Because freelancers are not Solar Staff's employees and we don't pay taxes on their payouts, they must declare any income received via Solar Staff by themselves.
To carry on tax accounting in the Republic of Kyrgyzstan for your Solar Staff income, you need to:
Comply with your tax obligations
Tax residence
Citizens and residents of Kyrgyzstan are taxed on their worldwide income. Non-resident aliens are required to pay income tax only on income that is earned in Kyrgyzstan or earned from a Kyrgyz source (i.e., related to a trade or business in Kyrgyzstan).
Individuals who reside in Kyrgyzstan for 183 days or more in any 12-month period that ended in a tax year are treated as residents.
Kyrgyzstan has double taxation treaties with a number of countries (full list), the provisions of which may override the applicable tax residence rules and other provisions of national legislation.
Tax ID number
A personal identification number (PIN) is a unique personal identifier assigned to citizens of Kyrgyzstan (at birth) or foreign nationals (upon application; does not apply to digital nomads). You need your PIN to get services from banks, State Tax Service, Social Fund, and other government bodies. This number consists of 14 digits. By law, a person can only have one unique PIN. Previously, PINs were issued by the Social Fund as an insert to national passports and were known as TINs (taxpayer identification numbers).
Taxes and contributions payable by freelancers
Tax obligations depend on the freelancer's status and/or fulfillment of certain conditions. Kyrgyzstan has two tax status options for Solar Staff freelancers to choose from:
IMPORTANT! Solar Staff does not have the option to choose a tax status for freelancers based in Kyrgyzstan, but you can fill in your tax ID in your account.
Read on for more details.
Individual
The status of an individual does not require any special registration and applies to employed people and freelancers alike. Individuals are liable to pay the following taxes and contributions:
Income tax is calculated and paid at a single flat rate of 10% and applies to most types of activities available to individuals.
Deductions are available in the form of expenses associated with education of the individual and their dependents (no more than 10% of the total taxable income) and interest paid on mortgage loans (no more than KGS 230,000 per year). You can only claim deductions when filing your tax return, and you need to submit both your application and all the supporting documents (learn more).
Reporting: A single tax return using Form 100 (filling instructions) must be submitted annually before April 1 of the year following the reporting year; the same deadline applies to actually paying the tax. Follow the links to see samples of filled out returns and videos with instructions.
Social security contributions are voluntary for individuals; to pay, they need to buy insurance policies. An insurance policy is a document confirming payments made to the Social Fund and stating its amount and reporting period; it can be either on paper or online (e-insurance). At their discretion, individuals can pay at least 8% of the average monthly salary to the Social Fund of Kyrgyzstan, or that 8% plus 2% to the Social Fund's State Cumulative Pension Fund. Individuals can also invest in non-state pension funds called Kyrgyzstan and Dordoy Salym.
Sole proprietor
A sole proprietor is a natural person who does business without forming a legal entity; certain obligations apply to sole proprietors under the Tax Code of the Kyrgyz Republic. Sole proprietorship in Kyrgyzstan is not linked to the resident status, with the same terms and conditions for all residents and non-residents alike.
Restrictions: There are certain types of activities sole proprietors may not engage in by law (we recommend double-checking this before registering as a sole proprietor or changing your tax regime); special requirements also apply to branding, although sole proprietors are not legally prevented from registering a trademark.
You can register as a sole proprietor either in person or remotely by submitting a Form 163 application indicating your preferred tax regime. The registration process takes at least a week (learn more).
Additional steps. While not part of registration as a sole proprietor, the below actions may be necessary for you to do your business:
Obtaining an embossing seal: A seal is not mandatory to register as a sole proprietor, but you will need it if you operate without a patent; in this case, you will be submitting monthly reports to the tax office and will need a seal to certify them.
Registration with the Social Fund: This is necessary for sole proprietors who have no individual tax number but have employees.
Opening an account with a bank: While that is up to the sole proprietor to decide, a bank account is required for any cashless payments.
In Kyrgyzstan, sole proprietors can receive income via Solar Staff under the following tax regimes:
Special tax regime for residents of the High Technology Park (HTP)
These tax regimes differ in terms of taxes and reporting, but regardless of the regime, sole proprietors are required to pay an income tax and contributions to the Social Fund applicable to the income of their employees (if they have employees) and local taxes (property and land tax, if applicable).
