Entrepreneurs of the Kyrgyz Republic will be deprived of the temptation to split up their businesses in order to pay less taxes - Fchain

The Ministry of Economy and Commerce has developed a draft law on amendments to some current regulatory legal acts of Kyrgyzstan. It is noted that the initiative is aimed at improving tax legislation, simplifying tax administration procedures, as well as creating conditions for fair competition and reducing the shadow component of the economy. The document has been submitted for public discussion.

“The definition of “business fragmentation” must be included in the current Tax Code, since the real situation on the market will change radically with the introduction of a patent-based tax, as well as an increase in the single tax rate from 0.1 to 0.5 percent, that is, the tax burden increases fivefold with a decrease in the permitted maximum threshold from 100 million to 50 million soms. Under such conditions, entrepreneurs will use tax evasion schemes by fragmenting their businesses,” the developers believe.

In their opinion, the entrepreneur will simultaneously create several affiliated taxpayers in order to conceal the real volume of revenue. This scheme can be used both when paying the tax on the basis of a patent and on the basis of a single tax.

The concepts of distributor and business fragmentation are proposed taking into account the previous experience of the taxation system of taxpayers paying taxes based on a patent and a single tax in the trade sector, and are important tools in the administration of taxpayers, the initiators explained.