as well as capital assets, intangible assets, other assets and money invested in the development of production and non-production base of their own, transferred without compensation to enterprises and organizations government and local self government bodies (given there is a Kyrgyz Republic Government resolution to this effect);
f) gross earnings from leasing property;
g) income received from disposal or transfer of intangible assets (non-property rights) to another person;
h) subsidies;
i) amounts received as consideration for agreeing to restrict entrepreneurial activity or to close an enterprise;
j) income arising from writing off and reduction of a legal person’s debt to other persons;
k) amounts received from sale of depreciated assets;
l) negative amounts of balance sheet value of depreciable assets at the end of a year under Item 7 of Article 97 of this Code .
2. Aggregate annual income of a resident taxpayer consists of income received by a taxpayer in the Kyrgyz Republic and outside of the Kyrgyz Republic.
3. Aggregate annual income of a non-resident taxpayer consists of income received from sources in the Kyrgyz Republic.
4. Aggregate annual income includes amounts transferred to a third party as:
1) mutual clearing of debts;
2) settlement with regards to direct or indirect expenses.
5. Amounts arising from revaluation of inventories should not be included into aggregate annual income.
1. Deduction from the aggregate annual income of legal persons is allowed for the following expenses incurred in producing income:
1) remuneration of labor;
2) material and social benefits to employees;
3) all other operating expenses incurred in income production;
4) amounts spent on insurance of assets connected with economic activity.
2. Traveling expenses are only deductible at the amount of actual expenses certified by the filed documents (except daily allowance with regards to which rates are determined by the Government of the Kyrgyz Republic). Where there are no documents available - at the amount fixed by the Government of the Kyrgyz Republic.
3. Amounts
channeled by institutions, organizations and enterprises of education, science, culture, sport and health care
to covering capital expenses in accordance with the approved estimate of
expenses in the established manner.
1. A deduction is allowed from aggregate annual income for interest paid on debt liability, where the amount has been used to cover the expenses incurred in carrying on economic activity.
2. Deduction amount is computed after the amount of debt payable in the current tax year multiplied by 150 % of the discount rate set by the National Bank of the Kyrgyz Republic at the time of debt occurrence.
3. The deduction must not exceed the amount of a taxpayer's interest income, plus 50 percent of the taxpayer's taxable income, excluding the taxpayer’s interest income and expense.
4. Any interest expense not allowed as a deduction under Item 3 of this Article shall be treated as interest expense deductible in the succeeding tax year.
1. Research, experiments, designing and exploration expenses related to gaining profit shall be deductible.
2. No deduction is allowed under Item 1 for the cost of acquisition and installation of capital assets.
1. Depreciation charges for capital assets used in production and subject to wear shall be deductible in accordance with the provisions of this Article.
2. The following are non-depreciable capital assets:
1) land;
2) inventory;
3) assets, whose value is fully included in the cost of finished goods, works done, services provided in the current tax year;
3. Depreciable capital assets are classified into five categories with the following depreciation rate limits:
|
N |
Assets category |
Depreciation
rate limit |
|
1 |
cars, taxes, tractors for use on the road, special tools,
equipment and accessories; computers, peripheral and data processing
equipment |
30% |
|
2 |
automotive fleets, trucks, buses, special automobiles, and
trailers. Construction equipment. Machines and equipment for all sectors of
industry, foundries; press forging equipment; electronic and simple
equipment; agricultural machines. Office furniture. Natural resource
exploration and development expenses; intangible assets |
25% |
|
3 |
other capital
assets subject to depreciation and
expenses equated to therm |
20% |
|
4 |
railroad, sea and river transportation facilities, power
machines and equipment: power engineering equipment, turbine equipment,
electric engines and diesel generators. Power transmission and communication
devices; pipelines |
10% |
|
5 |
buildings, facilities and structures |
10% |
4. Depreciation charges for assets in each category are computed by applying a depreciation rate, specified in Item 3 of this Article, against the balance-sheet value of a category at the end of a tax year.
5. For buildings, constructions and structures (hereinafter “structures”) depreciation shall be computed for each structure individually. Where the balance sheet value of a structure has reduced to less than 45 minimum monthly wages as a result of wear, allowable depreciation deduction for this structure in the current tax year shall equal
its residual balance sheet value.
6. The balance-sheet value of a category at the end of a tax year shall be computed as follows:
1) the balance-sheet value of a category at the end of the preceding tax year;
minus
2) the depreciation deduction for a category for the preceding tax year and the amount of deductions under Item 8 of this Article;
plus
3) (deleted)
plus
4) the cost of capital assets added to the category during the tax year;
minus
5) the sales price of capital assets disposed of during the tax year.
