Published
10/19/2026, 09:23Kyrgyzstan is preparing another package of amendments to the Tax Code. Businesses are being offered the option to pay tax debts in installments, additional safeguards during tax inspections, and new mechanisms to reduce exposure to penalties. Some of the support measures will be applied retroactively and will take effect from August of this year. Garment manufacturers have already received tax incentives, while market traders have reached an agreement with government authorities on revising penalty provisions. Yet behind these individual concessions lies a broader question: to what extent does the current tax system encourage business growth and development? To explore this issue, Akchabar spoke with Tatyana Kim, Chair of the Board of the Chamber of Tax Consultants, Azamat Kerimbek uulu, Director of the Legprom Association, and Sergey Ponomarev, President of the Association of Markets of Kyrgyzstan.
In 2026, Kyrgyzstan’s tax legislation was already amended in January and August. Parliament is now considering another package of amendments. Although the Tax Code is based on the principle of being revised once a year, exceptions exist for specific circumstances, including the implementation of presidential decrees.
Tatyana Kim, Chair of the Board of the Chamber of Tax Consultants, notes that the restrictions on the frequency of amendments were introduced for a reason.
“In the past, amendments were introduced 10 to 20 times a year. It was difficult even for professionals to keep track of them, let alone ordinary taxpayers,” — she says. At the same time, she notes that updating tax legislation remains necessary.
According to the expert, these amendments are driven by changes in the economy itself. Some of the proposed revisions are linked to the adoption of the Digital Code, while others are aimed at establishing the legal framework for the Tamchy Special Financial Investment Territory. The amendments also propose introducing the definitions of “fictitious supply” and “source of origin of goods,” which are intended to help identify fraudulent and non-genuine transactions.
“Tax matters are complex, and there is no such thing as a perfect tax code,” — admits Tatyana Kim, Chair of the Board of the Chamber of Tax Consultants.
However, for businesses, it is important that such changes remain predictable, particularly for companies that enter into long-term contracts and make investment decisions based on stable tax conditions.
One of the most significant initiatives, according to Tatyana Kim, is the proposal to allow taxpayers to obtain a court-approved deferral or installment plan for the repayment of tax debt.
Today, a company with a court-confirmed tax debt may face enforcement measures, including the seizure and sale of its assets. For a business experiencing temporary financial difficulties, such actions can jeopardize its ability to continue operating.
The proposed amendments would allow taxpayers to apply to the court for a modification of the enforcement procedure and repay their tax debt according to an approved payment schedule.
“This is not a tax exemption. The tax debt remains recognized, but the taxpayer is given an opportunity to repay it while keeping the business operational. In my view, this is a very significant amendment,” — Kim explains.
Such an approach serves the interests of both parties. The government retains the ability to recover the outstanding tax debt, while the business can continue operating, paying salaries, and generating future tax revenues. At the same time, the granting of a deferral or installment plan would not be automatic, as the final decision would remain with the court.
Among the other positive changes, the expert highlights the proposal to allow overpaid tax amounts to be applied not only toward outstanding tax liabilities, but also toward social insurance contributions and non-tax payments.
The amendments also propose strengthening restrictions on unscheduled tax inspections initiated by law enforcement agencies in cases where there is no documented evidence of incorrect tax calculation or tax violations.
Another area of reform involves revising the approach to business liability and the enforcement of penalties against entrepreneurs.
Sergey Ponomarev, President of the Association of Markets of Kyrgyzstan and Vice President of the Dordoi Association for Analytical Affairs, notes that dialogue with the State Tax Service has become more constructive in recent years. In his view, this is largely due to changes in the agency’s leadership.
“Above all, it comes down to people. New leaders have come in, led by Almambet Shykmamatov, including his deputy, Kubanychbek Ysabekov. They are open and approachable individuals who know how to listen and, more importantly, how to hear what people are saying,” — Sergey Ponomarev said.
As an example, he points to discussions surrounding penalties imposed on market operators and vendors.
Industry representatives had repeatedly opposed penalties of up to 1 million KGS, which could be imposed for violations related, among other things, to the activities of tenants and subtenants.
“Let’s say a tenant or subtenant commits a violation involving 5,000 KGS, yet the market owner faces a fine of 1 million KGS as a result. We argued that such a penalty was clearly disproportionate to the offense,” — he said.
