State support of entrepreneurship in Kyrgyzstan

Written by Sandeep Nehra

Sector of small and medium business is a public institution, which allows each person to become enterprising not only the object but also the subject of economic development. Steadily small and medium businesses share are increasing. Its share in GDP is 44.3%. Small and medium businesses produce 27.2% of industrial products manufactured in the country. (Farmer) households owned 50% of agricultural output. Private sector share in total agricultural production is 93%, while for the whole economy – about 90%. In recent years, the scope of business has increased due to improved institutional and legal framework.

State Committee of the Kyrgyz Republic:

• is directly involved in shaping and implementing a unified state policy in the sphere of entrepreneurship, in particular, regulatory and policy relating to the licensing business and the state registration of enterprises

• coordinates the activities of executive agencies related to the development and implementation of measures to implement uniform state regulatory policy in the sphere of entrepreneurship, business licenses, state registration

• Encouraging the development of financial credit, advice and information support of business in recent years have been issued Presidential Decree, a number of decisions of the Government of the Kyrgyz Republic aimed at creating favorable conditions for business and attracting foreign direct investment. Reduced large number of activities subject to licensing, is working to reduce the licensing documents and eliminate duplication of permits in all ministries and departments, designed and put into practice a mechanism of state registration of business entities on a “single window” to allow a minimum time to process registration business in one state agency.

The basic terms of business support was Presidential Decree “On measures to improve public policy in the regulation of investment and other entrepreneurial activities”, according to which introduced a one-year moratorium on the development and adoption of the Government of the Kyrgyz new laws and regulations that impede business development.

In order to promote entrepreneurship and support small and medium businesses in the area of taxation:

• reduced tax rate for businesses with 30 to 20%

• there are two income tax rates of 10 and 20%, in contrast to the previous system of progressive rates (from 5 to 33%) and in order to protect the poor, increased size exemption limit from 400 to 650 som. per month

• replacement of existing taxes imposed on the territory of the Kyrgyz Republic compulsory patenting for businesses and individuals to certain types of economic activity. At the same actors, paying tax on a patent based on a mandatory basis, for the period of the patent shall be exempt from inspections

• amendments to the Tax Code, allowing not only banks but also other financial and credit institutions to create reserves to cover potential loan and lease losses and relating them to deduct from the gross annual income

• introduced a simplified tax system for small businesses. This system provides for a single tax instead of income taxes, sales, for the use of roads, payments to the Fund and disaster situations for businesses and personal income tax and sales tax for individuals

• improved the payment of taxes on the basis of fixed payments – patents. Expanding list of business activities carried on the patent basis. Revenues for 2002 from the sale of patents amounted to 187.6 million soms., Which is 11% higher than previously

• amended the Tax Code of the Kyrgyz Republic, providing for exemption from VAT of technological equipment, imported as a contribution to share capital (funds) on the approved list, as well as exemption from VAT the supply of medicines, which will give a significant reduction in drug prices

To attract foreign investment in the economy is constantly being made to sign agreements on avoidance of double taxation. In 2004, made efforts to conclude agreements on avoidance of double taxation with 26 countries, of which entered into force of the Agreement with 14 States had signed and ratified by four states, eight countries are at different stages of readiness to sign.

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