Specifics of Taxation of Electronic Services in Kyrgyzstan

1) What qualifies as electronic services for tax purposes? Is there a list of such services?

Such services are recognized as business activities carried out through information and communication networks, including the Internet. The list of such services is established by law and includes, in particular, the provision of software, digital content, online advertising, marketplace services, hosting, cloud services, data storage and processing. At the same time, consulting services provided via electronic communication, Internet access services, and software distributed on tangible media are not included in such services.

*Tax Code of the Kyrgyz Republic dated 18 January 2022 No. 3, Art. 32

2) Is a foreign company providing services electronically required to register for VAT purposes?

As a general rule, taxpayers carrying out taxable activities in Kyrgyzstan may be required to register with the Kyrgyz tax authorities. In particular, a foreign entity providing electronic services to individuals resident in Kyrgyzstan may qualify as a VAT taxpayer where the place of supply is recognized as Kyrgyzstan. In such cases, the foreign provider may be required to register for VAT purposes and comply with VAT obligations under Kyrgyz law.

*Tax Code of the Kyrgyz Republic, Arts. 110, 253(1)(3), 255; Art. 263(6)-(7)

3) How is the place of supply of electronic services determined?

Under the Tax Code of the Kyrgyz Republic, VAT obligations for foreign providers arise where the place of supply of services is recognized as the territory of Kyrgyzstan. For supplies to legal entities and entrepreneurs, the place of supply is determined based on the location or registration of the recipient in Kyrgyzstan. For supplies to individuals (non-entrepreneurs), the place of supply is recognized as Kyrgyzstan if, among other criteria, the buyer's place of residence, bank account location, network address, or phone country code corresponds to Kyrgyzstan.

*Tax Code of the Kyrgyz Republic, Art. 263(6)-(7)

4) What VAT rates apply to electronic services?

As a general rule, electronic services supplied in Kyrgyzstan are subject to VAT at the standard rate of 12 percent.

*Tax Code of the Kyrgyz Republic, Art. 254(1)

5) Are there any thresholds for mandatory tax registration?

The Tax Code of the Kyrgyz Republic establishes the cases in which taxpayers are subject to registration as VAT payers. However, no threshold values for registration are established under the legislation of the Kyrgyz Republic.

*Tax Code of the Kyrgyz Republic, Arts. 253, 255

6) What reporting and filing obligations apply to providers of electronic services?

Foreign electronic service providers recognized as VAT payers in the Kyrgyz Republic may be required to submit VAT reports to the tax authorities no later than the 25th day of the month following the reporting tax period. VAT is payable no later than the 25th day of the month following the reporting tax period.

*Tax Code of the Kyrgyz Republic, Art. 319(1)-(2)

7) How are services supplied through marketplaces and platforms taxed?

Under the Tax Code of the Kyrgyz Republic, services supplied through digital marketplaces and platforms may qualify as electronic services where they are provided through information and communication networks, including the Internet. Accordingly, such services may be subject to VAT in Kyrgyzstan where the place of supply is recognized as the territory of Kyrgyzstan.

*Tax Code of the Kyrgyz Republic, Art. 32; Art. 253(1)(3)

8) What are the risks and penalties for non-compliance with tax rules?

Failure to comply with the requirements of the tax legislation of the Kyrgyz Republic may result in tax liability, fines and other sanctions. In particular, failure to submit tax reporting within the established deadlines may result in a tax sanction of 70 settlement indicators for legal entities. Understatement of tax by 10-50% of the amount due may result in a sanction of 50% of the understated amount; understatement exceeding 50% may result in a sanction of 100% of the understated amount. Failure to submit tax reporting at all for a given period may result in a sanction of 100% of the tax obligation identified.

*Tax Code of the Kyrgyz Republic, Art. 163(1), (1-1), (2)

Authors: Aisanat Safarbek kyzy, Akzyinat Tashieva