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Business Connections #11/2008
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AmCham Regional News

The Eurasia Business Platform in the Kyrgyz Republic


               

                The Eurasia Business Platform (EBP) is allowing the American Chamber, Kyrgyz Republic to work more closely with our sister Chambers in Central Asia and the Caucasus. We gain from opening lines of communication and sharing with our neighbors in Uzbekistan and Kazakhstan as well. The initiative was originally launched as a way to develop future strategic policy recommendations to the US government to help the regions overall.

                The US Chamber and its affiliates, through the Eurasia Business Platform, will foster regionally integrated trade and commerce hubs to further incorporate the region into the global economy.  EBP will seek to increase regional investment to create stability, security, and strong economic growth.


               

                Christina Smith, Executive Director, American Chamber Kyrgyz Republic, “In the Kyrgyz Republic, we find the initiative particularly appealing because it will provide our land-locked country with ways to move more goods in and out, attract more investment into our service economy sectors and leverage our tourism advantages among other features.”
                EBP members have convened several group meetings in Washington, DC and one Eurasia forum in Istanbul to date. EBP members have conducted an issues survey and are working to prioritize and articulate consistent messages which will help break down barriers and enact solutions to otherwise intractable problems such as rule of law issues, increasing transparency, and adoption of trade facilitation measures. 

Foreign direct investment in Kyrgyzstan up 40% in January-September 2006
                Bishkek (AKIpress) - Foreign direct investment (excluding outflows) in the economy of Kyrgyzstan grew 40% year-on-year to $189.5 million in [the period]January-September 2006, the Kyrgyz National Statistics Committee reported on the social and economic situation.
                The inflow of shareholders capital increased 40% to $27.6 million in the period, while the inflow of other types of capital grew 50% to $140.8 million. The growth in the latter indicator was the result of a 100% increase in trade loans and a 9.4% rise in loans received from foreign co-owners in the period. Reinvested profit fell 17.5% to $21.1 million in the nine months.
                Foreign direct investment from non-CIS countries rose 21.4% to $126.3 million in the period. Foreign direct investment from CIS countries grew 90% to $63.2 million in the period. Kazakhstan invested $56.2 million in Kyrgyzstan in the nine months, accounting for 29.7% of total CIS investment, while Russia invested $6.5 million, accounting for 3.4%.

Benefits of American Chamber of Commerce Membership
                Chamber members are invited to participate actively in an oganization existing to serve its members. Business development, economic, political, charitable, and social information provided to the Chamber is distributed to members.
                Business roundtable discussions with senior Kyrgyz and US government officials and business leaders are offered exclusively for members. Seminars, conferences, social networking events and charitable activities are organized for the benefit of Chamber members.
                Chamber membership contact lists and industry lists are available free of charge and exclusively to members. Member companies often provide exclusive discounts on products and services to other Chamber members. Link to your website and page on the Chamber’s website.
Resume service and search for candidates.

The information contained in this publication is for general guidance only.  You should neither act, nor refrain from acting, on the basis of such information.  The application of laws and regulations will vary depending on particular circumstances and may also undergo frequent change.  You should take appropriate professional advice relating to your particular circumstances and the current status of the laws and regulations.  PricewaterhouseCoopers disclaim all responsibility, including in negligence, for all consequences of any person acting on, or refraining from acting in reliance on, information contained in this publication.

Changes in Taxation
Below is the brief summary of the most important updates, which took place in the period 
 15 January 2007  30 March 2007

Capital expenditures
The Uzbek government introduced the following incentives to the companies which plan the capital expenditures.

Uzbek companies are:

eligible within 3 years to reduce taxable base for Corporate Income Tax by the amounts directed to modernization, technical and technological re-equipment of  production, repayment of loans taken for these purposes, and leasing income, less annual depreciation; exempt from property tax on new technological equipment put into use for the period of 5 years.
                Micro firms and small enterprises with production facilities, applying simplified taxation regime, are eligible to reduce the taxable base for Unified Tax Payment by the value of new technological equipment, but not more than 25% of taxable base.
                In addition the technological equipment and spare parts are exempt from import customs payments (import VAT, excise duties, customs duties).  The list of technological equipment has also been defined.

Unified tax payment

Ministry of Finance and State Tax Committee have approved the new Regulation establishing Procedure of Calculation of the Unified Tax Payment (the Regulation) which is enforced as of 7 April 2007.

Tax Payers
The following legal entities are subject to the Unified Tax Payment:

Micro-firms and small enterprises (except for producers of alcohol products, payers of unified land tax and fixed tax, PSA members);

Wholesale, retail sale and public catering companies;

Legal entities organizing lottery and other risk based games, and

Private notary offices.

The Regulation provides for definition of wholesale / retail sale companies, as follows:

For the purposes of taxation, wholesale / retail sale companies (or public catering companies) are legal entities whose core (profile) activity is the sale based on the results of the preceding financial year.


Sale is defined as the activity of selling goods previously purchased for resale. Accordingly, sale of goods of own production including sale through brand shops; sale of goods by brokers and intermediaries are not deemed as sales activity for the purpose of the Regulation.

Core (profile)
activity is defined as the activity generating the largest share of revenue in the aggregate annual sales.

Separate Accounting

The Regulation retains the separate accounting requirement for payers of the Unified Tax Payment that are engaged in several activities and have different basis for taxing those.

However, this requirement is no longer applicable to legal entities under the general taxation regime (i.e. those not listed as payers of the Unified Tax Payment).  Thus, for instance, if the manufacturing company along with the core production activity performs sales (as per the above definition), it would not maintain separate accounting for these two activities, as this company is not the payer of the Unified Tax Payment.


Foreign companies' bank accounts

In accordance with currency control regulations effective 18 January 2007 Permanent Establishments of foreign legal entities are eligible to open bank accounts in Uzbekistan.  To open bank accounts, Permanent Establishments are required to provide the following documents to the servicing commercial banks:

Application for account opening;

The copy of certificate, confirming registration with tax authorities;

and Samples of signatures and stamp/seal.

Business Connections #7/2007

Business Connections #7

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