7. If the balance-sheet value of a category at the end of a year is less than zero it equates to zero (a taxpayer has to include the above negative amount into his aggregate annual income,).
8. If the balance-sheet value of a category at the end of a tax year is less than 45 minimum monthly wages, a deduction is allowed for the total amount of the balance-sheet value of the category.
9. If all the capital assets in a category have been disposed of, transferred to another person or liquidated, the total amount of depreciation at the end of a tax year is subject to deduction .
10. The Government of the Kyrgyz Republic in agreement with the Legislative Chamber and upon approval of the People’s Representatives Chamber of the Jogorku Kenesh of the Kyrgyz Republic is entitled to establish rates of accelerated depreciation for specific types of capital assets.
1. Deductions for expenses incurred in repairs are calculated for each category set out in Article 97 of this Code.
2. Deductions for expenses incurred in repairs under Item 1 of this Article for each tax year are limited to 10 percent of the balance-sheet value of the category at the end of the preceding tax year unless otherwise provided by this Code.
3. The amount in excess of the limit stipulated in Item 2 of this Article shall be treated as the cost of capital assets added to the category during the tax year, and shall increase the balance-sheet value of the category under Item 6 of Article 97 of this Code.
4. The amounts spent on repairs of the rolling stock and the railway, passenger transport as the national and municipal property, shall be completely deductible from aggregate annual income.
The expenses incurred by a taxpayer in geological exploration work, (including expenses incurred by a taxpayer in acquiring the right to explore, develop, and exploit natural resources) and in preparatory work for the purpose of further extraction of natural resources shall be treated as the purchase of capital assets, and a deduction as depreciation shall be computed at the rate for capital assets of category 2 (as defined in Item 3 of Article 97 of this Code).
1. The cost of procuring or producing intangible assets by a taxpayer shall be treated as the purchase of capital assets, and shall be subject to a deduction from aggregate annual income as depreciation charge at the rate for capital assets of category 2 (as defined in Item 3 of Article 97 of this Code) .
2. Item 1 of this Article only applies to intangible assets with a useful life of more than one calendar year. This item does not apply to financial assets.
3. The cost of intangible assets does not include procurement or production costs to the extent that they have been subtracted in calculating the taxpayer's taxable profit.
1. Taxpayer's expenses incurred in procurement of capital production assets to be used by this taxpayer, rather than to be supplied to another subject, shall be deducted from aggregate annual income at the amount of 15% of their value.
2. Where a taxpayer treats expenses stipulated in Item 1 of this Article as deductible, these expenses shall not be included in depreciation charges on the procured capital production assets.
Aggregate annual income of a legal person is reduced by the amount of contribution made to the Social Fund of the Government of the Kyrgyz Republic at the fixed rate.
1. Losses arising from disposal of securities shall be offset against gains realized upon disposal of other securities.
2. If losses referred to in Item 1 of this Article cannot be offset in the year in which they occurred, they shall be carried forward and offset against gains realized upon disposal of securities in the five succeeding years.
1. The amount of deductions in excess of a taxpayer's aggregate annual income (loss) shall be carried forward by the taxpayer as a deduction from aggregate annual income of an appropriate year for a period of up to five calendar years.
2. The amount by which deductions exceed aggregate annual income of a taxpayer is the total amount of losses minus the difference between the deducted amount in the year when the losses occurred and those in the tax year.
1. Banks and other financing and crediting institutions operating within the framework of credit unions and licensed by the National Bank of the Kyrgyz Republic are obliged to establish reserves to which potential credit and leasing losses are charged. The reserves should be used for the only purpose of securing credits granted by banks and assets of equal status. The amount of contribution channeled by the bank to these reserves shall be established by the National Bank of the Kyrgyz Republic.
2. Amounts channeled by the bank or other financing and crediting institution operating within the framework of credit unions and licensed by the National Bank of the Kyrgyz to a reserve, to which potential losses from credit, leasing and other transactions of the same status are charged, are liable for deduction from aggregate annual income.
A legal entity carrying on insurance activity shall be entitled to a deduction for contributions to insurance reserve funds from aggregate annual income at the rates approved by the Government of the Kyrgyz Republic.