According to Ponomarev, following negotiations with representatives of the State Tax Service, the Ministry of Economy and Commerce, and members of the Jogorku Kenesh, an agreement was reached to reduce the fine fivefold, from 1 million KGS to 200,000 KGS.
However, he considers the most important outcome to be the proposal to change the very procedure for holding businesses accountable for violations.
“After all, what is the primary purpose of an inspection? It is not to fine a business, but to ensure that its activities comply with the law. If inspectors identify a violation, why not first issue a notice requiring the problem to be corrected?” — Ponomarev asks.
According to him, the parties agreed on a proposal that would give businesses 30 days to remedy identified violations. If the deficiencies are not addressed within the prescribed period, penalties and fines may then be imposed.
“Taxpayers deserve to be treated with respect. Running a business is a complex undertaking. Entrepreneurs may not always be aware of every requirement, or they may overlook or miscalculate something. After all, we are all human,” — he noted.
The proposed changes are expected to be incorporated into legislation. Their final scope and the specific violations covered under the new approach will depend on the version of the amendments ultimately adopted.
The parties also discussed the liability of market owners for the actions of subtenants. According to Ponomarev, they were able to agree on an approach under which the responsibilities of each party would be more clearly defined, taking into account the contractual relationships between them.
The Association of Markets plans to develop standard lease and sublease agreements for its members, clearly defining the rights, obligations, and responsibilities of all parties involved.
“The government and the business community should first and foremost be partners. Oversight and enforcement are necessary, but they should be transparent, proportionate, and aimed at ensuring compliance with the law,” — Ponomarev emphasized.
While some amendments are still under discussion, enterprises in the light industry sector are already benefiting from government support measures.
As Legprom Association Director Azamat Kerimbek uulu told Akchabar, from 1 August to 31 December 2026, garment and textile enterprises, as well as sellers operating through marketplaces in the EAEU member states, have been exempted from paying the single tax.
The decision was adopted following incidents at Wildberries warehouses in Russia that affected Kyrgyz entrepreneurs.
“Together with other business associations, we submitted appeals to the Ministry of Economy and Commerce, the State Tax Service, and the Presidential Administration. The response came almost immediately. While neighboring countries were still discussing how to react to the situation, our government agencies were already working on measures to support entrepreneurs,” — he said.
According to Azamat Kerimbek uulu, manufacturers that sell clothing directly through online marketplaces are subject to a 0.25% unified tax rate on turnover, while entrepreneurs engaged in the resale of finished products pay 2%.
For a seller with a monthly turnover of 1 million KGS, a 2% tax rate translates into a tax payment of 20,000 KGS. For businesses with higher turnover, the resulting savings can be substantially greater.
“For example, I pay an average of about 100,000 KGS in unified tax each month. Over a five-month period, that amounts to savings of around 500,000 KGS. That money can cover my team’s monthly payroll or help pay for electricity and other operating expenses,” — the entrepreneur explains.
Azamat Kerimbek uulu also speaks positively about other government support measures for the sector, particularly concessional lending programmes.
According to him, around 8 billion KGS was allocated to the garment industry financing programme through two funding tranches. Approximately 500 enterprises received loans at a 0% annual interest rate.
According to him, one of the factors considered during the application review process was a company’s tax compliance history.
“Today, banks ask businesses, ‘How much tax have you paid over the past three years?’ The more transparent your operations are and the stronger your tax record, the higher your chances of securing financing,” — says the Director of the Legprom Association.
In the entrepreneur’s view, this approach creates additional incentives for businesses to move out of the shadow economy. Operating transparently and paying taxes become not only a legal obligation but also an advantage when applying for government support and financing programmes.
Meanwhile, Tatyana Kim argues that tax reforms should be assessed not only in terms of individual tax incentives, but also in terms of their impact on the overall structure of the economy.
Over the past several years, Kyrgyzstan has significantly expanded the use of special tax regimes. For small businesses, this has meant simplified accounting procedures and lower administrative costs.
However, as companies grow, their tax conditions change.
“Instead of encouraging small businesses to transition to more transparent and standardized accounting practices, we are, in effect, creating incentives for them to remain under simplified tax regimes. At the same time, the administrative and tax burden is becoming increasingly concentrated on medium-sized and large businesses,” — she says.
