Addressing a key concern for business stakeholders, President Sadyr Japarov of the Kyrgyz Republic has signed a decree aimed at alleviating the financial burden on enterprises. Titled “On creating a favorable tax environment for business entities and increasing the interest of insured persons in state social security,” the decree signifies a significant step towards fostering a more conducive environment for economic growth.
Currently, high insurance premium rates stand out as one of the most pressing challenges confronting businesses in the country. The disparity between social contributions paid by employers and tax deductions has led to the underreporting of employee wages, thereby hampering the entrepreneurial landscape’s development.
In a bid to rectify this issue and stimulate economic activity, the decree mandates the submission of draft laws to the Jogorku Kenesh, the national parliament, for consideration. These proposed laws aim to achieve several objectives:
- Reduction of Insurance Premium Rates: The decree proposes a substantial reduction in insurance premiums, slashing the rate from 27.25% to 12.25% for most business entities. However, certain sectors such as mining, electricity provision, information and communications, excise goods sales, as well as commercial banks and specialized financial institutions, are excluded from this adjustment.
- Employer Accountability: Employers will face increased accountability for concealing wages paid to employees, ensuring greater transparency in financial transactions.
- Guidelines for Wage Determination: Clear guidelines will be established for determining wages for taxation purposes and calculating insurance premiums, aiming to streamline processes and minimize discrepancies.
- Standardized Income Tax Deductions: A standardized deduction rate for income tax to the republican budget will be set, providing clarity and consistency in tax obligations.
- Additional Allocations to Social Fund: To support these reforms, provisions will be made in the republican budget for additional allocations to the Social Fund under the Cabinet of Ministers of Kyrgyzstan, ensuring adequate resources for social security initiatives.
The decree represents a proactive measure by the Kyrgyz government to foster a more favorable business environment, stimulate economic growth, and enhance the welfare of its citizens. As these legislative proposals move forward, they hold the potential to catalyze positive change across the nation’s economic landscape.