Not subject to deduction from aggregate annual income are:
1) expenses incurred in procurement and installation of capital assets and other capital expenses, except for the amounts deductible from aggregate annual income under Article 100-1, unless otherwise provided by this Code;
2) fines and interest payable to the budget ;
3) taxes payable under this Code, except for land tax, road tax, tax for prevention and liquidation of emergency situations;
4) 50% of expenses related to construction, operation and maintenance of objects used for social purposes rather than economic activity - the remaining 50% of the above mentioned expenses shall be treated as deductions;
5) expenses of a taxpayer or members of his family, relatives and other relations to his family that are not involved in carrying on economic activity;
6) any profits tax liability payable under this Code; or
7) expenses incurred for the spouse or other member of a taxpayer’s family, for partners in economic activity, or for any other persons except when it is confirmed that the given expenses were actually effected for the purpose of payment for services rendered and arose from work necessity;
8) expenses incurred in procurement, management, or conservation of property the income from which is exempt from tax under the provisions f this Code;
9) any loss resulting from sale or exchange of property, directly or indirectly, by the taxpayer to a member of the taxpayer’s family / to a partner in economic activity;
10) expenses for which the nature and amount cannot be certified by records maintained by the taxpayer (receipts, payment orders, etc.)
1. The taxable profit of legal persons shall be taxed at the rate of 20 percent.
2. Profits of the I and II category invalid society and the enterprises of the Kyrgyz Blind and Deaf Society, in which invalids, deaf and blind account for at least 50% of the total amount of the employees, shall be taxed at zero rate. The list of the above mentioned enterprises shall be determined by the Government of the Kyrgyz Republic
3. Legal persons for which land is the principal productive asset and the principal source of income shall be only liable to pay land tax.
(deleted)
1. Interest payable to legal persons shall be subject to tax of 10 percent of the amount payable at the source of income.
2. Item 1 of this Article shall not apply to interest paid to resident banks, or gained by them from possession of government securities;
3. Interest previously taxed at the source in the Kyrgyz Republic should not be included in the taxable amount of interest, provided there are documents proving that the tax was paid.
1. Income of a non-resident that is not connected with a permanent establishment in the Kyrgyz Republic shall be subject to tax payable at the source of income, no deductions are allowed, at the following rates :
|
1 |
dividends and interest |
10% |
|
2 |
insurance benefits paid on policies insuring or reinsuring risks |
5% |
|
3 |
telecommunication or transport services in international communication and transportation between the Kyrgyz Republic and other states |
5% |
|
4 |
earnings from royalties, rendering services (including management, consulting services), income related to leasing; and other types of income |
30% |
1. Voluntary organizations with respect to the income arising from their charity activities and profits of corrective labor institutions of the Government Department of Punishment Execution of the Ministry of Home Affairs of the Kyrgyz Republic and credit unions are exempt from profits tax (profits from other types of activity are taxable in the established manner).
2. Registered enterprises with foreign capital invested in them (joint venture) shall pay profits tax under the Law of the Kyrgyz Republic “On foreign investments”;
3. Aggregate annual income of legal persons shall decrease by the amount of an asset including money, transferred without compensation to non-commercial charity organizations, at the amount that does not exceed 2% of a taxpayer's taxable income.
4. Dividends, received by legal persons-residents of the Kyrgyz Republic, shall be exempted from tax.
Profits gained by an investment fund, that is registered and whose activity is licensed, from the disposal of
investments in shares and securities of a resident legal person are exempt from tax to the extent of the amount of the
profits that the investment fund distributes to its members. Item 1 of the present Article shall apply to a fund that:
1) has a license of the National Commission of the Kyrgyz Republic on Securities Market, authorizing securities transactions;
2) derives at least 70 percent of its aggregate annual income during a tax year as interest, from investments, as gains from the disposal of securities or other income derived from investing in securities;
3) at the close of each calendar quarter during a tax year, has no more than 50 percent of its total invested assets in cash and on a settlement account;
4) possesses no more than 10% of investment fund assets invested in securities issued by any legal person;
5) possesses no more than 25% of equity shares portfolio issued by any legal person.
1. For any legal person whose principal activity is insurance or reinsurance of property and other types of insurance, the tax shall be an amount of 5 % of the total amount of the received insurance premiums.
2. For a legal person described in Item 1 of this Article, all activities other than insurance shall be treated as the activities of a legal person that is not an insurance company, and taxed under the provisions of this Code.
1. Legal persons shall be liable to make regular monthly payments to the budget, except for the tax amount withheld at the source of income, on or before the 20th day of each month in accordance with the procedure stipulated in Article 40 of this Code.
2. Current payments of profits tax should be first of all offset against the profits tax assessed to the taxpayer for the current tax year.