According to the expert, large companies are easier for the authorities to monitor because they maintain comprehensive accounting records, own assets, keep extensive documentation, and face reputational risks. However, significant differences between tax regimes can influence entrepreneurs’ decisions about whether to expand their businesses.
“Large taxpayers are easier to monitor and audit. However, the fairness of a tax system should not be judged solely by how convenient it is for the government to administer,” — Tatyana Kim notes.
Tatyana Kim believes that an even more fundamental question should be addressed: whether the current value-added tax (VAT) model is well suited to the specific characteristics of Kyrgyzstan’s economy.
VAT remains one of the largest sources of budget revenue. However, according to the expert, the numerous exemptions and special tax regimes currently in place make its administration increasingly complex.
Some companies operate within the VAT system, while others are exempt from paying VAT. This creates differences in procurement conditions, tax accounting practices, and the ability to claim input VAT credits.
“VAT is one of the largest sources of government revenue. Yet, in my view, we still have not learned how to administer it effectively,” — Kim notes.
As an alternative, she suggests considering a model in which imports would continue to be taxed, while domestic sales would be subject to a more uniform set of tax rules.
“Instead of VAT, an import tax would be introduced, while the sales tax would be applied more broadly and collected under a uniform framework,” — the expert explains.
At the same time, Kim acknowledges that such a reform would require a strong economic rationale and careful analysis before it could be implemented.
Another issue raised by Tatyana Kim concerns electronic invoices (e-invoices).
The draft law proposes restricting the recognition of expenses for corporate income tax purposes if the corresponding invoice is deemed invalid.
The purpose of the amendment is to combat fictitious transactions. However, as the expert points out, an electronic invoice (e-invoice) may be declared invalid not only due to the absence of an actual supply of goods or services, but also as a result of a technical error made by the supplier.
“It is important to distinguish between a technical error and deliberate fraud,” — she emphasizes.
For example, a company may have purchased and paid for goods and used them in its production process, only to discover years later that the supplier had incorrectly issued the invoice.
In such cases, the buyer risks losing the right to deduct or recognize expenses that were genuinely incurred.
“But if a supplier makes a mistake when completing an invoice, why should the buyer be held responsible? The buyer has, in fact, paid for the goods, received them, and used them in the course of business. They are not in a position to monitor every action taken by the supplier,” — Kim explains.
According to Kim, the State Tax Service is working on a notification system that will, in the future, allow businesses to receive alerts when the status of previously issued or received documents changes.
The expert views this initiative positively and further suggests distinguishing between the consequences of fraudulent transactions and documentation errors. According to Tatyana Kim, representatives of the State Tax Service have expressed preliminary support for clarifying the disputed provision, although discussions are still ongoing.
A similar issue arises in the case of purchases from retail stores. While simplified documentation procedures allow small retailers, in cases where cash register machines (CRMs) are used and in certain other situations, not to issue electronic invoices (e-invoices), corporate buyers may still require these documents in order to recognize the related expenses for tax and accounting purposes.
In this regard, the expert believes that buyers should retain the right to request an electronic invoice (e-invoice), so that simplified documentation requirements for small businesses do not hinder their cooperation with medium-sized and large enterprises. Alternatively, expenses confirmed by cash register receipts could be made eligible for tax deduction.
The discussion surrounding the latest amendments shows that the relationship between the government and the business community is gradually evolving beyond a narrow focus on tax rates and reporting requirements.
Installment payment options for tax debts would give businesses an opportunity to continue operating during periods of temporary financial difficulty. The proposal to allow taxpayers time to correct violations before penalties are imposed represents a shift in the approach to compliance and enforcement. Tax incentives for garment manufacturers help preserve working capital, while incorporating tax compliance history into lending decisions creates additional incentives for businesses to operate formally and transparently.
At the same time, a number of issues within the tax system still require further discussion and refinement.
“Businesses need to understand in advance the conditions under which they will be operating. Adjustments are inevitable, but a fundamental change in the rules every few months makes planning considerably more difficult,” — Tatyana Kim notes.
Sergey Ponomarev highlights another important principle: “The government and the business community should, above all, be partners.”
Ultimately, the impact of these tax reforms will be measured not only by the amount of revenue collected or the number of incentives introduced. Equally important is whether the new rules help businesses operate transparently, invest with confidence, and expand their operations.
