Favorable Opportunities for Doing Business in the Kyrgyz Republic

Kyrgyzstan is situated in Central Asia bordering on Kazakhstan, China, Tajikistan and Uzbekistan. It is the most important transit country in Central Asia, the main transportation routes of which is located along its territory towards north-east, i. e. from Kazakhstan to Russia towards Tajikistan and Afghanistan and southeast connecting Central Asia with China. It is located in the center of Euro-Asia.

A favorable geopolitical location, mineral and recreational resources attract foreign investment and businessmen to the country. Besides, liberalized legislation, improving investment climate, a clear foreign direct investment legal framework, low tax rates and advantageous bureaucratic procedures for business are the most important opportunities attracting both local residents and foreign citizens. The economy of the country is at the stage of active transformation into the world economic community.

Obstacles to normal economic activity are becoming fewer and fewer with every passing year in the Kyrgyz Republic. The country has the best taxation system, a free market and trade, support for investment activities and the most liberal trade regime in the region. The state conducts a favourable financial policy. The trade turnover is higher than the GDP level and that indicates its openness.

According to the rating of Doing Business starting business in Kyrgyzstan is not difficult. Registration of business is a kind of notification which takes three working days. It was necessary to visit the registration, tax and statistical authorities before establishment of the “one-stop shop”. Now it is enough to apply to the Ministry of Justice or its regional branches with the following documents:

• application;
• shareholders’ resolution on creation of juridical body;
• copies of passports of founders and executive director;

The following additional documents are required for registration of branches and representative offices:

• a decision on establishing of branches and representative offices;
• a copy of the certificate of registration;
• legalised extract from public register confirming the judicial body is functioning on the territory of own country;

The applicant may be one of the charter members, executive director or authorized person. Upon completion of the procedure a certificate, MCEO (the Main Code of the Enterprise, Organization) and TIN (Taxpayer’s Identification Number) are issued to the applicant.

The certificate of sole proprietor can be obtained at tax authority for the locality where it is registered (the only way for foreign residents) or the activities are carried out.

Then, submission of the following documents is required:

• application;
• a copy of the passport;
• attested POA (Power of Attorney) if an applicant is presented by another person).

Upon paying the duties a certificate of registration and a letter of confirmation on right to obtain a seal and corporate bank account are issued within three working days. All that is lacking is to make a seal and open a bank account, get limited issue forms with stamps of tax administration body. After providing copies of registration documents it takes 3 days the registration with the Social Fund and the notification is sent to the applicant by email. The procedure of registration with the Statistical Committee takes only a few minutes. Each individual entrepreneur (IE) is assigned a case manager to report to.

The procedure for registration at FEZ is established by Directorate General. The work on the territory includes a wide range of benefits concerning external-economic and business-financial performance. Registration of new business entities is executed on a simplified speedy method. It is provided direct access to all infrastructure facilities, (telecommunications, sanitation, electricity, transport) and customs procedures are simplified as much as possible.

There are a few ways to become the owner of an enterprise in Kyrgyzstan:

• open new;
• buy ready-made;
• launch a branch or representative office;
• make investments;
• take part in the privatization of state facilities the mandatory for which is to provide a detailed business plan for the development of the company.

The taxation system in Kyrgyzstan is the best in the region regulated by the Tax Code and other regulatory documents. There are general and simplified taxation regimes:

• Based on a patent;
• Simplified taxation system;
• Based on a tax contract (paid in accordance with pre-fixed amounts);
• On the territory of FEZ where the enterprises are partially exempted from taxes, duties, but complete exemption from customs duties on import, export and re-export of goods. As well as local manufactures for export are exempt from quotas and licensing. But, 0.1-2.0% of the income is annually deducted to the directorate general.

Concerning taxes there are following types of taxes that legal entities pay:

• Income tax.
• Leasing companies deduct 5%, but agricultural producers, agrarian and commodity-service cooperatives pay zero. Taxes are collected annually, but calculated quarterly.
• Small businesses pay income tax in the amount of 10% quarterly.
• VAT is paid 12% monthly.
• Excise tax is paid monthly and set for each type of product and transferred to the treasury.
• Taxes for the right to use subsurface resources (bonuses and royalties). The amount differs depending on stage of exploration of the deposit and its scale, the area of exploration for minerals, their value and depth.
• Sales taxes are paid 2-4% monthly. Small businesses pay quarterly.
• Land taxes are calculated depending on the type of the land and are paid annually until February 1.
• Property taxes depend on the property group.

Should a foreign company function on the territory of Kyrgyzstan establishing permanent representative, it becomes a taxpayer along with the local entrepreneurs.

Speaking about promising areas of business it is not easy to state which business is the most profitable in the country, as the market conditions are changing very often. Local experts consider production of goods for export, i.e. clothing products, meat, dairy industry, dried fruits, nuts and honey to be the most lucrative business giving chance for creating stable medium-sized businesses. But after joining the EAEU (Eurasian Economic Union) some problems arose due to introduction of customs duties with China. Tourism is considered to be one of the profitable businesses in Kyrgyzstan as well. Animal industry and processing of agricultural products, i.e. growing vegetables and fruits, especially in greenhouses are thought to be remunerative too.

Taking into consideration above mentioned facts, one can evaluate business climate in Kyrgyzstan, a promising country for doing business with liberal legislation, special tax regimes in the territories of SEZ, the number of which is five, having enormous potential to provide fertile ground for doing business, the best tax system in the region, simplified company registration, the most liberal trade and favourable financial policy. All these facts show Kyrgyzstan to have opportunities to do business.

Source:

https://kg.f-chain.com/en/legal-services-in-kyrgyzstan-with-office-in-bishkek/

https://www.hg.org/legal-articles/forms-of-business-in-the-kyrgyz-republic-4892