Read on for more details.
Patent regime
A patent regime (simplified system of taxation based on a patent) is a convenient option as you can register voluntarily at any point in time and for a specified period (from 15 to 365 days with possible extension), as well as suspend activities by simply discontinuing your patent payments.
To register, you need to contact the State Tax Service office in the region where you plan to operate. Your tax officer will calculate the patent price based on your Form 163 application (before you have registered as a sole proprietor) or Form 065 application (with a note saying you will need to use your patent to register as a sole proprietor). You will then need to pay for your patent directly at the tax office.
The following taxes and contributions apply under this tax regime:
A patent is issued for each type of activity and location (and is only valid in the region where it is issued). Go here to learn more about the patent price and types of activities available.
Relief is available under Article 417 of the Tax Code of Kyrgyzstan in the form of a discount on the tax depending on the patent duration: 5% for 90 days, 10% for 180 days, and 15% for 365 days.
Applicable limitation: Total revenue is capped at KGS 8 million.
No reporting is required.
To pay the tax, you need to pay the patent price before you actually start doing business
To pay social security contributions, you need to purchase an insurance policy (the same way individuals do). An insurance policy will cost you 25% of the patent price and will depend on the region and the size of your sales floor area (except for sole proprietors who operate in traditional street markets). Remember that your insurance policy may cost more than your patent tax.
All steps to obtain and pay for your patent and insurance policy can be completed online (learn more and see a guide here).
Simplified tax regime
A simplified tax regime (simplified taxation system, or simplified taxation system based on a unified tax) is the best choice and a go-to option for those not wanting to pay VAT (you may not pay VAT under this regime).
To register, submit a Form 163 application to the tax office at the place of your tax registration as a payer of the unified tax. If you have just registered as a sole proprietor, you need to do that within five days after your tax registration day; for all other sole proprietors, the deadline is December 1 of the current year. Tax payments under the simplified regime are due starting the first day of the month following the month you submit your application.
Applicable limitations. Your revenue may not exceed KGS 30 million (in 2023, this threshold was removed). Also, the unified tax is not applicable if you (see Article 419 of the Tax Code of Kyrgyzstan):
Pay a patent tax.
Provide financial and insurance services.
Operate as an investment fund or a professional securities market participant.
Are required to pay an excise tax.
Engage in extraction and sale of natural resources.
Operate in the industries of real estate development, mobile network and Internet connectivity, and heat, power, and gas supplies.
The following taxes and contributions apply under this tax regime:
The unified tax replaces three taxes (income tax, sales tax, and VAT) and has a rate of 6% for cash payments and 4% for cashless settlements (unless required otherwise based on the type of activity or territory under Article 423 of the Tax Code; for example, residents of the Creative Industries Park must pay the tax at a rate of 0.5% in 2023–2024, 1% in 2025–2026, and 2% starting 2027).
Relief: Sole proprietors with an annual revenue of below KGS 8 million are permanently exempt from paying taxes and reporting. To qualify for the relief, you must meet the following conditions:
Use a cash register in your business.
Have no more than two employees.
Pay all your social security contributions.
Operate in an organized retail facility (only for sole proprietors engaged in trade).
Social security contributions are paid the same way – by purchasing an insurance policy that makes up at least 10% of the average monthly salary; of that amount, under Clause 12 of Appendix 5:
8.75% is payable to the Pension Fund
1% to the Mandatory Health Insurance Fund
0.25% to the Workers' Health Improvement Fund
To learn more about social security contributions, see the procedure for calculating and making contributions under state social insurance.
High Technology Park
A special regime for residents of the High Technology Park (HTP) is designed specifically for the IT industry as an alternative to the general taxation system. To use this regime, you must register and meet certain criteria.
Some types of activities are not allowed under this regime. To qualify, you must engage in one of the following activities (learn more):
Interactive service centers
Programming, design, and analysis of information systems
Software sales, implementation, and support
Software and information technology exports
Also, at least 80% of your revenue must come from exporting your services (you have 18 months to meet this target).
