The unified tax return campaign is in full swing in Kyrgyzstan. We have honestly paid taxes to the state all year long and now it is time to get a pleasant bonus in the form of tax deduction.
Kyrgyzstanis may save their money by reducing their payments to the national budget. You can find how taxpayers can save below.
A tax deduction is the amount by which the taxable income is reduced. It is a sort of a benefit or support from the state, which allows to get back the tax paid during the year or pay less tax.
According to the new Tax Code that became valid in January 2022, there are three types of tax deductions in Kyrgyzstan:
- Standard deduction is the amount by which the tax base of the national of the Kyrgyz Republic may be reduced in case he/she falls into one or several categories of the standard deduction;
- Social deduction is the amount of expenditure on education by which the tax base of the national of the Kyrgyz Republic may be reduced;
- Property tax deduction is the amount of interest paid on mortgage by which the tax base of the national of the Kyrgyz Republic may be reduced.
The standard deduction applies to all categories of taxpayers, excluding non-resident individual.
- Nationals of the Kyrgyz Republic;
- Resident individuals who are not nationals of the Kyrgyz Republic, but who have a residence permit in Kyrgyzstan or the status of kairylman (temporary legal status before acquisition of the citizenship of the republic – author’s note).
- Personal deduction — at the rate of 6.5x calculation index (1 calculation index is 100 Kyrgyz som or about 1.2 dollars) per every month of the fiscal period. An individual may qualify for it.
- Deduction for the taxpayer’s dependants – at the rate of one calculation index (100 Kyrgyz som) per every dependant per every month of the fiscal period.
- State social insurance contributions, excluding state social insurance contributions per tax-exempt income.
- Contributions to the non-governmental pension fund – no more than 8 per cent of the taxpayer’s tax base.
The taxpayer is entitled to social deduction for education of the taxpayer and his/her dependants, whose age is under 24.
Note:
According to the law of the Kyrgyz Republic, dependants are persons who do not have independent sources of income and depend on the taxpayer’s support, they can be either related or not related to the taxpayer.
The rate of deduction for preschool, school education, primary, secondary and higher professional education is equal to the amount of payment made by the taxpayer to the educational organisation in the Kyrgyz Republic. However, it cannot exceed 10 per cent of the taxpayer’s tax base excluding deductions for education.
Moreover, taxpayers with three or more dependants shall have tax deduction not exceeding 25 per cent of the taxpayer’s tax base excluding deductions for education.
Example:
To find out the rate of deduction for education, the tax base should be calculated. Let’s take average salary in November 2022, namely 25,711 Kyrgyz som (nearly 300 dollars). So, it turns out that your total annual income is 308,532 Kyrgyz som (3,601 dollars). Out of them:
- Personal deduction per year is 7,800 Kyrgyz som or 91 dollars (6.5x calculation indexes multiplied by 12 months),
- Social deductions — 30,853.2 Kyrgyz som or 360 dollars (10 per cent of monthly income — the social deduction rate — multiplied by 12 months).
Thus, your tax base will be 269,878.8 Kyrgyz som (3,150 dollars).
You, being the bona fide taxpayer, should pay 10 per cent income tax to the state, or 26,987.88 Kyrgyz som (315 dollars).
But if you qualify for deduction for education, which is estimated at 26,987.88 Kyrgyz som per year, or at 67,469.7 Kyrgyz som (788 dollars) if you have three or more dependants, you may reclaim a part of income tax by reducing the tax base by the amount of tax deduction available to you.
The right to social deduction is granted upon submission of the unified tax return on the basis of the taxpayer’s written request and documents confirming the relevant expenditures. Only one taxpayer is entitled to deduction.
In other words, you should on your own follow our example and calculate the deduction for education and prove your expenditures by documents (payment receipt). Afterwards, you should reduce your tax base by the deduction rate and indicate it in your request to be submitted with the unified tax return.
It turns out that after you apply the tax deduction in the amount of 26,987.88 Kyrgyz som, your tax base will be 242,890.92 Kyrgyz som (2,835 dollars). In other words, the amount of your income tax liability is 24,289 Kyrgyz som (284 dollars). But you have paid income tax earlier in the amount of 26,987.88 Kyrgyz som. In this case, the tax authority must pay to you the difference, which is 2,698.8 Kyrgyz som (31.5 dollars).
To make sure you receive the money, do not forget to indicate your bank account in the request. After the tax authority makes a decision to pay the deduction, it will transfer the money to that account after 40 days.
Moreover, the tax deduction may be received only for the last fiscal year. In other words, if you paid for education the previous year, you will not be entitled to get the deduction.
- A written request (according to the form DOC STI-162);
- A copy of contract for paid educational service entered between the applicant and educational organisation;
- A copy of receipts for payment of educational organisation’s services;
- A copy of birth certificate/document of adoption of a dependant;
- A certificate from the educational organisation proving that the child/adopted child does not receive the scholarship, if the dependant is the student of secondary and higher educational institution;
- A copy of passport of the applicant, passport of the dependant (if any), passport of the applicant’s spouse, marriage certificate or divorce certificate;
- An employment certificate (from full-time and part-time jobs) of the applicant in due form indicating the amount of salary, withheld income tax and state social insurance contributions per the calendar year corresponding to the period of social deduction for education (DOC STI-161);
- An employment certificate (from full-time and part-time jobs) of the applicant’s spouse in due form indicating the amount of salary (if the spouse is a waged employee), withheld income tax and state social insurance contributions per the calendar year corresponding to the period of social deduction for education.
- Certificate of family composition from the aiyl okmotu, house management, homeowners association, quarterly committee, housing cooperative or other housing and communal organization.
If the subject of contract is purchase or construction of immovable property that is part of the housing stock. In this case, the taxpayer is entitled to property tax deduction within the amount that was in fact used to pay interest on loan or mortgage, or on housing loan, Islamic financing agreement, rent-to-own lease agreement for participants of state housing programme.
The amount of property tax deduction shall not exceed 2.3 thousand calculation indexes per year. Given that 1 calculation index equals 100 Kyrgyz som, it will be 230 thousand Kyrgyz som, or 2,707 dollars. So, if you prove your spending of this amount, you can reduce your tax base by this amount and consequently expect the return of the difference on the income tax paid.
Property tax deduction shall be returned to the taxpayer upon submission of the unified tax return on the basis of the written request and documents confirming the fact of payment of interest on loan or mortgage, etc.
- A written request;
- A copy of passport of the applicant;
- A copy of technical datasheet of the immovable property purchased;
- A copy of mortgage agreement entered with the bank and/or financial institution;
- A copy of collateral arrangement;
- Copies of mortgage payment documents;
- A certificate of the banking institution proving amounts of received, repaid loan and paid interest on mortgage loan;
- An employment certificate (from full-time and part-time jobs) of the applicant in due form indicating the amount of salary, withheld income tax and state social insurance contributions per the calendar year corresponding to the period of property tax deduction.
When expenditures on the taxpayer’s construction or purchase of a house, apartment, room or share thereof, including under the rent-to-own lease agreement for participants of the state housing programme, have been paid by another entity other than the taxpayer’s immediate relative. Also, if such property buying transaction is carried out between individuals who are interdependent persons.