Benefits and preferences for foreign investments

The Kyrgyz Republic has created a relatively liberal legislative framework for protecting the rights of foreign investors. The key principles of state investment policy, aimed at improving the investment climate in the country and stimulating domestic and foreign investment, are established by the Law “On Investments in the Kyrgyz Republic,” which also regulates relations between the state and investors. The Kyrgyz Republic grants foreign citizens investing in its territory the same national economic regime applicable to legal entities and individuals of the Kyrgyz Republic. Foreign investors have the right to free movement throughout the country, with the exception of territories where the conditions and procedures for stay are determined by relevant legislative acts of the Kyrgyz Republic.

The law provides for non-interference by the state in the economic activities of investors and recognition of their interests, except in cases stipulated by legal acts. Furthermore, Kyrgyz officials who fail to comply with these requirements are subject to liability in accordance with the law.

Investors investing in priority economic and social sectors operating in certain territories of the republic may be granted incentives in accordance with state development programs (projects). Long-term investments may be made in any form in facilities and activities not prohibited by Kyrgyz legislation, including licensed activities in accordance with the Law of the Kyrgyz Republic “On Licensing in the Kyrgyz Republic.”

Preferential Settlements

In accordance with the Law of the Kyrgyz Republic “On Amendments to the Tax Code of the Kyrgyz Republic” dated June 29, 2017, No. 114, in order to stimulate investment in industrial enterprises of the Kyrgyz Republic, on April 24, 2019, the Government of the Kyrgyz Republic adopted Resolution No. 193 “On Measures to Implement Articles 153, 159-1, 213, 315, 330, and 344 of the Tax Code of the Kyrgyz Republic.”

This Government Resolution was also adopted in accordance with the Law of the Kyrgyz Republic “On Amendments to Certain Legislative Acts of the Kyrgyz Republic in Connection with the Signing of the Treaty on the Customs Code of the Eurasian Economic Union” adopted on February 21, 2019.

In accordance with the adopted resolution, all cities in the Kyrgyz Republic, with the exception of Bishkek and Osh, settlements designated as “growth points,” and rural municipalities receiving equalization grants (transfers) from the national budget are considered preferential settlements.

The resolution approved a list of preferential types of industrial activities eligible for tax breaks and a standard investment agreement for operations in preferential settlements.

According to the resolution, the list includes industrial activities in the following areas:

All types of industrial production based on innovative technologies;
Light and food industries;
Electric power;
Agricultural processing;
Assembly production;
Any export-oriented production. For reference: when concluding agreements, new industrial enterprises/manufacturing facilities that were registered with the state after January 1, 2019, and that export products for six consecutive calendar months, amounting to at least 50% of the total supply volume, are considered export-oriented.

This resolution provides for the exemption of newly established enterprises in preferential settlements whose activities fall under preferential types of industrial activity from property tax, land tax, profit tax, and sales tax.

The decision to grant preferential industrial enterprises tax breaks within a specific settlement is made on the basis of an investment agreement. The investment agreement is concluded for five years by the local government of the preferential settlement with investors making investments in new industrial enterprises that were registered with the state after January 1, 2019, and whose activities fall under preferential types of industrial activity.

One of the conditions of the investment agreement for operating in a preferential settlement is that the investor, within 5 years, in accordance with the schedule, will create jobs, ensure investment in production in the amounts specified in the agreement, and ensure the amount of revenue from product sales specified in the agreement.

After 5 years, the local government has the right to extend the agreement.