To register, you must have a sole proprietor status and submit your application and documents. The consideration period is one month. If the application is successful, sole proprietors get temporary registration for six months that can be upgraded to permanent provided their project has reached the MVP stage during said six months.
Relief: No taxes (income tax, sales tax, or VAT) are payable under this regime if your income comes from foreign sources. For Kyrgyz-source income, general taxation requirements apply. If sole proprietors have employees, they pay the income tax on their salaries at a reduced rate of 5%, with social security contributions also reduced to 12% (of the average monthly salary).
Mandatory payments required under this regime are limited to 1% contributions to the HTP fund.
A sole proprietor's social security contributions are the same as under the simplified tax regime.
General regime
A general tax regime has no limitations on revenue, headcount, or types of activities.
That said, this regime requires full-fledged accounting (especially if you are a VAT payer). Those failing to do so will face liability, including criminal liability. Learn more about keeping accounts and reporting as a sole proprietor.
The following taxes and contributions apply under this tax regime:
Income tax is calculated at a rate of 10% (unless otherwise provided for by Article 240 of the Tax Code of Kyrgyzstan) of the difference between income (excluding nontaxable income) and expenses. Deductibles include business travel and hospitality expenses, as well as expenses related to training, charity, repairs, depreciation and amortization, and more (for a full list, see Articles 217–238 of the Tax Code of Kyrgyzstan).
Reporting: A single tax return using Form 102 (filling instructions) must be submitted before April 1 of the year following the reporting year. Sole proprietors must also submit a calculation of a preliminary income tax amount using Form 107 (filling instructions) on an accrued basis (first quarter, first half, and first nine months) no later than the first day following the 20th day of the second month of the reporting quarter (before May 20, August 20, and November 20).
The deadlines to pay the tax preliminarily calculated this way are the same (before May 20, August 20, and November 20); final calculations must be submitted before a single tax return is due (before April 1).
Sales tax is payable on the revenue from sales of goods, work, and services excluding VAT and sales tax (unless otherwise provided for by Article 366 of the Tax Code of Kyrgyzstan) at a rate of 1 to 5% depending on the type of activity and form of payment (cash or non-cash); for a full list, see Article 368 of the Tax Code.
Relief: Certain categories of taxpayers are exempt from paying the tax (for a full list, see Article 364 of the Tax Code).
Reporting: A sales tax return using Form 131 (filling instructions) must be filed monthly before the 20th day of the month following the reporting month. Small businesses file returns using Form 129 (filling instructions), while for medium-sized businesses, Form 130 applies (filling instructions); both forms must be submitted monthly before the 20th day of the month following the reporting quarter.
Tax payments (except those made by small businesses) must be made monthly before the 20th day of the month following the reporting month. Small businesses must pay the tax quarterly before the 20th day of the month following the reporting quarter.
Value-added tax or VAT is calculated at a rate of 12% (unless otherwise provided for by Article 254 of the Tax Code of Kyrgyzstan) and is payable only by those who have registered as VAT payers or have the respective obligation to pay.
Registration is mandatory for sole proprietors that have sold goods, works, or services for over KGS 30 million in 12 months or another period. You can also choose to register as a VAT payer voluntarily:
When supplying any goods, rendering any work, or providing any services other than those exempt from VAT (under Chapter 38 of the Tax Code of Kyrgyzstan)
Before commencing your activities if you anticipate having to register as a VAT payer in the future
Reporting: A VAT return using Form 062 (filling instructions) must be filed monthly before the 25th day of the month following the reporting month (this requirement does not apply to large taxpayers, who must file their returns before the last day of the month following the reporting month).
The payment is due before the 25th day of the month following the reporting month.
Additional steps. VAT payers must provide customers with a VAT e-invoice with all the details duly filled in (learn more).
A sole proprietor's social security contributions are the same as under the simplified tax regime.
Additional info
Income received through Solar Staff is declared using certificates and invoices, and in accordance with the offer agreement
Amounts in foreign currencies are translated into the national currency using the exchange rate of the National Bank of the Kyrgyz Republic
If you have any questions, get in touch via the chat in your Solar Staff account, or email us at [email protected].