«The purpose of the Tax Code is to optimize tax administration, ensure the stability of the tax system, further improve digitalization of tax procedures,» press service of the President commented on signing of the new Tax Code.
The Code provides for two basic approaches to taxation:
1. A general tax regime that provides for basic taxes such as income tax, sales tax, and value added tax (VAT) without a registration threshold. Large businesses with turnover of more than 30 million soms will operate under the general tax regime.
2. Simplified system of taxation based on the single tax. Small and medium enterprises with turnover less than 30 million soms will use the simplified system.
«Thus subjects applying this regime will have an opportunity to pay only one tax and submit one report on a quarterly basis,» the press service of the Presidential Executive Office said.
The Code also establishes a tax on e-commerce activities with a rate of 2 percent, similar to the rate set for non-cash trade. VAT is introduced for the services of foreign companies (such as Google and others).
In order to level the playing field and support domestic producers, the VAT rate for manufacturing is set at 1 percent.
The Code provides for exemptions on an urgent basis with an assessment of effectiveness. The list of tax benefits subject to evaluation as well as procedure and types of evaluation of effectiveness of tax benefits will be approved by the Cabinet of Ministers.
At the same time, tax incentives are also envisaged:
- For the garment industry (single tax rate — 0.25 percent of revenue for a period of five years);
- Jewelry industry (VAT relief for five years);
- Aviation industry (VAT relief for temporary import of airplanes);
- VAT exemption for electric buses (to reduce harmful emissions into the atmosphere).
A provision is established that an entity leasing space for economic activities, including retail spaces in markets (mini-markets) and in shopping centers and houses is obliged to stipulate in the lease agreement the requirement for the tenant to have a cash register. Failure to comply with this requirement entails the termination of such contract unilaterally.
At the same time, a part of the amount specified in the cash receipts for purchased goods, works and services (cashback) shall be refunded. The amount shall be returned to an individual to an account in the domestic bank. The Presidential Executive Office believes that this norm will increase control over the use of cash registers by the civil society. This will have a positive impact on creating a level playing field for competition and increase business transparency. To encourage paying of the tax arrears, there will be provided a write-off of fines and penalties in the amount of 50 percent of full payment of principal debt and the remaining 50 percent of fines and penalties.
A simplified VAT refund mechanism is being introduced for exporting companies. The simplified procedure applies to all enterprises which supply at least half of the volume for a period of six months as a whole. Thus, according to the results of desk audit, the exporter may receive a VAT refund within less than 30 working days.
The Code also provides for a scheduled tax audit to be carried out remotely. This mechanism provides exemption from desk and field tax audits, reducing the number of primary documents to be checked, and exchange of information in real time.
The Tax Code, which came into force on January 1, 2009, is recognized as invalid.
