The President of the Kyrgyz Republic, Sadyr Japarov, has signed a strategic decree set to define the country’s technological future. Published officially on the head of state’s website, the document aims to trigger an explosive growth of the high-tech and startup ecosystem within the republic. As part of this bold new reform, IT companies and innovative startups are being granted unprecedented five-year tax holidays. This decisive step is designed to position Kyrgyzstan as the most attractive digital hub in the region.
Who qualifies for tax exemptions?
Under the decree, businesses operating in the high-tech and creative economy sectors will be completely exempted from core taxes for a period of 5 years. This incentive is expected to serve as a powerful driver, particularly for the development of startups and the software market. Entities specializing in the following fields will be eligible for the tax exemptions:
- Innovative startups driven by unique digital technologies;
- Software development, information systems engineering, and the implementation of Artificial Intelligence (AI) projects;
- Business Process Outsourcing (BPO) and export-oriented IT services;
- Professional digital content creation and distribution on the internet (bloggers and influencers);
- Creative industry studios producing feature films, digital video, and television content.
Minimal Tax Rates for IT Sector Employees: Although the tax holidays do not fully cover personal income tax, a massive concession has been made for startups in this area as well: the income tax rate for IT and creative sector employees has been cut in half, dropping from the standard 10% to just 5%.
Furthermore, the state social insurance contribution rate for employees of these companies has been fixed at 12% of the country’s average monthly wage. This enables startups to retain talent during their initial years and funnel financial resources exclusively into scaling up their projects.
New demands on traditional business and digitization
Alongside fostering the tech sector, the government is tightening tax discipline in traditional service sectors, planning to allocate the generated revenue toward digital infrastructure. The decree establishes fixed unit tax rates for catering establishments (cafes, restaurants), bathhouses, and saunas:
- In the cities of Bishkek and Osh: The tax rate has been raised from 1% to 5%;
- Across the rest of the republic: The rate has been set at 3%, up from the previous 0.5%.
The deadline for entrepreneurs wishing to voluntarily transition from the simplified system to the general tax regime has been set for October 1, 2026.
Gold mines and anti-smuggling measures — ensuring budget stability
To offset potential budget gaps resulting from the tax exemptions granted to IT startups, the state is intensifying its oversight of the mining industry and trade channels.
- The Mining Industry: Progressive income tax rates are being introduced for large enterprises involved in gold and silver extraction and processing. The tax volume will scale directly in accordance with the global prices of precious metals on international commodity exchanges.
- Combating Smuggling: Strict, differentiated fines have been enacted for those illegally importing goods from EAEU nations (Russia, Kazakhstan, Belarus, Armenia) to evade taxes. The fine amounts will be calculated directly based on the market value of the contraband goods.
Social support for Batken developers
A crucial humanitarian component of the decree focuses on restoring the infrastructure of the Batken region, which was affected by border conflicts. Construction companies building state-funded housing to be handed over to the residents of Batken free of charge will have all their outstanding tax debts completely written off by the state.
