Specifics of application of Double Taxation Treaties in Kyrgyzstan

1) Which principal Double Tax Treaties (DTTs) are currently in force in Kyrgyzstan?

Kyrgyzstan has signed DTTs with 36 countries and this number is going to increase. DTTS with Netherlands, Luxembourg and Cyprus are on their final stage, and the first round of negotiations with other 5 countries are conducted.

2) What types of income are covered by Double Taxation Treaties?

Depending on the agreed conditions, the DTT may regulate different types of income, for example:

• Income from real estate;
• Profit from business activities;
• Profit from international transportation;
• Dividends;
• Interest;
• Royalties;
• Income from increase in the value of property;
• Income from independent personal services;
• Income from employment;
• Income received by members of the board of directors;
• Income of artists and sportsmen;
• other income.

3) How is tax residency determined for DTT purposes in Kyrgyzstan?

Tax residency is defined in accordance with the applicable DTT.

4) How to properly prove tax residency status to apply treaty benefits?

A company-resident shall submit an application in an established form of the tax authority with the state registration certificate and registration card of the taxpayer. 

State tax authority shall review the application within 10 working days and issue a certificate on tax residency which proves tax residency status.

5) How to determine which Double Taxation Treaty applies to a specific transaction?

The application of the DTT to a specific transaction is determined taking into account the residency of the parties, types of income, transaction structure and other factors.

6) Do the provisions of the DTT take precedence over domestic tax law?

Yes, according to Art.3 of the Tax Code of the Kyrgyz Republic.

7) What tax obligations does a resident have when receiving income from abroad under a DTT? 

A resident is required to report his worldwide income in a single tax return and pay taxes on it in accordance with the applicable DTT and domestic tax legislation.

8) How are tax rates on dividends, interest, and royalties applied under a DTT?

DTT may establish a maximum threshold for the tax rate, which in relation to dividends, interest and royalties is usually from 5 to 10% of the total amount of dividends, interest and royalties.

9) What are the mechanisms for eliminating double taxation?

Mechanisms to eliminate double taxation are to ensure that the same tax is not paid twice, for example, by crediting foreign tax, exempting from tax, reducing the rate, etc.

10) What is the dispute resolution process and Mutual Agreement Procedure (MAP) under a DTT?

All disputes related to the implementation of the DTT shall be resolved through negotiations and consultations.

Author: Aisanat Safarbek kyzy