Switching taxation systems is an important step for businesses aiming to simplify accounting, reduce their tax burden, and optimize processes. In Kyrgyzstan, one can switch from the General Taxation System (GTS) to the Simplified Taxation System (STS), but it requires understanding certain nuances and following the proper procedure. In this article, we’ll break down how to do it correctly and without unnecessary stress.
What are GTS and STS: the basics
There are few tax regimes in Kyrgyzstan
The General Taxation System (GTS) is the classic tax model, where a business pays:
- profit tax (10%);
- VAT (12%);
- social contributions;
- and files more complex and extensive reports.
The Simplified Taxation System (STS) is a preferential regime designed for small and medium-sized businesses. The main rates are defined under the Unified Tax:
- 2% of revenue without VAT — for companies not registered as VAT payers;
- 3% of revenue with VAT — for VAT payers;
- reporting is simpler than under GTS;
- it’s possible to opt out of VAT and move to a fixed rate.
Who can switch to STS in Kyrgyzstan
Not all businesses are eligible. According to the Tax Code of the Kyrgyz Republic, the following may switch:
- individual entrepreneurs (IE) or LLCs with annual turnover up to 30 million KGS;
- organizations not engaged in licensed activities subject to restrictions (e.g., banks, insurance companies, pawnshops);
- businesses not conducting certain categories of foreign economic activity (restrictions are specified by the tax authorities).
When you can apply to switch to STS
The switch is possible:
- From the beginning of the calendar year — application must be filed before January 1 of the current year;
- During the year — only upon registering a new business;
- When changing regimes (e.g., voluntary exit from GTS) — with tax authority approval, but only from the beginning of the next quarter.
Step-by-step guide: how to switch from GTS to STS
Step 1. Check eligibility
- Make sure your business is not subject to exclusions.
- Confirm your annual revenue does not exceed the threshold.
- If you are a VAT payer, decide whether to remain with VAT under STS or switch to STS without VAT.
Step 2. Prepare the required documents
- application form for transition (approved by the Tax Service);
- copy of the registration certificate;
- accounting report for the past period (if turnover confirmation is required);
- certificate of no outstanding tax debt.
Step 3. Submit the application to the tax office
- Apply to your local STS office;
- Submit the application before the start of the new tax period (usually by the end of the quarter);
- Confirm the date of transition and request official confirmation of the new regime.
Step 4. Receive notification and update your accounting
- Once reviewed, the tax office issues a notification of the transition to STS;
- From that moment, you must keep records under the simplified regime;
- Update reporting formats, cash discipline, and accounting templates.
Important points to consider
- Inventory and receivables: when moving from GTS to STS, you must properly revalue remaining stock and account for it in taxation.
- Tax reporting: file GTS reports for the period before the switch, then STS reports afterward.
- VAT refunds are not possible after opting out of VAT when switching to STS without VAT.
When it makes sense to stay on GTS
Switching to STS is not always the most beneficial option. It’s better to remain on GTS if:
- your business works closely with VAT-paying counterparties;
- your expenses significantly exceed your revenue (under STS, tax is based on revenue, not profit);
- you conduct foreign trade activities that fall under restrictions.
Bottom line: should you switch?
If your business is small, works mainly with individuals or non-VAT companies, and does not involve complex financial schemes — STS in Kyrgyzstan can significantly simplify operations. The key is to follow the rules and apply on time. If needed, you can also rely on outsourcing accounting services to support the transition.